Disqus - Latest Comments for rjtCalgary

Re: Weekend Open Thread

rjtCalgary — Tue, 30 Jun 2009 20:44:24 -0000

Inflation is an expansion in money + credit. Deflation is a contraction in money + credit.

People buy houses with not just money, but also credit. The problem is that we have basically reached "peak credit". There is still plenty of land to add new houses and new condos.

Re: Weekend Open Thread

rjtCalgary — Tue, 30 Jun 2009 18:17:02 -0000

That's right Radley. No economic problems here. Close you eyes and tell yourself that 30 times and it must be true! :)

Seriously though. You continue to miss the big picture, which is price levels. Calgary house price levels remain way above sustainable levels. They are being juiced right now by fixed mortgage rates under 4% and variable rates under 3%. It is not a "shortage" of land or houses, or economic dynamist which is propping up prices.

As you your comment about the US RE market bottoming, perhaps, but the CS index today showed that YoY price changes were -18%. Many cities are down over 40% or 50% from their peak prices.

Let's compare median house prices for the following cities.

Atlanta: 209K
Boston: 364K
Chicago: 257K
Denver: 325K
Houston: 189K
Miami: 220K
Minneapolis: 225K
New York: 399K
Phoenix: 199K
Seattle: 355K
Wash DC: 319K

Calgary: 446K

Which one doesn't belong.... Add to that the fact that mortgages are tax deductable in the US, and people can sign up for 15 and 30 year fixed rate mortgages around 5% and you start to see how out of whack Calgary house prices are.

Do the math relative to both incomes and rents, and you get the same answer. Compare to oil and gas cities in the US like Dallas, Houston, and Denver and you get the same answer.

Bottom line, Calgary is not a competitive city anymore, even with regards to the energy industry. low interest rates can keep prices up for a while, but economic fundamentals suggest that there is much more room for them to drop to the downside, than there is fundamental reasons for them to rise.

The fact that you bought a condo in Bridgeland does not change the calculus. If I were you, I would take advantage of this period to get out while you can, rather than watch the "hot" spring market fizzle come fall and winter...

Re: Weekend Open Thread

rjtCalgary — Wed, 17 Jun 2009 09:58:02 -0000

Hi Tony. Are you invested in one of those Real Estate scams? If so, I actually feel quite bad for you. Lots of innocent people were taken in by the promise of easy, high, returns on a "can't lose" investment like Real Estate.

Unfortunately, because we've been in a huge bubble the past 4 years or so, it was very risky to invest in RE development. People just didn't realize that until they gave their hard earned savings to these guys...

Re: Weekend Open Thread

rjtCalgary — Wed, 17 Jun 2009 01:06:55 -0000

Did you guys see this? Another RE scam that suckered Calgarians over the radio...

Real estate investment firm being investigated

Updated: Tue Jun. 16 2009 18:53:33

ctvcalgary.ca

The Alberta Securities Commission is investigating allegations of fraud against a Calgary real estate firm.

Shire International Real Estate Investments' principal Jeanette Cleone Couch and several related companies are being investigated for fraud and misuse of investor funds.

The commission has ordered the company to stop marketing some of its investments pending a full hearing on the matter.

The news is not sitting well with investors.

Jennifer Lofgren and her husband invested $75,000 in two Shire development projects - one in Fort McMurray and one in Maui.

Lofgren says, in the three years since they invested, the company has done little on either project.

Lofgren says when her bonds matured on one of the projects she tried to pull her money out. She had a contractual right to do that but she says Shire never gave the money back to her.

A spokesperson for Shire International Real Estate Investments, in a written statement, says the company is "deeply concerned about the ASC's actions and allegations and the impact on our company, staff, investors and business partners. Because the matter is before a hearing it would be inappropriate to respond to any specific allegations until then."

Re: Weekend Open Thread

rjtCalgary — Sun, 14 Jun 2009 23:30:36 -0000

Hey Stormy. Once everyone who doesn't own a house is priced out, who will buy?

