Contrarian’s View on Calgary Edmonton Real Estate

[bigbear]

Contrarian`s View on Calgary & Edmonton Real EstateI am a professional real estate investor and since several months ago I no longer hold any Alberta real estate in my portfolio. Alberta has been real estate investors` dream come true in the past few years however I do not believe real estate prices will continue to increase substantially and I believe there is a very significant risk that prices may dramatically fall. Real estate prices have doubled in the past few years however wages have increased only 15% in the past 5 years. I question whether this growth of real estate prices is sustainable for the next few years. The chart below makes me wonder whether part of the growth was related to a real estate bubble (another topic for another day).

http://tinyurl.com/yku9aq

Affordability Level

The affordability levels in Calgary and Edmonton has reached approximately 45% of pretax income well above the 33% guideline recommend by Don Campbell.

Here is a quote from his Real Estate Investing in Canada book "Even though prices may be skyrocketing, if the city`s index is 5 percent or more above this mark, it is an indicator that the market is turning speculative and the fundamentals are getting out of balance". I question why Edmonton is still promoted by REIN when it`s index is more than 10% above the guideline.

It is becoming quite expensive to own a home in Alberta and less affordable. Edmonton and Calgary are not world class cities like Vancouver, Toronto or New York to maintain high un-affordability levels.

Real Wages Are Decreasing in Alberta

Yes Albertans have had wage increases but due to high inflation and housing prices the average Albertan earns less salary when adjusted to inflation than five years ago. How will the end users of homes be able to buy homes with higher house prices if they have less purchasing power than they did beforehttp://tinyurl.com/2mf2ss
Why should people move to Alberta now when they will earn less purchasing power than five years ago? People will realize that it`s not as great as it is promoted. Heck from what I read the net migration of people to Alberta is decreasing since there are more people leaving than before in past few years.

35% of Edmonton`s Inventory is Vacant

This is not a healthy sign and this indicates that a lot of properties are held by speculators and real estate investors. (http://tinyurl.com/ysdu89 ) I have become concerned that a lot of the demand in Edmonton and Calgary has been driven by investors and may have artificially pushed prices higher than they would have been. Every single real estate investor I know has been investing in Alberta and they all unquestionably believe it can only go up. Maybe they are right and it will continue to amaze everyone. I just know that you make more money when you move against the masses.

Record High Inventory

Calgary and Edmonton both are near record high levels of real estate inventory. There is massive supply and sales have been decreasing. Supply and demand dictates that prices should decrease. From talking to real estate investors everyone tells me that everything will turn around in Spring and inventory will go back to normal. There is a chance supply might increase because every seller I know who could not sell in the last few months has de-listed from MLS and is waiting for Spring to re-list. I would not be surprised if we have a massive number of inventory as sellers are all hoping for a spring rebound.

Real Estate Prices Decrease $50,000 (10%) in 4 Months

The average price of a Single Family Home in Calgary was $505,920 in July 2007 and it was $452,254 in October 2007. The median price of a SFH also decreased $40,000.->http://tinyurl.com/3d6xcn

Hopefully, this is just a small correction but the last time I have seen a $50,000 correction was Alberta real estate crash in the last oil boom.

Conclusion

I have a feeling I will be labeled as doom and gloom guy but it`s the way I see things. Yes, I know that Alberta has massive oil reserves however I believe that fact has already been priced into housing prices.

I love real estate and I believe it can be a great investment. However, I believe there may be less risky places to invest in than Edmonton and Calgary. I cannot see how continued price increases in Edmonton and Calgary can be sustained.

 

[DonCampbell]

Hi,

It`s always great to see that when the plateaus hit that investors are paying attention.

If you were a REIN Member you would have heard discussions around these exact subjects (affordability index, income increases etc etc) and the economists take on why these numbers fluctuate in an ecomony that grows at the ridiculously high rates that we have enjoyed in Alberta over the last few years.

That`s why we are constantly analyzing and bringing in un-biased experts on these key subjects so we can identify when the market is actually shifting and when it is just going through its inevitable cycles. As a long term investor I`m sure you have seen cycles that have hit before. You`ll remember the mass selling that occured when the Kyoto was signed and announced, you`ll remember the `affordability panic` that occured in early 1990`s as wages were not growing as quickly as real estate prices, you may remember how the `Rent Control` threat pushed speculators out of the market and left us investors to get some great deals. We just covered the 28 times that cycles like this have hit the real estate markets since mid 1999 at the REIN Workshops and put real life numbers to them all to show how you can tell whether the shift is fundamental or cyclical.

