Or I guess it's going to be more like an on-going project. This comes after a little discussion about home prices in my city. While out driving on the weekend, we saw that my boyfriend's old house is for sale. It was built in 1981 and worth about $70,000 at the time. Today it is listed at $265,000 and a family member joked that we should buy it because 'it's a good price'. We disagree. What makes 'a good price' these days, in my region and across many parts of Canada. I do not live in a huge city, it's the 5th or 6th smallest - which means we are at the bottom for population because there are not many 'cities' in Alberta lol. First I looked at avg income but it varies online.... (one site says 2009 was to be between $27,000 and $52,000 depending on if you are male or female). Some sites say $78,000 or $90,000 household income. But the range is pretty close so you get the idea.... $50,000 top end for avg individual income, let's say $80,000 for family.
Next I looked at avg home sale prices in 2009 and various sites range from $240,000 to $260,000. Whoa... average?? That's almost three times the higher avg of family income, let alone individual.
I was curious what things look like south of the border so I chose Great Falls, Montana. It's the same distance away as Calgary (actually a bit less), the population is almost the same as my city, same kind of people live in and around the area - farmers, ranchers, hydro power, oil, gas, etc..... but I nearly fainted and died when I looked at the property markets. $90,000 for a lovely home almost identical to mine - except mine would go on market for about $230,000 here. What is wrong with this picture? For $260,000 down there, I could get a house on a piece of land near the city, a shop, a few acres, 2-3 car garage... but just outside the city here you are looking at FAR more than that. What gives?
For kicks we also looked at Las Vegas and nearly choked to death there as well. Palm Springs... same. I am sure some people would say that things have gone bad down there, so I can't judge by that - however I also looked up a few pages that showed former 'avg home prices' in those areas before 2000 and they were still less than half of what they were in my city. The avg earnings for Great Falls was a bit lower than here, around $45,000 individual at several sites I checked - but the homes are only double that, not 3 to 4 times more. It is truly bizarre.
So when our family member said 'that's life' when I said no, a house that cost $70,000 to build should not be $265,000 today, I decided to start collecting some data on similar cities in Canada and the US to compare. I wanted to tell her that the prices here are high because people fell for it, but I decided not to say that since she herself bought a $400,000 home a couple of years ago and is most likely going to lose a lot of money on it when they decide to sell (original plan was to buy it and then sell it in 2-3 years to make a profit and buy a condo)...... It's a very lovely home but when you are hitting retirement age, is that a good decision to make? Scary.
I also noticed lately that a lot of older people are suggesting it's a bad idea for us to be renting right now --- but it occurred to me that when they were my age, THEY were still renting too. And yet house prices were ridiculously low. Yes, high interest rate, but $500 a month is all my dad's mortgage was, now they are 3 times that or higher in this city. Gee, which one would I rather pay?
So my own project is to look around at prices and compare. Should we be sucked into paying this much right now? Or is it best to wait and see what happens because things could come crashing down up here and we will breathe a sigh of relief that we were not financially devastated by it......
You can't really compare the US and Canada. The US housing market is still in complete freefall because of the subprime bubble. The net effect of this was to cause 5-10% of the "owners" to simply walk away as their houses were below water when the bubble burst and they could walk with impunity (in the US a mortgagor can not sue a mortgagee for the difference, and there's no impact on your personal financial state - the only security the mortgagor is allowed is the property). I know one guy who simply walked on half a dozen properties, he wasn't unemployed or hurting financially, he just decided once the market stopped rising it was the prudent thing to do.
ReplyDeleteUnfortunately there's not a lot of price elasticity in housing when you have 10-12% unemployment, so one or two desperate sellers will drive the market down (I saw this on my first house in the GTA where market values dropped more than 50% in one year, I turned down $600K and 18 months later sold for $230).
Alberta, I believe is still growing, so even if you're not in the high demand area your area will be impacted by the spill-over of those who can cash-out of the high demand areas and move to your area.
For a fair comparison you need to look at jurisdictions with very similar economic indicators, demand, and regulations.
I know it's not perfect to compare prices in diff countries with differing rules and regs etc etc but even before 2000, prices in my small city were double that in Great Falls, when our earnings are NOT double. We played little games with the online mortgage calculators on the US and Canadian sites and the mortgages came out at 1/3 to 1/2 they are in my city, old and new prices.