I know you think RE prices only Rise, but that is because you are an idiot, who doesn't learn from history. Typically, prices rise for an extended period, then fall for an extended period.

Ask any American if house prices only go UP

Re: Weekend Open Thread

rjtCalgary — Fri, 12 Jun 2009 11:15:02 -0000

Virtually all Canadian mortgages are what the USA would call "ARMS".

In the US, a fixed rate mortgage means a 15 or 30 year loan, and the rate is fixed for the entire length. In Canada, most loans are either monthly adjustable, or fixed rate for 5 years. In 5 years, almost all loans have the potential for interest rate shock, depending on the prevailing rates of the moment.

The biggest risk that people take in my opinion, is not understanding this issue. People max out their monthly payment capacity based on extremely low rates. This is very stupid, as they can still experience payment shock in 5, 10, 15, 20 years... Do you want to predict what interest rates will be in 10 years? It is impossible to know.

That is why it is actually much better to buy a house in a high interest rate environment. Not only will you pay much less, but you have to potential to benefit from lower rates in the future, which will push up the value of your house, and lower payments when you re-finance at the next term. If you pay top dollar for a house at ultra low interest rates, you have virtually no upside, and only excessive risk. You can pray that rates stay low forever, but realistically, you will have the double wammy of higher rates in the future pushing down the value of your home, and also the very high probability that you will have to re-finance at higher rates in the future.

Re: Weekend Open Thread

rjtCalgary — Thu, 11 Jun 2009 16:07:31 -0000

Radley likes to speak of inventories. Here is the problem as I see it for the oil and gas sector

http://www.eia.doe.gov/oil_...

If you understand this data, you will see that natural gas inventories for North America is at an all time high for this time of year. over 18 months of low prices has not reduced supplies.

Until you see natgas prices firmly over $8 for a long period of time, it is unlikely you will see robustness return to the conventional drilling sector. That's why Alberta's government is in the red and asking for equalization payments. That is why there is a hiring freeze on nurses etc. The newspaper focuses on oil prices, but over 80% of our energy sector is natgas.

Those bulls expecting 2009 to shape up like 2006 better look at the big picture. The massive drop in interest rates and the usual spring house buying season have been a definite prop to the local housing market right now, but over time, that "stimulus" will wear off and the crappy economy, rising unemployment, & still very high house prices will again weigh heavily on the market.

Those looking to sell, have about a month or two before the market slows way way way down again. I suggest if you get an offer, take it, because this time, the first offer will probably be the best one you'll see for a couple of years.

Those looking to buy, you will easily save $20,000 or $40,000 or $60,000 simply by waiting until the fall, when the "spring rush" is over.

Re: Weekend Open Thread

rjtCalgary — Wed, 10 Jun 2009 23:16:20 -0000

I don't know much about these guys, other than the radio commercials telling ignorant Calgarians to invest with them because they were "no risk, high reward" savvy real estate investors.

Turns out they wern't so savvy after all.

There is no such thing as "low risk high reward.

Re: Weekend Open Thread

rjtCalgary — Wed, 10 Jun 2009 23:12:14 -0000

Did you guys see this?

Concrete Equities in receivership

To the chagrin of investors who packed a Calgary courtroom yesterday, Concrete Equities was placed under receivership.

Justice Barb Romaine ruled the best thing for the real estate company would be to put it under the control of a court-appointed receiver.

A lawyer representing limited partners in the company had sought an order replacing Concrete's current general partners with a new entity.

But, Romaine said such a move would be a step backward in terms of stakeholders finding out where their investments stand, instead approving the general partners' application for a receivership order.

"The new general partner would be starting from the state of almost no information," Romaine said.

Mike Hansen, one of the limited partners, said he was disappointed, noting if the company has to liquidate the five buildings they've invested in, his group will see little return.

"As limited partners we would be the ones to fall to the bottom of the list (of creditors)," Hansen said.

"Pennies on the dollar, that's been the concern right from the beginning," he said.

