People ask me all the time how 'bad' is the Calgary real estate market. The only answer is ‘depends’. If a property has condo fees attached to it….HUGE buyers market, big price declines. These are apartment condos and many townhouses. If you are buying one of these then you have a lot of negotiating power. If you are selling, then you need to price right to start with. If you are selling a single family house over the price of $600,000, you also have a buyer’s market. If you have a house under $500,000 then we are actually in a SELLERS market. Especially if you have a house under $400,000. Strange market, but overall I consider our market to be stable considering the economic downward trend in our city and province. Surprising I know!
BLOWN AWAY by the experience of Stranded Water Valley (Survivor Challenge) this weekend! The challenge was set up and ran by Jamie Vandehaar, the former challenge coordinator for the CBS reality TV show ‘Survivor.’ Early last week we (the 16 contestants) received emails warning and hinting that we needed to be prepared for a very authentic version of the real show. They even started restricting our supply list that we originally thought we could bring (basically the clothes on our backs, a jacket and sweater). We arrived by bus west of Water Valley, Alberta on Friday August 12th. Immediately we were taken up a hill as a group and then led into the trees on a long path. Eventually ended up at a fire pit with benches (Tribal Council) and were given our tribe colours (8 people per tribe). I was put into the ‘Fallen Timber Tribe’ and the 8 of us were taken on a hike to our camp location. At this location we found a fire pit, a tarp, rope, bag of rice, a pot, lighter, water canteens (no water though!), and very light summer sleeping bags. We were then left alone. We set up shelter with the tarp and collected fire wood (all the wood was soaked from rain). We were then told a water jug was up a steep hill tied to a tree. So when we needed to fill our 500ml water canteen we needed to climb up to fill it (imagine how many trips that took on a hot day!). A whistle then blasted and we were told to hike back down to the flat open area to begin our first team challenge for ‘immunity’. All of the challenges were similar to the ones Jamie did on the real Survivor TV show. Our team unfortunately lost this challenge. We were told to hike back to camp where we made rice and darkness came and went to bed on the ground under our shelter. Tribal Council was not until the next morning. We woke to cameras in our faces, literally! It was really awkward to wake up outside on the ground with a camera crew suddenly there with a camera looking at you! Our tribe voted the first person out around 7am the next morning (just guessing because the sun had barely come up by then). We then returned to camp to make rice to prepare for the next challenge. Our next challenge came and we finally won, the other tribe had to vote one of their players out. Each time we had to hike back and forth between the challenge location and camp (and from camp to our water). It was hot on Saturday and everything we did was physically demanding. Our tribes continued to do challenges until we had voted out a few players each. Then they suddenly took both tribes up to the Tribal Council area and put a twist on the game. They re-did the tribes. I was then put into a different tribe with some of the same players and some new players. That is when the game became mentally tough! The lack of food, sleep, and physical exhaustion was getting very difficult for many. It was also when you really started to notice the alliances and game playing. As this was a sponsored event, the main sponsor (TD Bank) was allowed to have 4 of their own employees in the game. On top of that there were a few pre-game alliances with a few of their friends in the game as well. The final 4 were all in the same pre-game alliance, so that part was perhaps the only complaint from the other contestants. For those of us who were strangers to the other contestants, we really didn’t have an opportunity to create a true ‘social’ game. But my complaint stops there because without TD Bank and their generous donation, Kids Up Front wouldn't have raised so much money (so thank you TD Bank). My game ended when my tribe eventually had to vote another person out, I was the odd man out of those pre-game alliances. It was just before the merger of the two tribes. While the cards were stacked against many of the other contestants from the start, it didn’t take away from the incredible experience. I would do it all over again if given the opportunity! After you are voted out, you are then led back to the main camp containing lodges for accommodation, including showers, a bed, food, beer, etc. Once it was all over and the last surviving member remained, we had a big BBQ at the main lodging area and then back on the bus to Calgary. I am sure the video will take months to create and edit, but there are thousand of pictures I hope they share soon! I will share as soon as they are released! Below are a few sample pictures from Kids Up Front. I am very thankful to Kids Up Front Calgary for allowing me the opportunity to be a part of this incredible and inaugural event! THANK YOU to each of MY donors for contributing to this charity event! We raised over $60,000 for the local charity and at the end of the day that is what we did it for!