ReplyDeleteWhat bothers me is that while we may not have had as big a problem with mortgages as the US, we are not out of the water. I know people right now who are trying desperately to sell because they got their $300,000 ++ homes at only 3.01% or so interest and they realize now that they have stretched themselves so thin (using the No Money Down and the 35 or more yr mortgages too), if interest rates increase a small fraction they are not going to be able to afford their home anymore. That's right here in Alberta, and across Canada. I know one guy who got his home for fairly cheap (old crappy house lol), but he wound up needing a 50 year mortgage when his wife left him.
How can a guy working full time for GoodYear not be able to afford a $150,000 house? I know him well, he does not have a bunch of other stuff to pay for, his car is old, etc... but if the interest rate increases he is stuck again. It's just mental.
Old houses built in the 50s in the least reputable part of my city are going for over $200,000 right now. No garage, 2 bedrooms, tiny old shoddy houses that everyone in the city has made fun of for the past 20 years - and yet there they are, costing someone a cool 200 grand or more. It's mind boggling. Prices were driven up when people moved here for the booming oil and gas industry but now they are trying to ship out and not lose much cash - homes still being sold for highly inflated prices (in my opinion).
The $265,000 house I mentioned above is listed as 'SOLD AS IS'. Right on the front you can see a piece of siding is torn right off. It looks like someone ripped a bandaid off between it's eyes (windows lol). But it's almost 300,000 dollars. To me this is sheer lunacy and middle income people falling for these homes is very scary. We don't want to see our family members become homeless in a few years when they re-finance... but then again they are often the ones turning their noses up at the fact we are renting and 'throwing our money away'. Guess what - they don't OWN their homes either, not for another 33 years! If they miss payments, they are sunk, no different than us - except when we hit harder times, it won't destroy our credit if we have to move, and it won't destitute us completely. We have choices, they Don't, but we get looked at as 'throwing our money away'. I think buying a house that only 5 years ago was $120,000 but shelling out over $350,000 for it 2 years ago is 'throwing money away' lol.
I understand your frustration, but I still think comparing to Wyoming is unrealistic. If you want to pick a state to compare to try Washington, and pick somewhere 70 miles out of Seattle, where at least the economic indicators are similar. Comparing Alberta to Wyoming is closer to comparing Alberta to a backwater in N.B. or northern Ontario.
ReplyDeleteAlso, realize that in a growing province a rising tide lifts all boats.
New house construction costs here are running about $100-150 per square foot. Add to that lot levies (fee required by municipality on new homes) that can run to over $100,000 per lot in Ontario (I assume Alberta does the same, as its a great way for the town to suck money out of developers) and a 2000 SF house is suddenly costing $250-300000.
Yeah Nevada and Florida were just for fun, after seeing so many homes on Flip This House and Property Virgins for such low prices down there. Great Falls, Montana was my main pick because of the similar life styles of people, it's only about 2.5 hours south of me, population very close in size (only a couple thousand or so less). But Spokane was going to be my next choice to compare. Seems like a similar city, we get all their tv channels lol, and it's the first place I think of when I think of Wash State because I believe I was conceived there LOL.
ReplyDeleteI wish homes of 2000sq ft were only $250-300,000 here..I just finished the first part of my project on my other blog, and almost all of the 80+ homes that were between 0 and $350,000 were just over 1000 sq ft. The top house in my search was 1200 sq ft, built in 2005, and $349,900. But even a house built in 1983 that was 1150sq ft was selling for $294,900. I grew up in that area, and our house in 1985 was $72,000 and probably cost $30,000 when it was first built in 1972. But now those same homes are well over $250,000 and no where near 2000 sq ft.
Building costs are high, but homes in 30-50 yr old areas go for the same price with few upgrades (as in, still a very 60s or 80s home lol). It is frustrating. I don't want to fork out 300 grand for a piece of crap.
I just found another that is 1450sq ft, built 2005, and it's $432,000 today. Oh and finally I'm getting close - an 1880 sq ft built in 2005 for a cool $454,000. It's lovely, but looking at the photos, the living space isn't exactly ginormous,,, but it's over 450 grand.
Oh and ps, I'm sure our city does the same because they announced last year that we had over 350 million dollars cash sitting and waiting to be used. There has been a TON of building going on over the past 8 years or so, with entire new housing estates cropping up in every orifice. But that does not excuse 40 yr old homes going for $200,000. The new ones of decent size are $400,000. You'd think we were in Calgary or something.
ReplyDeleteI can't speak for your area but here the difference between the older homes and the newer with square footage is that the older homes actually have some land attached to it. I look at all these McMansions and you can spit from end of the lot to the other. All the houses look the same and they are so packed together. I love living my little village on the outskirts.
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