Urban vs Suburban - 2 styles enter, one style leaves!

[suburbia]

Originally Posted by freeweed

From a purely selfish standpoint, I'm loving the direction this city is headed. The less common SFH becomes (proportionally), the more valuable my house becomes. Those stories you hear of SFH in Vancouver selling for 2, 3 million? Bring it on! It'll make for a sweet retirement bonus.

Folks who own in inner city neighbourhoods like Kensington will make out like bandits.

Yup - its great to actually be owning the land beneath one's feet in this environment!

Agreed that the rich who own or can purchase SFHs in the inner city will be laughing all the way to the bank!

[rotten42]

Originally Posted by suburbia

Yup - its great to actually be owning the land beneath one's feet in this environment!

Agreed that the rich who own or can purchase SFHs in the inner city will be laughing all the way to the bank!

Having lived here all my life I understand this well. My first house in Calgary cost me $134k in Charleswood. I live mortgage free in the burbs because I was able to buy in cheap and ride the wave. Once the kids are old enough I will downsize and move inward and enjoy a different lifestyle. I always thought Bridgeland looked like a good area for me. My concern is more for my kids. It is so much harder now for young adults to get into this market.

[suburbia]

Originally Posted by rotten42

Having lived here all my life I understand this well. My first house in Calgary cost me $134k in Charleswood. I live mortgage free in the burbs because I was able to buy in cheap and ride the wave. Once the kids are old enough I will downsize and move inward and enjoy a different lifestyle. I always thought Bridgeland looked like a good area for me. My concern is more for my kids. It is so much harder now for young adults to get into this market.

While it is tangential, it is interesting to also highlight the longer-term benefits of ownership (as you've demonstrated also). I was highlighting this some years back on this forum (different thread), when people jumped on me comparing rent versus monthly cost of a mortgage+taxes. I countered, pointing out that a portion of a mortgage payment actually pays down principal, and how over a decade or two, not only do to own outright, but land value has gone up. Later I realized that the fellow arguing against me was a slum lord whose profits were built on the public having a false belief of rent being the better option.

In a way this tangent is quite relevant to this discussion, as more and more, people can only stay in the core areas if they rent. The discussion of urban vs. suburban, as such, is not only a discussion on home size, land, and amenities, but also about long term wealth accumulation vs. rent outflow leading to the increase in urban homelessness over the long term.

[MasterG]

Originally Posted by suburbia

While it is tangential, it is interesting to also highlight the longer-term benefits of ownership (as you've demonstrated also). I was highlighting this some years back on this forum (different thread), when people jumped on me comparing rent versus monthly cost of a mortgage+taxes. I countered, pointing out that a portion of a mortgage payment actually pays down principal, and how over a decade or two, not only do to own outright, but land value has gone up. Later I realized that the fellow arguing against me was a slum lord whose profits were built on the public having a false belief of rent being the better option.

In a way this tangent is quite relevant to this discussion, as more and more, people can only stay in the core areas if they rent. The discussion of urban vs. suburban, as such, is not only a discussion on home size, land, and amenities, but also about long term wealth accumulation vs. rent outflow leading to the increase in urban homelessness over the long term.

Renting has a very necessary role in the economy. The flexibility that it offers on housing choice and location can and should does demand a premium overall. It also allows someone with little capital to build wealth at an early age as it usually is cheaper per month relative to purchasing option in the same neighbourhood.

In downtowns and areas that are highly desirable, ownership is unlikely; and it makes sense economically. The only entities that have the capital to effectively develop and live in the highest-valued land is not individuals, but corporations, investment funds etc. Companies can accrue many thousands or millions of times more capital that individuals can. As people still want to live there, for the more attractive lifestyle and accessibility they cannot get elsewhere, and they cannot compete to be landowners against the large funds of corporations you can do several things: compromise in ownership (buy a smaller fraction i.e. condo) or rent.

This is all a normal process. There is not much you can do to control affordability in the most attractive part of the most booming city in the country.

It avoids all risk associated with asset depreciation (while giving up asset appreciation gains possibilities as well).

The other obvious bit is around the idea that land and property prices will always go up (and in a significant enough amount) to make ownership worth it, but that doesn't have to be the case. The run up on prices in the past 30 years makes it relatively (important word) more expensive to buy a house than previously. There is also no indication that we can expect that run-up again for the next 30 years, which is how long it might take to make the huge cost of ownership pay-off this time. If it ever does.

Enough baby-boomers want to cash-in all at once and downsize, the wealth they accumulated begins to evaporate. Renters suffer much less.

