‘Catching The Bus Out Of Boomtown’
The Calgary Herald has this housing bubble report from Canada. “For Tim and Erin Luki, a hefty house loan meant settling for fewer future children, cheaper vacations, full-time work for both parents and a lifetime of monthly payments to the bank. So the family is cashing in on what’s become for many a real estate lottery, and like others, the Lukies are moving on instead of up.”
“The Lukies are among a growing number of longtime Calgarians seizing the opportunity to sell high and buy low, somewhere other than this booming metropolis where property values keep shooting skyward. ‘We feel lucky. We’ve been told by so many people they wish they could go, too,’ says Erin Lukie.”"The experts are reluctant to admit there’s an emerging trend; that people are increasingly catching the bus out of boom town. The Calgary Economic Development Authority ‘didn’t want to go there,’ and declined to provide any further comment.”
“The Calgary Real Estate Board, too, was reluctant to point out a flaw in the rosy picture called Cowtown. Board president Kevin Clark admits he’s heard stories of longtime Calgarians who’ve been sitting on a pot of gold selling out to chase a new real estate rainbow in another town.”
“‘Calgary is getting to be a pain in the butt. Traffic and taxes and all the BS that piles on,’ says retired geologist Don Wilson, who at 85 is leaving the home he bought nearly 50 years ago for a life in an apartment in Nanaimo, B.C.”
“Wilson bought his Glendale home for $19,000 in 1958 and recently sold it in a day for $480,000, $80,000 more than its listed price. A number of other longtime residents on his street are also selling.”
“‘At that price, I thought somebody had rocks in their head,’ said Wilson, still reeling from the windfall he doesn’t even need and plans to give away to his kids.”
Thanks to the reader who posted this link earlier. This story reminds me of when I first got to Arizona. I noticed a bunch of people here were from California. I started asking them, ‘why did you leave, it is supposed to be wonderful.’ Almost every one either left to cash-out or because the entry-level homes were too high.
The folks moving from Calgary to NB might be surprised how bubbly it is in NB as well. A friend of mine there sold his house in one day for twice what he paid for it 6 years ago.
I spent a night in Calgary years ago. Nice enough, but a big city. I do remember driving for hours south and west through mile after mile of fields, etc. Not exactly a shortage of land in Canada.
Doubling in six years?? That’s nothing. My friend put his SoCal house on the market in 2003 for exactly twice what he bought it for 2002 — as a feeler. The house sold it in two weeks. Lot of people on this blog and elsewhere who are constantly amazed at the stupidity of people, haven’t grasped the mind-set of a bubble-head momentum chaser. I kid you not, many of the second home buyers are actually looking for expensive places that are in fast rising markets. In fact, if prices haven’t risen 20% in a year, they aren’t interested!! We here think that’s crazy, bubble-heads thinks thats business as usual. People accuse me of not knowing the facts when I tell them houses have gone up 600%-1000% in since 2001 here in specific areas of SoCal (with NO remodeling or tear downs, the exact same property). Literally you can simple knock a zero off the end of the price tag to know what houses here sold for in 1998-2000.
And you can knock two zeros are the price tag to get 1970 prices. So If a house is 3 million today (or Aug 2005), in 1998 it was 300,000. In 1975 it was 30,000. That’s a pretty good guide to SoCal bike-to-the-beach property.
For great Calgary coverage, check out the Calgarian Contrarian.
Calgary is an interesting case. The oil industry (especially the oil sands - which has more oil than Saudi . . .) is absolutely booming. They cannot get enough workers in the province. McDonalds has to pay well more than minimum wage to get anyone to work there.
Ben is right that there is no land shortage, but there is a construction worker shortage. Labour is the scarce resource; not land.
All that said, prices can still get out of hand. Especially if this is just a supply-side bottleneck.
Compared to British Columbia, Alberta is ‘different’ because they are attracting huge inflows of population (unlike BC, which is seeing net outflows) and the huge oil projects underway.
However, this doesn’t mean that Alberta is ‘different’ in that prices are completely justified. The prices really started taking off only about a year ago there. So, they are still pretty early in the psychology cycle.