Today, of course there is a shift in affordability, average wages couldn`t have jumped the 70+% that property values have in the last 18 months. There is ALWAYS a lag, for obvious reasons. The 33% you focus on is based on 25 year mortgages, now 50% of mortgages across the country (source RBC) are being issued at 35 and 40 year amortizations, thus lowering monthy costs and assiting in affordability index. I`m sure that the Index will be changed by RBC in the coming years to reflect this change. (you will enjoy the new Update Version of Real Estate Investing in Canada that refects the new fundamental changes in structure of the economics - due in 2008)

In addition, I do recommend that you get a copy of Jeff Rubin`s latest presentation at the Calgary Real Estate Conference, his unbiased research also discussed these same subjects and why, over the long term that they will all come back into alignment in Alberta and selected areas of Western Canada.

Keeping on top of these critical cycles is very important, I, like you, love real estate as an investment but of the real economic fundamentals didn`t say it was a good time - none of us would be buying and the REIN Members would know that LONG in advance. That is why focusing directly on identifying what are economic structural changes and what are part of the cycle of an over-heated economy`s growth curve is so critical. Maybe we`ll see you at a REIN Workshop in the future where we discuss these things in detail on a monthly basis.

As a quick side-note, if you do wish to make a comment that others take seriously, I do recommend that you don`t do it anonymously (big bear) but you do put your name and photo in your profile and sign-on. The way it is now, it looks much too much like you are a plant just trying to stir the pot. I don`t imagine you are, but I thought I`d mention that this will be the perception from those reading your post.

Thanks for the post.

P.S. Glad you read the book and supported Habitat for Humanity by doing so.

 

[timk519]

QUOTE (DonCampbell @ Nov 9 2007, 05:48 PM) Today, of course there is a shift in affordability, average wages couldn`t have jumped the 70+% that property values have in the last 18 months. There is ALWAYS a lag, for obvious reasons. The 33% you focus on is based on 25 year mortgages, now 50% of mortgages across the country (source RBC) are being issued at 35 and 40 year amortizations, thus lowering monthy costs and assiting in affordability index. I`m sure that the Index will be changed by RBC in the coming years to reflect this change. I was just looking at the RBC affordability index, and the Sept 2007 PDF discusses the effects that longer-term amortization periods have. There is an expectation that 30-40 year amortization periods make higher RE prices more affordable, which means that the RE prices in those areas will probably rise by an proportionate amount.

 

[RebeccaBryan]

Bigbear,

I think I`ll choose to listen to the people with the money and pass on the journalists views that live pay check to pay check.
Also, If you look for excuses not to invest, you`re sure to find them! As well, you need to learn to read the facts, instead of predeciding what you think is right, and then finding aritcles to support your view. There are plenty of people out there that don`t have a clue what they are talking about. REIN has a proven record, I`ll go with that!

Rebecca Bryan

 

[RedlineBrett]

Hi Bigbear,

Thank you for posting. You have provided some numbers and evidence of an overvalued market - not just hearsay and opinion. Contrarian views are important to intelligent discussion.

I don`t like the affordability gap either, but that doesn`t surprise me given how fast prices have increased - employers aren`t going to double their wages in a two year span. I would imagine that it will take some time for wages to increase relative to the cost of living.

The big thing, is that the global economy is driven by oil and Alberta has lots of safe barrels. If the demand for oil continues the world will continue to need our oil and we will need to employ workers to extract it. These workers will need places to live and consequently, will continue to fuel our real estate markets. The development over the past few years has been largely exploratory... have a look at all the HUGE expansions planned in oil and gas (all costed well below $80/rbbl) and the increased labor that will be required to bring them to fruition..

you can have a quick look at the huge numbers of capital projects forecasted for Alberta over the next two years here:

http://www.alberta-canada.com/statpub/albe...ects/mp0708.cfm

So what is going to spurn the `dramatic fall` in prices you are worried about?

I just can`t see the logic behind people moving away from Alberta given our economy and safe political climate and also the quality of life relative to other major centers.

I hope our seasoned REIN members will take the time and effort to address your points specifically...I`m just a rookie in this game.

ALSO I think this has the potential to be a REALLY GOOD THREAD... so lets not flame the guy that is asking the questions that so many of our potential JVPs are undoubtedly asking...