Regardless of what you own (condo or house), the only truly good investment is location. Houses are cheap in countless dying towns and hamlets all over the country. Houses are also cheap(er) in the far-flung communities of the city. But the economic potential for gains is also much much less.

[Ramsayfarian]

Originally Posted by suburbia

Yup - its great to actually be owning the land beneath one's feet in this environment!

Agreed that the rich who own or can purchase SFHs in the inner city will be laughing all the way to the bank!

Don't forget those of modest income that bought in the inner city before it become cool. I bought my first place in Ramsay for $132K. At the time, friends and co-workers thought I was insane for buying in Ramsay.

[RyLucky]

Originally Posted by Ramsayfarian

Don't forget those of modest income that bought in the inner city before it become cool. I bought my first place in Ramsay for $132K. At the time, friends and co-workers thought I was insane for buying in Ramsay.

Nice move! I would bet the best inner city investments for new SFH buyers now are places like Forest Lawn, Bowness, Rosscarrock, Renfrew, Mayland Heights, Tuxedo Park, Capitol Hill. Places like that. Or else, the distant 'burbs, where the value will increase once there are mature trees, parks, schools, roads, transit, retail, and culture. Come to think of it, buying into the distant 'burbs is kind of like buying a condo before it is built!

The problem with buying into a neighbourhood as an investment is that you have to live in it until it becomes more liveable. I think the key is finding value in local amenities that others may overlook. For example, if you work at the airport, go ahead and buy into Taradale. If you really love biking or walking your dog at Nose Hill, go ahead and buy into MacEwan. If you really love driving on the Ring Road, living on a reclaimed land fill, watching construction crews build your neighbour's houses, go ahead and buy into Spy Hill. That's my philosophy.

[RWin]

Originally Posted by freeweed

From a purely selfish standpoint, I'm loving the direction this city is headed. The less common SFH becomes (proportionally), the more valuable my house becomes. Those stories you hear of SFH in Vancouver selling for 2, 3 million? Bring it on! It'll make for a sweet retirement bonus.

Folks who own in inner city neighbourhoods like Kensington will make out like bandits.

I never thought of it that way. I may have a new retirement plane.

[suburbia]

Originally Posted by MasterG

Renting <> allows someone with little capital to build wealth at an early age as it usually is cheaper per month relative to purchasing option in the same neighbourhood.

Tell that to the people who chose to rent in 2004 and are still sucking wind, and may never recover. Those people who forced themselves to rent in DT versus buying a place further from the core, are now destined to keep renting for a very, very long time. They may have built wealth a few percentages, but those who purchased multiplied their money several fold.

Remember that a house from in mid 2004 that went from $200K to $400K would have been purchased with only $50K down. Since that time, the mortgage would have been paid down another $50K, and so would cash out $300K on the $400K sale. That is a profit of 500%. The "building of wealth" for the renter over that time is negligible. Additionally, most in the rental market simply get the best place they can for their income, and rarely save. It is just the reality. Ask any homeless guy in the downtown if they owned or rented before they ended up in the street. The answer will almost always be rented.

[RyLucky]

Originally Posted by suburbia

Tell that to the people who chose to rent in 2004 and are still sucking wind, and may never recover. Those people who forced themselves to rent in DT versus buying a place further from the core, are now destined to keep renting for a very, very long time. They may have built wealth a few percentages, but those who purchased multiplied their money several fold.

Remember that a house from in mid 2004 that went from $200K to $400K would have been purchased with only $50K down. Since that time, the mortgage would have been paid down another $50K, and so would cash out $300K on the $400K sale. That is a profit of 500%. The "building of wealth" for the renter over that time is negligible. Additionally, most in the rental market simply get the best place they can for their income, and rarely save. It is just the reality. Ask any homeless guy in the downtown if they owned or rented before they ended up in the street. The answer will almost always be rented.

Where do you live while you save that 50K?

[geotag277]

Originally Posted by suburbia

Tell that to the people who chose to rent in 2004 and are still sucking wind, and may never recover. Those people who forced themselves to rent in DT versus buying a place further from the core, are now destined to keep renting for a very, very long time. They may have built wealth a few percentages, but those who purchased multiplied their money several fold.

Remember that a house from in mid 2004 that went from $200K to $400K would have been purchased with only $50K down. Since that time, the mortgage would have been paid down another $50K, and so would cash out $300K on the $400K sale. That is a profit of 500%. The "building of wealth" for the renter over that time is negligible. Additionally, most in the rental market simply get the best place they can for their income, and rarely save. It is just the reality. Ask any homeless guy in the downtown if they owned or rented before they ended up in the street. The answer will almost always be rented.