The limited partners, who overwhelmingly voted to put a new general partner in place of the current management, will at least in part benefit from court intervention in the operations, he said.

"Now that it's in the hands of the court, the shenanigans can stop," said Hansen.

But he said the process chosen by the limited partners -- a process lawyer Blair Yorke-Slader will ask Romaine to still consider -- would have been preferable.

"We have voted in a new general partner and that general partner will do the forensic audit for us and that's in the end what we want to do," Hansen said.

"We will find out where our funds have gone, but it should be by our choice, it shouldn't be done through the courts."

Re: Weekend Open Thread

rjtCalgary — Sat, 06 Jun 2009 11:00:14 -0000

In my experience working for a bank and a large financial company, bankers are not the wisest people around. They believe lots of hype, and say things like, "that couldn't happen to MY loans".

I guarantee you those working for Citi, Merril, Bear, etc etc had no idea of how many bad loans those banks had on the books. They lived in a world of denial, because their "models" told them they were hedged and the likelihood of national price declines in houses was a "six sigma" event, which had a probablity of basically zero.

Just like our friend Radley's "model" which tells him that Calgary house prices will bottom in 2009. Nothing to worry about... I wonder if Radley build into his model the possibility of new condo developers dropping prices by 40%-50% to sell unsold inventory? Hehe

Re: Weekend Open Thread

rjtCalgary — Fri, 05 Jun 2009 10:17:41 -0000

Some great deflationary news from Calgary. Rents down for residential and commercial. Even better news: Construction costs down and falling...

Vacancy rate reflects tough economy

Updated: Thu Jun. 04 2009 17:58:35

ctvcalgary.ca

Good news for tenants is bad news for building owners downtown.

Residential and commercial vacancy rates are rising and prices are falling.

Developers of the Waterfront project on the east side of Eau Claire are the latest to feel the pinch.

Two towers are slated to go up on the site and while they will go ahead as planned, developers say the market has changed dramatically since the project was announced.

"The money we are going to make is what you would call the economic minimum," says Eric Carlson of Anthem Properties. "It is tough. It is tougher than it was for sure."

Properties in the building are now being reduced by up to 187 thousand dollars and buyers who have already signed up will be getting a rebate.

According to Greg Kwong of CB Richard Ellis, Calgary has roughly 34 million square feet of inventory in the downtown core with another six million coming online by 2011.

That could push the vacancy rate to 18 per cent in two years.

The upside to the downturn is that construction costs have dropped significantly, allowing some developers to drop their prices without cancelling projects.

Re: Weekend Open Thread

rjtCalgary — Wed, 03 Jun 2009 15:53:44 -0000

Ever hear about seasonality realtor? I know you can't possibly learn that much in your 3 week course... but come on. The 2nd lowest sales in May of the last 10 years... May is always up from April. Just like September sales will be down from May.

Re: Weekend Open Thread

rjtCalgary — Wed, 03 Jun 2009 01:08:30 -0000

Hehe. Good comment. In my opinion, part of the problem in Calgary and Edmonton, is that many people during the boom started believing the nonsense that "we are the next New York" or the next whatever. It's all bs. People who believed that were mostly from Saskatchewan or rural Alberta and have never been to New York, London, Hong Kong, or any real large true international city. People like Radley who think that Calgary is the big time.

Castello and condos like it, were charging big city prices for small condos in a small, un-densly populated prairie city. Once the fools ran out, no big surprise that they are stuck with unwanted, small, overpriced condos.

In 2006, my good friend bought a nice 1 bedroom condo in a great area of mid-town Manhattan for about $399K. People told her she was crazy. The funny thing was that people in Calgary were paying the same price or more for a 1 bedroom condo in Calgary! So many people bought into the hype, without stopping to think about where they actually lived.

Re: Weekend Open Thread

rjtCalgary — Tue, 02 Jun 2009 12:37:25 -0000

radley

your "models" are meaningless unless you also take into account price levels vs income and rents. Those are the fundamentals.