 

[DonCampbell]

I Agree with Brett regarding the importance of holding a discussion. No one should take offence to someone who has a different opinion or looks at real estate from a different perspective. It is healthy to include all opinions in our analysis.

We all like to encourage discussion and discourse. That`s what life is all about, if we all held the same opinion on everything it would be a pretty boring world. It also helps everyone reading the thread to get the facts clear in their mind so that they can address the inevitable questions with JV partners and family Members.

Thanks Brett for encouraging the discussion.

 

[EdRenkema]

I agree with Brett and Don re encouraging constructive discussion. I`m a bit of a rookie and not a REIN member (yet) so I try to be as informed as possible and boil it down to some sort of simplified answer. As I see it demand has far exceeded supply in Alberta hence the rapid appreciation in RE values. Those speculating in an up market may do well or be caught unawares when not investing along basic fundamentals. I have read both of Don`s first 2 books and the system prescribed is quite comptehensive. I`m a buy and hold sort of person so I won`t consider a property unless it has positive cashflow. I got caught in the downturn of 89/90 in a property with huge negative cashflow, capital loss over 40K and very little of my own dollars in. It took me 8 yrs to pay off my debts, recover, and sell the property. I used FEAR as a reason to stay out of the market then - now I use fear as a healthy way to increase my awareness and knowledge. These discussions are a great way to do just that.
Thanks for the posts!!

Ed R

 

[RedlineBrett]

I guess Bigbear didn`t want to follow up.

Kinda sucks... oh well.

 

[Thomas Beyer]

supply and demand drive prices .. supply is currently relatively high so yes, prices will adjust .. also demand for labour is still high .. thus construction costs will not come down significantly .. and much of the price of a new home/condo is COST: land, labour, material .. the only price down so far is US lumber .. so yes, for the next 1-2 years we`ll adjust downward somewhat .. so expect a flat`ish type of RE world .. until the Olympics are over and all BC construction projects will come to a halt in two years in fall 2009: skytrain extension, Olympic venues, Port Mann bridge, highway to Whistler ... and all those workers can come back to AB driving up in-migration and lowering costs .. good for us here, not so good for BC .. (but they have the better weather .. so some baby boomers like me will setup P/T shop there ..)

Certainly RE in Calgary and Edmonton is not cheap anymore and we can`t expect those insane price increases we`ve seen the last few years .. but people are still coming because our TAXES are low and there are jobs here .. plus post-tax income and post-tax affordability is still decent in AB compared to other places .. plus a great place to live and raise kids .. mountains, skiing, sunny skies, space ..

Much like Don I am also a fan/listener of Jeff Rubin .. and yes, oil will drive this economy for a few decades according to him .. and follwoing Jeff Rubin at the last Calgary RE Forum a large condo builder from Vancouver compared the 3 markets: Calgary, Vancouver and Toronto from a condo construction business point of view .. and he used a clock analogy. Toronto he stated is expensive to build, land costs are so so, wages are so so, demand is so so and it is 5`o clock pm. Vancouver: land is VERY expensive, very expensive to build, lots of regulations, lower average incomes and demand weaking due to the factors mentioned above .. 9`o clock pm. Calgary: land is reasonable, labour is so so, less regulations, small downtown footprint, lots of upside, lots of in-migration, highest average wages in the country: noon.

So, yes, we will see some prices drop, we will see adjustment to normal prices and then moderate price growth. But the place with the lowest taxes, and the highest average wages, all things being equal, always comes out ahead. LOTS OF UPSIDE HERE IN ALBERTA .. albeit more moderate than the last crazy decade !!

Buy with cash-flow with prudent leverage .. speculate less on huge equity upside .. and you`ll do JUST FINE !!

 

[bigbear]

Don,I have a lot of friends in REIN and they become very defensive when they hear my opinion and get quite upset. So I simply stop talking about it. I don`t list my identity because people tend to shoot the messenger.

Changing the mortgage amortization from 25 to 35 years does not change affordability too much. In Japan, they came up with 100 years mortgages in the 1980s and it did not influnce price decreases.


Thomas Beyer,

You mention that it is more expensive in Toronto yet Calgary has the same affordability as it (1).

I just don`t get why people will keep moving to Alberta when they are earning less real salary than five years ago.
They can live in other cities and have just the same standard of living but without the cold weather. I think living in Calgary is overrated. Maybe I am just blind.