“Hey William (or is it Bill?) what are you doing this summer? Would you like to head out into bear country with literally nothing but the shirt on your back for 3 days with 15 strangers?” Ummm. “You’ll get a free T-shirt and a Kids Up Front button.” I’M IN! I’m easily bought. I paid attention in Cub Scouts, so look out opposing Survivor Tribe! Seriously though, what an incredible opportunity to be asked to be part of the Survivor Water Valley cast to support such a fantastic charity as Kids Up Front! Kids Up Front Calgary has teamed up with the former challenge coordinator from the hit CBS TV show Survivor to create a unique fundraising event. They’re sending me and 15 others into the Canadian wilderness for 3 days to survive, outwit, outlast and outplay each other! Each cast member has a fundraising goal to raise as much money for Kids Up Front as we can before we are cast away into a remote location in the wilderness. Survivor Water Valley will be an extremely challenging and engaging fundraising initiative to support Kids Up Front Calgary. Jamie Vandehaar, who was a former challenge coordinator for the hit CBS series Survivor, along with his crew, offered their help and expertise to create a unique version of the popular show, exclusive to Kids Up Front. Sixteen players are split into two “tribes” and are taken to a remote, isolated location near Water Valley. Contestants are forced to live off the land with meager supplies for two nights. Frequent physical challenges are used to pit the tribes against each other for rewards, such as food, luxuries, or for “immunity” forcing the other tribe to attend “Tribal Council”, where they must vote off one of their players. Once about half the players are remaining, the tribes are merged into a single tribe, and competitions take place on an individual basis; winning immunity prevents that player from being voted out, while seven that are voted out at this stage form the game’s “jury”. The jury then votes for which player should be considered the Sole Survivor and win the grand prize. All money raised will go to Kids Up Front Calgary. Everyone who donates toward the fundraising efforts will receive a charitable tax receipt from Kids Up Front. I’ve personally been a volunteer with Kids Up Front for the past year and can’t say enough great things about this organization. Kids Up Front provides experiences to deserving kids, teens and families. Many of the kids are affected by poverty, abuse, illness and disability or they are newcomers to Canada. They endure trying conditions, sometimes without any family support. And they need your money and my survival skills! Please donate any amount you wish – it’s as easy as a few clicks below. Put it this way: If you don’t donate and I don’t make my fundraising goal of $2,000 then you don’t get to see me struggle in bear country with nothing but a pair of Daisy Dukes! It’s for the Kids.
Calgary detached homes have over 3,077 active listings at the moment, the highest in nearly 4 years. The gap between active listings and sales is growing larger and as you may remember from previous posts, the bigger the gap the more likely prices will fall in the coming months.
Last week of January. The time of year when most have given up on their New Year Resolution and to top it off, your December credit card bill needs to be paid. Debt. High interest debt. Paying high interest for purchases of ‘stuff’ is a killer to your finances (you already know this). However, sometimes it isn’t the interest you are worried about, it’s the monthly payment obligations. Especially as people are laid off or have their hours reduced during our current economic slowdown. Now, today, sit down and look at ALL of your currently monthly payments and debt balances. Strongly consider a debt consolidation loan to help you get back on track and saving more for retirement. Consider this example, perhaps it illustrates your situation. Perhaps it opens your eyes to the power of cash flow to help you retire earlier!
EXAMPLE: Let’s assume you owe $40,000 in total debts that have over $1,000/month in payments: Car payment: $275 MasterCard: $157 VISA: $123 Retail Credit Card (Bay, Sears, etc.) $175 Loan (line of credit) $286 TOTAL PAYMENTS: $1,016
A debt relief mortgage/loan can pay these debts to consolidate into 1 monthly payment of approximately $402. Saving you $614/month in this example! Now put that money into savings any you will soon go from being in debt to having a retirement fund!
Call me if you think this is something you would like to explore for your debt. I can't help with your broken new year resolution though, google Bob Newhart's skit on 'Stop It' for that part.
