Ghost Towns USA

After the Bubble: Could this be repeated here?

BENTONVILLE, Ark. — Dennis Pflueger and his wife won a rent-free

year in a nice new house in an expensive subdivision not far from the headquarters of Wal-Mart Stores Inc. As part of the prize, they then have the option to buy the four-bedroom home for $452,000.

Mr. Pflueger, a telephone-cable installer who describes himself as an “old redneck,” is in the middle of his free year. But the Pfluegers are a bit lonely. Just one other family lives in any of the 28 new or unfinished houses on Foxboro Court. Up the street, a sign announcing “Elegant Homes” sits on a lot choked with weeds. The block is as quiet as an old ghost town.

Since real-estate tanked, many new planned communities across the country are half-empty, with for-sale signs outnumbering residents by a large margin.

Some of the projects abandoned by bankrupt developers are in places that were hotbeds of new housing construction: Southern California, Atlanta, Las Vegas, Phoenix. As of July, the percentage of vacant housing stock available for sale or rent stood at 4.8% nationally, the highest figure in at least 33 years, according to Zelman & Associates, a real-estate research firm.

Daily life in these developments seems a bit post-cataclysmic. Children play on elaborate but empty playgrounds. They walk their dogs past rows of shiny houses that have never been lived in. Voices echo up and down the block. Unfinished houses and vacant lots strewn with construction debris clutter the horizon.

Robert Waltenspiel lives with his wife and two daughters in a unfinished subdivision in Auburn Hills, Mich. Standing in front of his house, he can see more than 30 weed-choked lots where new houses were supposed to go. The developer halted construction more than two years ago.

“As far as working on my yard and saying, ‘Hey, neighbor, want a beer?,’ that’s not going to happen,” says Mr. Waltenspiel, an account manager for Hewlett-Packard Co.

The hot tub at the community center doesn’t work. The communal fountains are dry. Mr. Waltenspiel’s kids have no one in the subdivision to play with, so he has to take them to a nearby park for social interaction. His 4-year-old “will walk up to strange girls in the park and say, ‘Hey, will you be my friend?’ ” he says. “A, it’s adorable. B, it’s sad.”

In the past year, roughly 15% to 20% of residential developers have gone out of business, suspended operations or changed their line of work, according to an estimate by the National Association of Home Builders.

The people who bought into these subdivisions encounter all sorts of other unexpected problems, including burglars looking to steal toilets, appliances and copper wiring. And blight. Krista Anderson, an administrative assistant, lives in a subdivision outside Phoenix where the developer suddenly halted construction last fall, leaving behind not just unfinished houses but also scaffolding, piles of cement and construction material that “is turning yellow and looks bad.”

Many residents aren’t sure exactly who is in charge of mowing the weeds, maintaining the street lights, cleaning up when someone uses open space as a dump.

Some residents form especially tight bonds with neighbors 10 or 20 doors down the street. Others relish the peace and quiet.

“With my art and my books, I don’t need to go outside,” says Miriam Ramirez, who lives with her husband, a retired doctor, in a stalled subdivision in suburban Atlanta. “But not everybody’s like that.”

Her subdivision, Woodbridge Crossing in Smyrna, 15 miles from downtown Atlanta, was supposed to consist of several hundred garden-style houses. Instead, she lives on a street where most of the roughly 30 units have never been lived in. It’s the only inhabited street. Paved roads surround acres of empty lots. At night, she says, Woodbridge Crossing can feel a bit like “a cemetery.” One plus: She usually has the community swimming pool to herself.

In overdeveloped Northwest Arkansas, real-estate officials estimate that property values have been steadily declining since 2007. Early in the decade, the region saw a population explosion as more than 1,000 people a month moved to Bentonville, Rogers and several nearby communities to work for Wal-Mart or one of its 1,250 locally based suppliers. Developers began building new houses at a frantic pace, carving up sprawling farmland into fancy developments with names like Stone Meadow and Kensington Hills.

