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Improving Affordability Trends in Calgary March 29, 2009

Posted by DustinRJay in Calgary real estate, carrying costs, valuation models.
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13 comments

Calgary housing affordability is now better than long term averages.  This is due to three reasons:

  • growth in household income
  • falling interest rates and a
  • correction in the housing market.

The following chart also illustrates how housing affordability is much better than the early 1980’s real estate cycle and more similar to  the early 1990’s real estate cycle.  One factor for improving affordability is interest rates are at record lows (but could go lower).  One should always budget for a rise in interest rates to ensure they are not exposed to any excessive risks.

Improving Affordability Trends In Calgary

[click above for larger view]

Data: Statistics Canada, Alberta Finance, Bank of Canada, CREB, Bob Truman – First Place Realty

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Carrying Costs for Calgary Houses – Highest Since the 1980’s January 27, 2008

Posted by DustinRJay in carrying costs.
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8 comments

One macroeconomic factor affecting real estate is interest rates.  As interest rates go down, house prices should go up and vice versa.

Here is a summary of  conclusions that I have made regarding the graph below:

  • Historical annual carrying costs above ~$17,500 in 2007 dollars appear to be unsustainable
  • Recessions often follow peaks in the housing cycle (as is currently being exhibited in the United States)
  • Upward trending house prices from 1997 to 2005 is rational due to decreasing interest rates
  • It is unlikely for there to be interest rate relief in the magnitude necessary to bring carrying costs into sustainable territory
  • Interest rates are still relatively low in a historic sense

Carrying Costs for Calgary House Prices