Calgary media writing today that real estate market sky has fallen. But has it? Are you wondering why your neighbour sold their house for near list price in under a month while today’s media says, ‘buyer's market’? Can you have a seller's market at the same time as a buyer's market? What a neat and frustrating market we have in Calgary (and surrounding towns) at the moment. Price of oil hovers around $40/barrel, layoffs in the hundreds per week, yet, here we are with some homes selling fast and at list price. Every down turn is different. In the 1980’s we had mortgage rates nearing 20% (20 freaking percent!). Oil supply and Mr. Trudeau’s (the older guy, not the newer guy) National Energy Program (NEP) in the 80’s lead to a collapse in our oil industry but homeowners also had double digit mortgage rates….with this information, I’ll let you play economist to figure out why house prices dropped in all price categories. Fast forward to the most recent memory, the 2008/2009 housing drop. Thanks to greedy American investment bankers we had one of the worst economic financial meltdowns in history. That led to Canadian banks to literally HALT lending to most people for a period of time. Combine no mortgage access with a lower demand on our oil and exports, our provincial economy took a hit as people left our province. With nobody buying houses and others unable to get a mortgage because banks stopped lending, demand dropped and supply increased at a dramatic rate (Fall of 2008). Prices fell quickly, across all price categories. Now, let’s look at why, after a full year of declining oil prices, we still have a market where some homes are selling like hotcakes? All of the past downturns have shown swift movements in the housing sector, why not this one? 1) 2013 Flood. While the flood devastated so many homes and people, it actually created significant wealth for most other homeowners. Builders were behind production in 2013, resale home market was already balanced at the time, and migration into the province was at record numbers with nearly the size of Airdrie moving to Calgary that year. We had a zero supply in the rental market, forcing many to buy. The flood displaced hundreds and took out any little supply that our market had at the time. So, by the time oil dropped in 2014, our supply was so low and demand was still high. There was a lot of room to add supply to our market, easing a lot of the initial pain to real estate prices.
2) Affordability & Financing. Yes, people are losing their jobs. However, in the $300-$500K segment of the market, by technical standards, Calgary and Edmonton still boost the most affordable real estate values in most of Canada based on average incomes. This is why, as of December 1, 2015, we still have a seller's market in this category with just a 2 month supply. Conversely, the unaffordable market of over $600K, has over a 6 month supply or a buyer's market. Also, mortgages are still attainable, whereas in 2009 they were not, in a broad sense. In the summer of 2007, house prices in Calgary across all segments of the market teetered on the unaffordable side (relative to incomes and average house price) and then when the prices dropped enough for people to buy, the banks said no to the mortgage! Ouch, what a time in our real estate market by the time 2009 came. In the current market, people who want to buy a house can still afford to buy a house and can still get a mortgage to buy the house.
3) Migration. Up until the third quarter of 2015, we still had a large number of people moving to our province. Crazy considering the number of job losses in 2015, but they kept moving here! In 2008, people stopped moving here almost immediately. This time the trend has taken a lot longer. Expect this to change for 2016, expect fewer people moving here. NOTE, when or if you see the migration number as a negative then you can officially call every segment of the housing market a ‘buyer's market’!
Are you sitting on an $800,000 house or a condo apartment and cursing me at the moment? The so called ‘hot market’ only pertains to the single family (detached) homes under $500,000. Homes in the higher-end are faced with a buyer's market, as do all condo apartments. In fact, condo apartments could become much worse as 2016 progresses as new buildings near completion. If oil doesn’t rebound during the first few quarters of 2016, expect migration to falter and housing supply increase. This will cause even the ‘hot market’ of homes under $500,000 to become a buyer's market as well. Once this happens, you will then see a real drop in overall house prices. We just aren’t there yet. For the next few months we will continue to operate in this strange seller's market and buyer's market, relative to the type and price category. So if you hear a co-worker or friend brag about their house selling fast at no discount to last year's price, ask if it was a condo or detached house, then ask if it was under $500K or over $500K.
The best case scenario for Calgary or Edmonton in 2016 would be stable oil prices and a housing market with zero appreciation (give or take a few percent depending if you are in the above or below $500,000 segment). This is the BEST case scenario. Worst case isn’t worth talking about is it?
Terrible time to downsize because your larger home will take a bigger overall hit than your newer home. But, it is what it is as they say. At least you built a lot of free equity over the past decade. Plus, this trend could take years so if you want to downsize, then waiting might not help you either as taxes and maintenance will cost you a lot more by hanging onto your larger house. Great time to enter the housing market if you can afford it and have a stable job. More selection, better pricing and record low mortgage interest rates make your timing nearly perfect (but not perfect). The one thing to consider in buying a house in 2016: it won’t be a great short-term investment as it likely won’t appreciate over the next 5 years enough to pay closing costs, commissions, taxes etc. So, if you plan to by real estate next year, consider it a long-term investment and hope you don’t need to sell it within a few years.