Moreover, the Bank of Canada pays a lot of attention to how the high dollar(caused by high commodity prices) hurts the Ontario manufacturing economy. So, there is no guarantee of much higher interest rates here.
A bit more: trades workers are flocking to Alberta - living in trailers and tents. There was a story in the paper the other day about a guy from Quebec - couldn’t speak a word of English - doing drywall or something and making big $$, but living in a campground in Calgary.
So anyhoo, I see this as big increase in demand running up against a supply constraint. That explains big price increase. However, if oil prices were to drop - or when the supply side starts to respond - prices could move in the other direction.
Calgary, for those unfamiliar, is a city cold enough to justify the steretypical perception of Canada as an icy, unforgiving climate. They regularly have snow well into the spring, and in some years they’ve actually had snow in summer - August in ‘02 for e.g.
In other words, people are moving there for jobs, not for lifestyle or amenities. So, as VHB notes above, if oil prices drop or supply elsewhere increases, prices will drop like a stone.
My mother was born and raised in Winnipeg. I believe that is the closest thing to Siberia in North America. Seriously. They plug the cars in to electric outlets in the winter there. I don’t think I’d survive a winter in that place.
And isn’t Ft. McMoney still a flying commute from Calgary anyway? Even if you bought a house in Calgary you’d still be flying out to the work areas and living in tents/shacks..
txchick57 - yes, even other Canadians discuss the city of ‘Winterpig’ in hushed tones of horror.
Calgarians also have to plug their cars into electrical outlets, to keep the batteries from freezing solid. It’s a regular winter wonderland.
txchick57,
I was born and raised in Siberia, we used a blowtorch to warm the oilpan, it was like molasses, and took the car battery home. God I miss those days, when my ear and nose cracked as I was walking to work. LOL. Trees were snapping in half on a good sunny day. I miss snow in California.
From watching Canadian TV, I got the impression that the country is really pushing for in-migration. But what will these high prices do to that?
I really like the people there; one cultural thing I noticed in the media. They almost purposefully avoid mentioning the US until the end of the news, or downplay the US’ significance with regard to their economy. It seemed like they were self-conscious about it.
Yeah, we take a lot of immigrants - much higher than the US in %age terms. Most are from China/India these days. We have a system that gives big points to education, but we don’t really have a shortage of guys with an masters in Sociology - it’s a shortage of diesel mechanics and tradespeople. So, we end up with all of these doctors from Kenya driving taxis because their degree isn’t recognized here, but continued shortages for the jobs in demand.
Yeah, and Kenya loses much needed doctors. It would make more sense all around if we brought-in some of their tradespeople instead, as we need them more and they’ll miss them less.
They almost purposefully avoid mentioning the US until the end of the news, or downplay the US’ significance with regard to their economy. It seemed like they were self-conscious about it.
Canada has an identity crisis; we’re so much like Americans (except for socialized medicine and fewer handguns) that it is difficult to define ourselves other than as ‘not Americans’. Consequently, we de-emphasize the (in reality, ubiquitous) American influence (both economic and cultural) whenever possible. Think of an insecure younger brother, obviously and pervasively influenced by an older brother, yet uncomfortably insecure and self-concious in the elder’s shadow.
That may be the way Canadians feel, but I found the people to be a better lot, percentage wise. Sincerly honest, friendly. A kind of frontier toughness outside the cities. I would love to live in BC, but the over-all socialism is worrying. Traveling on the highways took some getting used to. Everybody drives exactly at the speed limit. Lawabiding to a fault, except when it comes to drug laws.
You should check out the Maritimes. They are beautiful and not nearly as expensive.
In Vancouver they have photo radar, so it would explain people driving the speed limit, at certain times. Trust me I lived there and we are a bunch of speeders
Out here in Toronto 130km/hr is the average speed for the 401 highway, but the posted speed is 100km/hr
photo radar was abolished by the Liberal provincial govt years ago, and no one drives the limit in Vancouver unless they want to experience roadrage first-hand.
80% of all immigrants to Canada go to Toronto, Montreal and Vancouver. This is for cultural not economic reasons - birds of a feather flock together. Alberta (Calgary etc.) has Canada’s strongest economy, but gets far fewer immigrants. It does get the most internal migration by far.