For there to be further price increases in Calgary, then affordability levels will need to hit 50-55%. Maybe but not without the risk of speculation.

Higher Interest Rate
Furthermore, part of the real estate price growth in the last few years has been related to low interest rates. Low interest rates pushed up artificial demand as low income individuals bought homes they could not normally do until our historically low interest rates.

What happens when there the historically low interest rates start up to increase? Hell they have already started.


SubPrime Crisis
In the next few years, it is going to be very difficult to get financing to purchase a home. The US subprime incident has caused a massive credit crunch worldwide which has made it much more difficult for banks to loan money. Many potential buyers are being turned down and this may decrease demand. Hopefully, the credit crunch will get better.

(1) http://rbc.com/economics/market/pdf/house.pdf

 

[bigbear]

RE/MAX Housing Market Outlook 2008

They forecast that there will be 0% growth for residential average prices in Calgary for 2008. Realtors are the cheerleaders of real estate. If realtors are bearish on Calgary that is not a good sign.

http://tinyurl.com/2ot9y8

I just think that you should aim for better returns in real estate.

 

[Thomas Beyer]

yes, prices have increased here AND worldwide in the english speaking portions: Autralia, UK, Ireland, US, India .. and to a lesser extent in places like Germany, France .. and yes, a good portion of that is/was the low interest rates .. which are now resetting to more normal levels and may go up another 1% or 2% ..

Given an overpopulated planet, and still an overabundance of worldwide capital, and a huge US (and also European, btw) debt, we are living in an INFLATIONARY world. Hence, people like to invest in REAL assets, like Gold, resource stocks or real estate. Hence, yields on office towers, commercial strip malls, apartment buildings and single family houses have plummeted / prices have increased for the same $ in rent.

Gold doesn`t produce any income, nor do many resource stocks. This leaves commercial real estate with income and equity growth.

Also, in Canada, the gain on the house you own is TAX FREE. In the US, you can deduct your interest from your income up to a certain maximum. Hence, it makes sense in an inflationary world to buy REAL assets with cheap /deflating money (i.e. a mortgage) .. as your debt decreases (in real terms) and your income/value rises, tax free for a majority of it. Plus we have in-migration in Canada AND in a more and more volatile world people will flock to peaceful places with jobs. Alberta is such a place. Do you rather sit in traffic in India with a facemask or in Bejing in the 20th storey of a high rise and you can`t see the ground because the air is so bad ? People with inginuity, cash and/or abilities will move around in the world to a better place. Alberta is such a place (there are many others, of course ..) .. and once a place is "discovered" prices remain high. Alberta and it`s oilsands was an emerging market until just recently. We are now a "normal" place on the planet. Normal places with low taxes, many jobs, clean air, decent safety, a functioing democracy, free press and good/free schools and heathcare will always be desirable .. and thus, expensive !

Welcome to the world, ALberta .. yes expensive .. and hence decent (and slower) upside / value growth ! Calgary and Edmonton are about to double in size in teh next 20-25 years. Of course prices will adjust if interest rates go up, or in-migration temporaily slows or costs of construction falls. The real estate "cycle" is actually a sloped line with ups and downs along it .. and yes, we`re in a sideways move for a year or 2 .. to get back to the sloped curve as we way overshot ... but there are plenty of reasons while the ride will continue ..

So, I`d argue we`re both right: you because you take a 2-3 year view and yes, prices will adjust or have adjusted already and will do some more for a year or 2 .. and many others who may take a 10-20 year view are also right .. 2018: $500,000 for an average house in Calgary ? Cheap !

 

[RedlineBrett]

QUOTE Don,
I have a lot of friends in REIN and they become very defensive when they hear my opinion and get quite upset. So I simply stop talking about it. I don`t list my identity because people tend to shoot the messenger.

Changing the mortgage amortization from 25 to 35 years does not change affordability too much. In Japan, they came up with 100 years mortgages in the 1980s and it did not influnce price decreases.

It does lower the monthly cost to the buyer so it will make buying a house more affordable.

QUOTE Thomas Beyer,

You mention that it is more expensive in Toronto yet Calgary has the same affordability as it (1).

I just don`t get why people will keep moving to Alberta when they are earning less real salary than five years ago.
They can live in other cities and have just the same standard of living but without the cold weather. I think living in Calgary is overrated. Maybe I am just blind.

For there to be further price increases in Calgary, then affordability levels will need to hit 50-55%. Maybe but not without the risk of speculation.