These are interesting times in Alberta. Please let me know if you have any questions regarding your house or mortgage, ask now before it’s too late.
In 2008 our real estate market experienced over-building and a large supply of homes combined with negative migration to our province (low demand for home buyers). This caused steep price declines. During the current oil industry crisis we have been lucky to have started with a low supply of homes. Todd Hirsch of ATB reports today this might be changing, especially in Edmonton. Migration could turn negative very soon yet builders are still building on spec. I could go on with in-depth analysis using graphs and charts but really it simply means prices will drop more rapidly than they currently are. Expect this in 2016. Todd’s report click here.
Calgary real estate market, calm but definite in its trend downward. Single (detached) home prices have slowly decreased to a near 5% drop compared to this time last year. Good news, there isn’t an Armageddon or mass rush to the exits we witnessed in October 2008. Prices can be expected to continue this downward trend as inventory increases and sales continue to decrease. Sales in October 2015 were down whopping 34% from October 2014. Do you own an apartment condo and looking to sell? It won’t be pretty. There is nearly 6 months worth of active listings you are competing with. Prices have had a rough year (seen in the chart below). With new buildings being completed this winter, inventory and prices will continue to enjoy an inverse relationship. What’s next? Migration is nearing negative numbers. As major oil companies continue with layoffs and major investment into our province evaporates, people will stop moving to Alberta. Once our migration numbers show negative numbers, real estate is negatively effected in the months following. Since builders haven’t over-built and the market has already been easing over the past 10 months, the landing should be soft, but, negative non-the-less.
Secondary Suites in Calgary have been under the microscope at City Hall lately. As a result, I have had a number of people asking how/if they can add one to their house. I have constructed a list of general guidelines regarding secondary suites in Calgary:
1) Check the zoning of YOUR house. Until city council fully approves a change to the bylaws, you can’t add a secondary suite to your house if you have an R-1, R-C1, R-C1L zoning without a lengthy and uncertain re-zoning (Land Use Amendment) process. This can take a year in some cases, sometimes after the fight you still can’t add the suite. R-2 zoning (and some others) is the proper zoning allowing secondary suites in Calgary.
2) Apply for a permit with the City of Calgary. Then, cross your fingers and have a LOT of patience!
3) Your lot must be large enough. Minimum size in most cases: 13 meters wide by 30 meter deep.
4) You must change/add basement egress windows to allow proper emergency escape. An egress window should be a minimum of 3.77 sq/feet with no dimension less than 15 inches – unobstructed with a proper window well to allow escape (you must verify the latest building codes, this is just a guideline).
5) Minimum ceiling height for suite is 1.95 meters.
6) The secondary suite must have their own balcony, deck or patio of at least 7.4 sq/meters.
7) An independent heating and ventilation system, along with an independent electrical service panel or a convenient access to a shared panel must be installed. This is a surprise to so many that they can’t use the same furnace that heats the rest of the house.
8) Furnaces and hot water tanks must be in a separate, enclosed, fire dry walled (at least ½ inch thick) room.
9) Smoke (fire) separation between the main dwelling and secondary suite must be installed (meaning, add a ½ inch fire rated drywall on ceiling/walls/common area/exit).
10) You must install interconnected smoke alarms to both dwellings of the home.
As you can see, it's not as simple as putting a new door to your basement and collecting rent. Done right, to code, and with permits, adding a suite will INCREASE not decrease your property value in most cases (contrary to popular opinion). Done without proper building codes and permits, you are putting your tenant at risk not to mention the potential to destroy your life savings!
If you have any questions regarding the effect on value or my own personal philosophy regarding city density and secondary suites please contact me!
I have financed the purchase and construction of secondary suites many times, if you have a mortgage question please don’t hesitate to call and ask!
This list is to provide information only. The list is not comprehensive and not to be relied on (check the current building codes and bylaws before proceeding with any renovation). William Charlton - Mortgages
William Charlton is a direct private mortgage lender and does not provide mortgage advice, mortgage brokering services or arrange third party financing. Should you need mortgage advice please contact the Real Estate Council of Alberta or the Alberta Mortgage Brokers Association. William Charlton does not accept other investors and does not raise funds.