Calgary has strong fundamentals, but prices have gotten ahead of them. Just wait for the next oil bust. And as has been pointed out, there’s empty land around the city all the way to the horizon - hello supply.
BTW, for the benefit of US readers, when Canadians talk about immigration, they mean legal immigration. Canada has substantial legal immigration (much greater than the US per capita), but very little illegal immigration.
“At that price, I thought somebody had rocks in their head,’ said Wilson, still reeling from the windfall he doesn’t even need and plans to give away to his kids.”
Well put…
That’s what struck me too. The buyers almost certainly ended up with an adjustable 100% LTV I-O and maybe even a pay-option loan. What remains is a lot of debt connected to the same place that was probably debt free.
The 100% LTV goes back to the leverage topic of many prior posts. Leverage is now, more than ever, an overlooked vulnerability in the RE markets, especially when compared to stock market meltdowns. Stocks in general are far less leveraged than housing is today which makes housing a lot more vulnerable to a complete price collapse, where we plunge well below fundamentals in price…
The other thing to mention is that Calgary got absolutely *creamed* in the 1980s during the oil bust then. Ben has often spoken of his experiences in Texas during that period. Same thing for “Texas North” in Alberta. They should know about booms and busts!
A popular bumper sticker in Alberta in the 1990s was something like, “Please God: Just One More Oil Boom. I Promise Not to P!ss It All Away This Time”
We’ll see in the next few years whether they learned.
Yeah, I heard there is a housing boom in Ft. Murray, or McMurray, something like that. I stopped there too. If a housing bubble can form there, no place is immune.
Vancover, I seem to recall Wyoming having a similar bumper sticker. When oil went bust here in the 80’s entire communities got liquidated. The state goverment was also hurting for cash since they had gotten fat dumb and happy off of all the oil royalties and did not plan for a downturn.
People in need of help. Goverment out of money and unable too. People have to move. It sucks. I think alot of places are going to see this happen in the next 2-5 years.
‘People have to move.’
That’s what socked Texas housing, especially in the oil-patch. It wasn’t like there were no jobs, but folks had to move to find them. Homes just weren’t selling, so the defaults ran up and wiped out the lenders. Then prices really headed down hill.
We had that sticker in Bakersfield. I last saw it in 1998 when the price of Kern River Crude dropped to $8 bbl. Its now at $62 bbl.
Stress meter moving up swiftly at our office for closing sales & refinances:
I’m severely editing, so bear with me. Wife just closed our office at noon Pacific Time today for the holiday. Came home very upset. Over the past two weeks we have had several instances of people refinancing that have completely “lost it” by screaming at us over the phone why we (escrow) had to pay off certain debts, including Dept. of Social Services leins (you know….child support etc…) etc…which netted the borrowers or sellers less than expected. This morning we had another client completely lose it due to not receiving funds as expected. Went balistic. We just closed on a deal recently where the client purchased a fixer for a cool 1/2 mil. Monitoring that closely over the next few weeks for the turn n burn flip. Had a mortgage broker get a “rainy day” loan from their boss until the MB closed their deal with us. Suspect maybe this happening with Realtors too. Maybe someone should open a “pre-pay-day loan center” for real estate practitioners–lucrative, but maybe it’s already out there.
We have never ever seen so many people including allied real estate professionals (mortgage brokers and Realtors) so uptight and literally putting the squeeze on us and clients to close early to make end of month payday schedules at absolutely NO BENEFIT to their client ( borrower ).
It is really intense folks and we are in an area of Pacific Northwest where we are lagging the country in rising inventory. Multiple offers are still happening and I feel very sorry for these folks if our market turns such as other markets outside of our state lines. I can’t imagine what it’s like in Ben’s country or So. California, Florida or New England. Have a brother in east Mass. near Springfield and he says, OMG, it’s ugly. And yes, I think this is early in the process.
“Maybe someone should open a “pre-pay-day loan center” for real estate practitioners–lucrative, but maybe it’s already out there.”
That’s been out there for at least 8 years with the big companies. Very few boutique shops have access to that.