Past data showing a correlation between low interest rates and low bond yield spreads correlated with rising prices were all from periods where the starting prices were much much lower as a ratio to both income and rents.

The current period is starting with prices a huge multiple to both incomes and rents in historical terms.

The current period of low interest rates may be preventing a collapse in prices, but will have nowhere near the juice to raise prices as they did in the 2002-2006 period.

Your risk models are just like all the banks risk models that told them sub-prime loans and prime loans would only default at x percent because historically that's always been true. They forgot to take into account the huge risk layering that happened during the recent boom where people borrowed a greater and greater % of their incomes. That's why they missed the point and underwrote dumber and dumber loans as prices got higher and higher. That's why it blew up. And that's why extremely low mortgage rates did not save the RE market from it's fundamental correction.

Re: Weekend Open Thread

rjtCalgary — Tue, 02 Jun 2009 00:54:19 -0000

Stormy. You've called a bottom to the US recession and housing market for 112 weeks in a row now. You've been wrong for 112 weeks straight. One day you may be right. I doubt it's today though

Re: Weekend Open Thread

rjtCalgary — Mon, 01 Jun 2009 23:07:23 -0000

Monkey. I wouldn't take anything I'm saying personally to Bob or anyone else. I don't even know what you're talking about with Garth Turner.

My issue is that many house salesmen pretend like they are "expert financial advisors", which is not the case. Just like stock brokers tell you to always buy stocks, regardless of timing.

All investments in life depend on timing. sometimes RE is a good investment, sometimes it's bad, just like stocks, bonds, or anything else.

Re: Weekend Open Thread

rjtCalgary — Mon, 01 Jun 2009 22:21:36 -0000

I agree that the market are "anticipating" inflation. However, their is no inflation as of yet... I think the last 6 or 7 years were were inflationary, and the authorities pretended there wasn't. There will be inflation again... the question is in how long. Will it be this year, next? in 5 years? In 10 years?

It is hard for their to be inflation when credit has contracted at a faster rate than base money supply has increased.

Now that the US has to lick the balls of the Chinese, even they will have to stop increasing the money supply at such a rate. When the Chinese start requesting a higher interest rate to finance the US deficits, the US will jump and say "how high!" I don't know when this will happen, but the result won't be pretty.

History tends to rhyme, and if you want an understanding of how the bond market prevents politicians from keeping rates low forever, look up "bond vigilantes". Interesting stuff.

Re: Weekend Open Thread

rjtCalgary — Mon, 01 Jun 2009 22:15:16 -0000

My attack is not on Bob. It is on the industry and how they twist stats to tell the "story" that they want to tell.

Bob does that, and so do many other realtors.

If a house sells quickly, it is because it is priced "correctly" for whatever the market conditions are at the time. In my opinion, it is not a reflection on the "skill" of the realtor.

Re: Weekend Open Thread

rjtCalgary — Mon, 01 Jun 2009 21:25:28 -0000

Just look at the "listings" on his home page. for example "SOLD! in 17 Days for 97% of list price"

If you go to the findcalgary.ca website for daily stats, you will see this stat

Average SP / LP Ratio

Re: Weekend Open Thread

rjtCalgary — Mon, 01 Jun 2009 18:12:26 -0000

I'm on a roll, so why not keep going.

Another retarded stat which is meaninless is "Day's on the market" or "Average day's on the market"

Why?

Because realtors simply re-list and re-list houses, in order to keep the "day's on the market" low

I have a friend that just bought a house in Willow Park. The house was listed last year for $650,000. After a couple of price reductions, it was de-listed and then relisted in February for $550,000. In May, it was taken off the market for 2 weeks, then re-listed for $499,000. My friend (who had been watching it drop for over a year), purchased it the first day it was back on the market for $489,000.

Soon after, the seller's realtor was advertising the house on his website proudly saying: "SOLD in ONE DAY for 98% of list price!)

What a joke.