For some living far from the downtown core in suburbia hell is a fate worse than death. Not all decisions are driven purely by monetary decisions, otherwise we'd never go on vacations and we'd never buy depreciating assets of any kind. What a boring existence.

The reason a typical homeless person may have never bought a house is likely they were unable to save the tens of thousands of dollars necessary for the initial down payment and don't have the wherewithal to have the credit history necessary for mortgage approval - people who do generally don't end up homeless and could be either renting or buying. That said I doubt you've actually gone around and asked a statistically significant number of homeless people whether they rented or bought property in the past, essentially you are just pulling things out of your behind.

[freeweed]

Originally Posted by MasterG

The other obvious bit is around the idea that land and property prices will always go up (and in a significant enough amount) to make ownership worth it, but that doesn't have to be the case. The run up on prices in the past 30 years makes it relatively (important word) more expensive to buy a house than previously. There is also no indication that we can expect that run-up again for the next 30 years

I can't think of a single time in history where housing, over a 30 year span, did not increase in value. Other than shitholes like Detroit. Pick any 30 year span and you'll find at least modest increases in value.

Real estate, in the long term, is one of the safest investments on the planet. As the saying goes, land is the one thing we ain't making any more of. And in a city like Calgary, with expansion limits due to water issues, that's even more true than a lot of places.

[freeweed]

Originally Posted by suburbia

Remember that a house from in mid 2004 that went from $200K to $400K would have been purchased with only $50K down.

That house could easily have been purchased with $10K down. Yeah, your mortgage payments end up slightly higher due to the CMHC insurance, but as opposed to sitting around for another decade waiting to save another $40k?

[RyLucky]

Originally Posted by freeweed

That house could easily have been purchased with $10K down. Yeah, your mortgage payments end up slightly higher due to the CMHC insurance, but as opposed to sitting around for another decade waiting to save another $40k?

Perhaps with a cosigner and high, stable income.

[H.E.Pennypacker]

Originally Posted by rotten42

Having lived here all my life I understand this well. My first house in Calgary cost me $134k in Charleswood. I live mortgage free in the burbs because I was able to buy in cheap and ride the wave. Once the kids are old enough I will downsize and move inward and enjoy a different lifestyle. I always thought Bridgeland looked like a good area for me. My concern is more for my kids. It is so much harder now for young adults to get into this market.

It is .. I just purchased my first place and it's tough sledding out there .. It was either a condo or townhouse (if I was lucky) in the inner city or a house in the burbs

Personally I hate commuting and love walkable inner city areas/being close to downtown .. Now I work in real estate so I know the market quite well, and was able to sniff out a solid deal for a townhouse in Winston Heights for just under $300k .. But for someone who doesn't know the market it would be hell I can imagine

Additionally the affordability is insane .. Living with roommates kept my rent down enough that I could aggressively save for the downpayment - but only 10% .. If you're living on your own renting an apartment it's almost impossible to save for a place within a reasonable amount of time

[Ramsayfarian]

Originally Posted by RyLucky

Nice move! I would bet the best inner city investments for new SFH buyers now are places like Forest Lawn, Bowness, Rosscarrock, Renfrew, Mayland Heights, Tuxedo Park, Capitol Hill. Places like that. Or else, the distant 'burbs, where the value will increase once there are mature trees, parks, schools, roads, transit, retail, and culture. Come to think of it, buying into the distant 'burbs is kind of like buying a condo before it is built!

The problem with buying into a neighbourhood as an investment is that you have to live in it until it becomes more liveable. I think the key is finding value in local amenities that others may overlook. For example, if you work at the airport, go ahead and buy into Taradale. If you really love biking or walking your dog at Nose Hill, go ahead and buy into MacEwan. If you really love driving on the Ring Road, living on a reclaimed land fill, watching construction crews build your neighbour's houses, go ahead and buy into Spy Hill. That's my philosophy.

There's also Dover and Ogden and probably more than a few others. Even the "worst" neighbourhoods in this City have areas that are fairly nice.

When I first moved into Ramsay we had a pretty major crack whore problem but in time that changed.


In all the years I've lived in Ramsay, I've had a less than a handful of incidents. Someone attempted to steal my motorcycle and I've had my vehicle broken in once and my garage once. It might sound like a lot but that's over 15+ years of living in the crime ridden inner-city.

One can have a bit of fun with it as well. Back when we had a hooker issue, I took great joy in honking and waving at Johns when I saw them pick up hookers.