Where are all these people going to work then? If an exodus is pending in Alberta where will the jobs come from to employ these people? If affordability is driving their relocation surely they won`t go west to BC which is far less affordable than Alberta. Will they go to work in new oilfields in Sask. which is even harder to extract? If you think living in Calgary is overrated spend a winter anywhere in Saskatchewan.

Yes affordability levels have increased in the last couple of years but wages are inelastic relative to price increases - it takes time for employers to change their compensation plans due to the `real salary` metric you mention. Alberta employers will have to compete with other provinces on the affordability issue - but if they can afford to offer higher wages as the price of oil starts to knock on $100/bbl they will fall more in line with the 33% we all want to see. Can the industries in BC and Sask. pony up like the oil companies can?

QUOTE Higher Interest Rate
Furthermore, part of the real estate price growth in the last few years has been related to low interest rates. Low interest rates pushed up artificial demand as low income individuals bought homes they could not normally do until our historically low interest rates.

What happens when there the historically low interest rates start up to increase? Hell they have already started.

People have to live somewhere. If they can`t afford to buy a home they will have to rent. If interest rates go up then competition in the rental pool will increase and landlords can charge higher rents and hence afford to pay the higher interest rates. Like any other business the buck ends up being passed to the consumer. While higher rates might stunt market appreciation a bit it will make for great cash flow for those investors that buy right and aren`t over-levered.


QUOTE SubPrime Crisis
In the next few years, it is going to be very difficult to get financing to purchase a home. The US subprime incident has caused a massive credit crunch worldwide which has made it much more difficult for banks to loan money. Many potential buyers are being turned down and this may decrease demand. Hopefully, the credit crunch will get better.

(1) http://rbc.com/economics/market/pdf/house.pdf

If you search carefully you will find plenty of press speaking to Canada`s `robustness` when compared to the US lending market. Here is one from a credible source and it even has nice cute pictures

http://www.bmoharrisprivatebanking.com/pdf/Spring_2007.pdf

Canadian lenders did not stoop to the levels that US lenders did - large downpayments or good credit have always been required for a loan here in Canada. This is just another one of the appropriately tagged `boogiemen` (thanks Don) that steals the press and gets people more worried about something than they really need to be. You aren`t a REIN member so you won`t have heard what we have.. but Kyoto, SARS, rent controls, year 2000 etc. have all had press and we`ve powered past every one.

So I still don`t see why you are so worried? You have provided lots of info on current headlines and why now might not be a good time to SELL in Alberta... but you haven`t spoken to the long term outlook of the province which is what the REIN strategy is all about! What about all the jobs in safe oil? What about the lowest corporate tax rates in the country and the big business that are flocking here to take advantage? What about a debt-free (or very close to it) provincial government that is pulling in surplus after surplus and pumping it back into infrastructure?

And if Alberta`s not the place to be right now, then where is? Be sure to show me the LONG TERM bright future in that market

If you REALLY want to shake the trees I think you`ll have to speak to some of those points

 

[bigbear]

RedLine Brett,

Yes Alberta has future growth. Prices have increased dramatically because of speculation of this long term growth.
Everyone has been investing in Alberta for the future gains so I believe the housing prices has the future growth already priced in.

If you have taken a finance class you know that the stock has its (discounted) future earnings acknowledged into its price. However, the real estate market is not as efficient as the stock market but it has some efficiency. However since nominal wages has increased 15% and prices have increased 100% in the past few years, this signals that a lot of future Alberta economic growth has already been factored into the housing market.

Speaking strictly from a finance perspective, the house prices in Alberta have all this amazing future economic growth already included in them.

 

[RedlineBrett]

QUOTE (bigbear @ Nov 13 2007, 12:28 PM) RedLine Brett,

Yes Alberta has future growth. Prices have increased dramatically because of speculation of this long term growth.
Everyone has been investing in Alberta for the future gains so I believe the housing prices has the future growth already priced in.

If you have taken a finance class you know that the stock has its (discounted) future earnings acknowledged into its price. However, the real estate market is not as efficient as the stock market but it has some efficiency. However since nominal wages has increased 15% and prices have increased 100% in the past few years, this signals that a lot of future Alberta economic growth has already been factored into the housing market.