I thought that’s what HELLOCs are for. If realtors can’t liberate equity on a rainy day, we’re in deep poo
Probably don’t have to drag people kicking and screaming out of Calgary either. The city isn’t all that bad, but the weather gets very extreme and there are a lot nicer places to live..
The old timer thinks so….
So why doesn’t Canada put together a regular run of ships to and from Mexico, to bring work-hungry Mexicans to those plentiful jobs? If that isn’t win-win, what is? It mitigates our border problems, employs Mexicans and helps solve the Canadian labor shortage. For that matter, Central American likely has beaucoup workers looking for this opportunity. Best of all, it would seem to give Canada more balance in its demographics.
Actually there are were hispanics in every part of Canada I drove through (Alberta and west) except the Yukon territories. Mostly doing construction.
How do Mexicans like the feel of -40 degrees? (BTW, -40 degrees is the same for Farenheit and Celsius, in case you didn’t know. Canadians know these things . . . .)
Actually, in reference to my earlier post, there are a lot of immigrants from Africa around (not so much in Vancouver, but lots in Toronto and Montreal). So, I guess humans can adjust.
Haitians and Indians are all over eastern Canada like a cheap suit. They love the easy immigration policies and all the government handouts. I guess if it’s a choice between hard work/low pay/nice hot climate OR kicking back on the government dole in cold weather, cold weather wins every time!
We have a sh*tload of Mexicans/Central Americans here in Minnesota, so I guess they cope with the -40s just fine.
Hopefully our nouveau poster and Canadian Marc Authier will weigh in on this one.
I’d be careful calling a bubble in oil towns. even though oil peaked around 1980, there wasn’t a bust until the last 80s in texas, no? I think oil probably has a long way to run.
I agree, the tar-sand oil boom has years to run yet before it runs into problems (huge amounts of energy and water needed to process tar into oil, vast amounts of pollution produced thereby, etc.)
However, despite all the media coverage directly linking the Calgary housing boom to the oil boom in Fort McMurray, I suspect that Calgary housing prices are primarily a function of the rolling RE boom and that the oil boom connection has been presented as a seemingly rational justification for the otherwise irrational spike in Calgary housing prices. God knows there’s no other explanation for people paying high prices to live in that frigid cowtown (my place of birth & childhood, my memories are of snow and more snow), therefore some explanation was required and an uncritical media breathed it into being, perhaps with the assistance of industry insiders. Nothing new there.
Speak for yourself, Betamax. Your view of Canadian’s sense of themselves is off-base. That answer you gave may have prevailed 30 years or so ago.
I disagree on both counts: I am not speaking for myself at all, and the national definition of being not-American is still regretably prevalent.
Many Canadians, particularly young people, have of late exhibited a jingoistic rah-rah form of patriotism (which in itself is merely imitative of Americans), but there seems to be little substance to it regarding what makes us quintessentially and uniquely Canadian. Wearing a T-shirt that says “Canadians kick ass” suggests much but actually conveys nothing.
I think I’ve heard of this “Canada” place before. Where is it again?
Betamax,
Don’t be ridiculous. Last summer, we drove to Newfoundland. What a beautiful and varied country. Look at the talented Canadian performers we have all enjoyed…from Paul Anka to Avril Lavigne. (Including Cirque du Soleil which is from Canada!) Our country created four sports, Basketball, Lacrosse, Hockey and Ringette.
If you’re talking about “identity”, you must be taking a very narrow view. I certainly don’t have any “angst”. I’m sorry that you do.
Boombust,
Sorry, but I gotta take Betamax’s side here… I am also Canadian, but having lived and travelled in Europe and in the US I gotta say we really don’t compete when it comes to “identity” per se…
Most other countries have very, very strong traditions whereas we Canadians are such a diverse nation that there is not really one particular thing that you can call “Canadian” - IE all Canadians eat it, do it or are familiar with it. Maybe maple syrup? Hockey night in Canada? We certainly don’t all speak French, and neither do we all speak English. People on the west coast smoke a lot of weed, but do people on the east coast? What about Halifax? What does it have in common with Victoria? Both cities are near water?