[freeweed]

Originally Posted by RyLucky

Perhaps with a cosigner and high, stable income.

Not in the slightest. I qualified for a 5% down mortgage, had no cosigner, and had the bare minimum income to meet the 3x mortgage threshold (literally, within about $2k). Hell, when I applied for it I discovered a black mark on my credit history that went back 4 years that I had no idea about - technically at that point I was ineligible to obtain even a $500 credit card. Paid off the problem (wasn't worth fighting) and got approved for the mortgage within a day.

OK fine, I had a stable income, but that's not exactly difficult. I've had that since I was 15.

Don't get me wrong - I think there are serious flaws with the CMHC system - but CMHC insurance makes getting a mortgage pretty easy for anyone who can wake up on time every day to show up for work.

[freeweed]

Originally Posted by Ramsayfarian

In all the years I've lived in Ramsay, I've had a less than a handful of incidents. Someone attempted to steal my motorcycle and I've had my vehicle broken in once and my garage once. It might sound like a lot but that's over 15+ years of living in the crime ridden inner-city.

This anecdote is exactly why I view Calgary as being so crime-free, for the most part. It's what I hear over and over again from people here.

My parents live in one of the nicest areas of a comparable Canadian city, and they've experienced more crime on their property in 15 years than you have, living in the "ghetto". It took me about a year to realize that pretty much no one in Calgary uses a steering wheel Club. I couldn't imagine parking without one, for a long time.

[fusili]

Originally Posted by freeweed

I can't think of a single time in history where housing, over a 30 year span, did not increase in value. Other than shitholes like Detroit. Pick any 30 year span and you'll find at least modest increases in value.

Real estate, in the long term, is one of the safest investments on the planet. As the saying goes, land is the one thing we ain't making any more of. And in a city like Calgary, with expansion limits due to water issues, that's even more true than a lot of places.

In Nate Silver's book, The Signal and The Noise, he points out that housing prices over the last 100 years, adjusting for inflation, have increased on average 0.6%. Not per year, total. Obviously in a growing city such as Calgary, this isn't the case, but housing is not as good an investment as many think. On average, it is a pretty poor investment.

Also, it is a great book to read. I don't know much about stats other than taking one political science stats course, but after reading this book, Naked Statistics and Thinking Fast and slow, I have a much better grasp on the concept.


EDIT- Also the Black Swam by Nasim Taleb is a beautiful book on investing and statistics.

[geotag277]

Originally Posted by fusili

In Nate Silver's book, The Signal and The Noise, he points out that housing prices over the last 100 years, adjusting for inflation, have increased on average 0.6%. Not per year, total. Obviously in a growing city such as Calgary, this isn't the case, but housing is not as good an investment as many think. On average, it is a pretty poor investment.

Also, it is a great book to read. I don't know much about stats other than taking one political science stats course, but after reading this book, Naked Statistics and Thinking Fast and slow, I have a much better grasp on the concept.


EDIT- Also the Black Swam by Nasim Taleb is a beautiful book on investing and statistics.

The problem with that analysis is that people actually live in their house - so while you are earning 0.6% you are also building equity in your home and at some point actually pay it off. Housing also has utility in that you can rent it out. In absolute terms considering just market prices for a house, sure it might not seem an attractive investment in those terms over the long term, but once you factor in rent alternatives/equity/utility the equation certainly changes.

Not to mention that a rapidly growing metropolis like Calgary will generally have much much higher returns than a tiny town with small population growth like Drumheller - both kinds of which are included in the same study.

[Policy Wonk]

Originally Posted by freeweed

I can't think of a single time in history where housing, over a 30 year span, did not increase in value. Other than shitholes like Detroit. Pick any 30 year span and you'll find at least modest increases in value.

Real estate, in the long term, is one of the safest investments on the planet. As the saying goes, land is the one thing we ain't making any more of. And in a city like Calgary, with expansion limits due to water issues, that's even more true than a lot of places.

"Eating Your House" is an archaic strategy from another age because you just can't take for granted that you will be able to sell your house on your terms at a time of your choosing. You also can't take for granted that Calgary is going to be hot shit forever. The US is "Drill Baby Drilling" itself into a massive crude oil glut that is going to create a discounted domestic US price because they can't export it and if oil prices plummet there isn't an US politician who is going to do anything to intercede export wise. That is going to be devastating to Calgary and Edmonton.

If that comes to pass and you're short selling your house so you can haul ass to Toronto... so much for your retirement strategy.