Re: Weekend Open Thread

rjtCalgary — Mon, 01 Jun 2009 18:07:01 -0000

One more point.

Bob Trumans Sale to List price ratio only measures the "final" list price before a sale.

Example:
Listing prices
March 1: $500,000
April 1: reduced to $475,000
May 1: reduced to $450,000
May 17, sold at $440,000

Sale to list price recorded by bob and his other compadres (Stormy): 98%! See! The market is hot!

Re: Weekend Open Thread

rjtCalgary — Mon, 01 Jun 2009 18:04:04 -0000

Who cares what the average sale to list price was? It doesn't tell us anything other than how realistic or unrealistic the seller is.

Example.
2 houses are identical, in same neighborhood, on same street.

One is listed for $450,000 and sells for $400,000. The other is listed for $375,000, there is a bidding war and it sells for $400,000.

In the first case the sale to list price was 88.9% In the send case, the sale to list price was 107%

These numbers: 88.9% and 107% tell us absolutely nothing about the "hotness" of the market. Both identical houses sold for the identical price: $400,000. Is the market hot or cold?

I could sell a house above list price in a crappy market because I price too low. I could sell a house way below list price in a hot market because I price too high.

Re: Weekend Open Thread

rjtCalgary — Sat, 30 May 2009 14:43:35 -0000

Funny... My prediction is that once the usual spring "buying season" is over, the market will simply slow right back down during the summer. Everyone who still wanted to buy a house this year will have already done so. Mortgage rates have bottomed, and are now starting to rise (5 year up 25 bps in last 3 days from 3.54% to 3.79%). Still very low, but have basically formed a bottom.

At some point, economic reality must set in. Read yesterday that Starbucks, which is a huge lessor of commerical RE is demanding 20%-25% reductions in rent for most locations. Classic example of deflation in action. Calgary residential rents are already down 20% from the peak and probably have some more to fall. More deflation in action.

You can worry about future inflation all you want... you'll know it when its here. Right now however, there is virtually no inflation in sight.

Re: Weekend Open Thread

rjtCalgary — Sat, 30 May 2009 10:56:38 -0000

There's tons of oil. The last "shortage" of oil was in the 1970s, due to the oil imbargo by the Saudis.

Now, you can go to any gas station in Calgary, or the rest of the world and fill up. Also, OPEC has had to cut back significantly to try and prevent an epic collapse in prices. OPEC now has significant spare capacity to increase production if need be.

World inventories of crude oil are currently the highest they've been in history (seasonally adjusted).

What is going on is that fiat currencies, led by the USD are going down, so needed commodities like oil are going up. In my opinion, the type of inflation we are likely to see is in needed products that are relatively un-leveraged (food, oil etc), while we will see large deflation in highly leveraged assets (real estate)

You can't have continuous inflation in RE without rapidly rising incomes or rapidly falling interest rates. The recession is taking care of incomes, and interest rates are basically at a maximum low, they can't really drop more.

I'm not a big fan of Paul Krugman, but he is right to point out that there is no inflation right now, and that all of the excess capacity of labor, empty factories, empty houses etc need to be worked down before we'll see any significant pricing power again.

In Calgary, all I see is deflation everywhere. Rents are collapsing, drive through the industrial zones and you will see hundreds of "for rent", or "for sale" signs on almost every industrial and commercial building. Layoffs of workers, pay cuts, overtime cuts. Not really inflationary...

Re: Weekend Open Thread

rjtCalgary — Fri, 29 May 2009 15:35:41 -0000

hehe. typical sales person.

Nasdaq March 10, 2000 5048
Nasdaq March 6, 2009 1293
Nasdaq Today: 1753

Is the Nasdaq a good investment? You would say yes because you are trying to sell shares, I would say depends on timing.

Same with everything... stocks, bonds, Real estate. Whether it's a good investment or not depends on timing... Prices of Calgary houses remain over 200% what they were 6 years ago... Are we at a bottom, or just the usual Spring rush, juiced by low interest rates?