Really, when I was asked to define something that was symbolic of Canada, I could only answer “Diversity.” (Oh, and the fact that we aren’t Americans… yet… Harper seems to want to change that, though, so pretty soon we’ll have to scrap that answer…)
I am not expressing my own ‘angst’ here; I am merely describing what I perceive in the actions and expressed beliefs of many other Canadians. I am merely attempting to objectively report what I have observed. I don’t understand why you can’t understand the difference.
Betamax,
NOT to mention that Canada has North America’s OLDEST city, (St. John”s NL) and the world’s second largest French-speaking city. (Montreal) You really need to get out more.
You’ve travelled in Canada, that’s great - too many Canadians have not, instead choosing the easy pleasures of a Club Med over experiencing their country, culture and history first-hand.
In ‘02 I fulfilled a life-long dream by spending the summer riding a motorbike coast to coast and back again. It cost me a lot of money, both in expenses and lost wages, but I felt it well worth it to experience this great, large country in it’s totality. I had studied Canadian literature and culture in university, but I wanted to see it all up close and personal, to experience it directly, without the mediation of media. As a consequence, I have a fair idea of what Canada is all about, though I am not prepared to write a treatise expressing it here.
And now…back to housing….
Hi Guys, the Calgarian Contrarian here…
Calgary is clearly booming from an economic point of view. However, the real estate market is awfully bubbly based on all the same factors as in the other cities… hype, panic, misinformation. Everybody talks about real estate all day long. Thousands of people are flipping houses. Huge bidding wars way on the outskirts (right beside the next farm). The last time I checked oil was still a commodity, and commodities are cyclical. They always have been, and no… despite what Calgarians think, it is NOT different this time. People are getting raises that average 7% per year but house prices up over 50% last year. Rents have risen but not so sharply. Anything you buy today to try and rent out will be cash flow negative. People are taking huge mortgages, HELOCs, and living the good life as if the boom will never stop.
We are different… we will get extra suprised when the bust comes.
http://www.calgary-housing.blogspot.com
I know Calgary well and no-one in his/her right mind would move to such a dismal place for any other reason than better work. It gets my vote as Canada’s ugliest city. I do not think the city planners have ever had a vision for Calgary. It has 1 million ugly strip malls that line every major street and there is a Porn Store on every street corner. The weather is brutal: a very short summer and excrutiatingly long and bleak winter. There are no lakes or rivers nearby. I could go on but enough already. Calgary’s real estate boom is completely artificial. As soon as the economy turns around the prices will nosedive as everyone will leave this cursed and godforsaken place.
You are forgetting Edmonton. Like Calgary but worse.
Yah, right, you’ve been to Calgary. No rivers. No Bow River or Elbow River. No Rocky Mountains. I see you are from Vancouver… talk about an artificial real estate boom! And there are just as many strip malls and way more porn shops in the GVRD than there are in Calgary, and as for weather, I have lived in both places, and 11 months of rain isn’t that much better than having an actual winter.
Bow river: You call that muddy ditch a river? You sound like you love Calgary which proves the epithet that “love is blind”. Open your eyes buddy.
Calgary has suffered from the boom town mentality since forever: “we are only here for a good time, not a long time”. That’s why you can drive through countless old subdivisions and see houses sitting on empty flat lots with no efforts from any of it’s owners over the years to plant a tree or shrub to make it look good. I understand that the growing season is only a week and a half long, before the winter sets in, but still, over many years a plant would grow a few feet.
I can drive around all day in Vancouver and the GVRD without seeing a single Porno store. Try driving down the no. 1 through Calgary town and do a count for me.
What street in Vancouver is completely lined with delapidated strip malls with crappy retail stores, porn stores and dingy restaurants, as most of greater Calgary’s streets are? Maybe Surrey, that’s it.
Calgary is attracting heavy drinking hosers, rednecks and yahoos from all over the country to work the oil patch. No wonder long time residents are clearing out. No wonder too, that Porn shops are doing so well.
10 years ago or so, you could really get around Calgary quickly. The congestion is now equal to, if not worse than Toronto’s.
Bottom line is: I would not move to that city under any circumstances. That’s the only thing you Calgary hosers like to boast about: your boomtown economy, there is nothing else to brag about, there never has been anything else.
OK, I’ll admit that once outside Calgary, the “big sky” country is quite beautiful during the summer.