Speaking strictly from a finance perspective, the house prices in Alberta have all this amazing future economic growth already included in them.

hmmmm, I have taken finance classes and I understand what you`re getting at however I`m not so certain it applies here. You keep coming back to affordability but what`s to say that Alberta wasn`t simply an incredible bargain prior to recent years? Let`s look at some numbers from RBC`s affordability index (could be considered a P/E ratio for housing) which I`m sure you must have seen:

http://www.rbc.com/economics/market/pdf/house.pdf

Go to page 8 where RBC applies their aggregate metric `affordability measure` across the country and also in all the major centers for detached bungalows, two storeys, townhouses and condos.

For simplicity`s sake I will provide the `standard two-storey` numbers for the benefit of our discussion:

REGION AFFORDABILITY INDEX (%)
Canada 46.2
British Columbia 68.2
Alberta 44.8
Saskatchewan 40.2
Manitoba 34.5
Ontario 42.9
Quebec 43.9
Atlantic 36.6
Toronto 52.0
Montreal 46.1
Vancouv er 73.3
Ottawa 36.8
Calgary 45.7
Edmonton 41.4

This is just for two storeys but the same trend can be found in other property types.

So, if Alberta`s economic future is already priced in then why is its affordability in line with the other provinces and still below the national average? Calgary and Edmonton are still below Toronto, Montreal and Vancouver - would you say those areas have just as bright an outlook as Alberta does?

Further to that, if buyers in Alberta have been purchasing their properties on implied future value (and stretching themselves to do so given your concerns on affordability) wouldn`t the same have to be said of all Canadians?

What these numbers tell me is that Alberta was undervalued prior to the boom. Now, we are priced in line with the rest of the nation yet we have the benefit all the future growth previously mentioned.

 

[bigbear]

Good point Brett.

Regarding the three cities above Calgary`s affordability:

Vancouver - It is the second highest overpriced city in North America according to Merryl Lynch. I also think it has the potential for a big price correction in the next 3-4 years.
Toronto - Yes it may be more expensive but I don`t think Calgary is as world class as Toronto.
Montreal - Calgary is pretty much the same affordability level.

If you have noticed much of Canada is above the healthy 33% affordability level. This is a sign that many cities are overvalued and are not good comparisions. Just because all the other cities have high unaffordability levels and are overpriced should not justify why that is is okay for Calgary to be overpriced.

Real estate is in cycles. We are just near the peak of it in many Canadian cities. The long term regression of average real prices dictate that current affordability levels are higher nation wide than historical trends. Unless these high un-affordability levels become a permanent plateau prices, then Calgary can be considered to not be overpriced. However if there is to be a permanent plateau of over 45% affordability levels, it would signal a massive social concern.


I also played around with the numbers of a 25 and 35 year mortgage. The payments would decrease approximately 10% if one used a 35 year mortgage and if affordability is 45% based on 25 years it would be 40.5% based on 35 years. A bit better but it still reflects an overvalued market.

 

[RedlineBrett]

QUOTE (bigbear @ Nov 13 2007, 03:16 PM) Good point Brett.

Regarding the three cities above Calgary`s affordability:

Vancouver - It is the second highest overpriced city in North America according to Merryl Lynch. I also think it has the potential for a big price correction in the next 3-4 years.
Toronto - Yes it may be more expensive but I don`t think Calgary is as world class as Toronto.
Montreal - Calgary is pretty much the same affordability level.

If you have noticed much of Canada is above the healthy 33% affordability level. This is a sign that many cities are overvalued and are not good comparisions. Just because all the other cities have high unaffordability levels and are overpriced should not justify why that is is okay for Calgary to be overpriced.

Real estate is in cycles. We are just near the peak of it in many Canadian cities. The long term regression of average real prices dictate that current affordability levels are higher nation wide than historical trends. Unless these high un-affordability levels become a permanent plateau prices, then Calgary can be considered to not be overpriced. However if there is to be a permanent plateau of over 45% affordability levels, it would signal a massive social concern.


I also played around with the numbers of a 25 and 35 year mortgage. The payments would decrease approximately 10% if one used a 35 year mortgage and if affordability is 45% based on 25 years it would be 40.5% based on 35 years. A bit better but it still reflects an overvalued market.

So, as a full time real estate investor are you getting out of the game altogether and waiting for a better market condition? I guess it would mean you can go on vacation for a while

 

[bigbear]

Good question Brett,

Yeah its hard to know what to do. It`s hard to know where to invest. I now aim for cashflow in the less stellar areas because at least I can sleep well at night.

Best wishes and good luck to everyone!