Then the housing market collapsed. Soon developers were defaulting on their loans and declaring bankruptcy. In May, federal regulators seized one Northwest Arkansas lender, ANB Financial, whose portfolio was overloaded with bad construction loans.

Now, many of the region’s new subdivisions, with houses that can’t be rented, much less sold, are forlorn monuments to disastrous real-estate forecasting. A subdivision called Tuscany, five miles west of Bentonville, was envisioned as an enclave of luxury homes with landscaping meant to evoke an old-world Italian village. Developers installed an enormous hand-built stone wall surrounding several hundred acres of what had been cow pasture. So far, only five houses have been built, and just two sold.

Carol Trees, who paid $570,000 for a 4,800-square-foot house six months ago, admits the solitude is a bit disconcerting. The good news is that her three children have the run of a pasture longer than several football fields. “We love it right now,” says Mrs. Trees, a nurse practitioner. “We sit on our back porch and fantasize that we own all this land.”

Then there’s Quail Ridge, the temporary home of Mr. Pflueger, his wife, Joyce, and their 11-year-old chihuahua, Peaches.

Real Estate Company of Arkansas, a local outfit, had been so eager to sell units that it raffled off a year’s free rent for one house. On a cold weekend afternoon last December, more than 1,000 people showed up at the subdivision in hopes of winning the prize.

As a marketing effort, the event was a total bust. “We didn’t sell one house,” real-estate agent Michael McKinnon says. “We didn’t get diddly.”

But for the Pfluegers, who won, the outcome appeared to be nothing short of divine intervention. Mr. Pflueger had been out of work for eight weeks. Unable to afford the rent for their $475-a-month apartment, the couple was planning to move into a trailer in their daughter’s back yard.

Suddenly they were moving into a new 3,400-square-foot house with an entertainment center, an outdoor hot tub, stainless-steel appliances and more than enough room to store the 61-year-old Mr. Pflueger’s collection of guns and antique fishing reels.

The last seven months have been an odd existence. Chickens wander by from a nearby farm, poking around in the brush. Not long ago, someone broke into one of the unoccupied houses around the corner. Now the Pfluegers say they pay close attention to passing traffic, but hardly anybody passes by.

“There’s just no noise,” Mrs. Pflueger said.

When their 12 months end, the Pfluegers will move on too — perhaps to that trailer on their daughter’s property. Mr. Pflueger recently found a job but still can’t afford to buy the house. “That’s way out of my league,” Mr. Pflueger says. Unless someone else moves in, only one family will be left in the 28 houses on Foxboro Court.

Write to Alex Roth at [email protected]1

68 comments ↓

#1 Keith in Calgary on 08.04.08 at 6:12 pm

One thought comes to mind…..

“Omega Man”

#2 GrandePrairiegirl on 08.04.08 at 7:29 pm

Funny! Wasn’t that with Charleton Hesston?

#3 mike on 08.04.08 at 7:37 pm

While most acknowledge that there are disastrous and tragic areas in the U.S., certainly I know of a number of medium companies in the computer sector who recently went chapter 11, most must also acknowledge that very little of this is happening in Canada at this point. Living in Toronto I can honestly say that I do hope we see some degree of correction in real estate, hopefully without all the heart-ache and tragedy BUT I also feel we won’t and aren’t currently seeing these ghost town scenarios in any part in the GTA, possibly in the rest of Canada as well. I am not sure how this article reallt applys to Canada.

#4 Calgary rip off on 08.04.08 at 8:32 pm

Garth:

Unlikely that scenario will play out in Calgary, as the houses are too close together, dont know if its a different story in Ontario.

#5 Shawn on 08.04.08 at 9:02 pm

Everyone acts surprised over this. The collapse was predicted over 2 years ago but noone did anything. Now it is time to pay the price.

#6 brazer on 08.04.08 at 10:39 pm

Real estate in US, UK, Australia and others are in the toilet, but yet Canada is deemed by some to be “different”?

Time will tell :)

#7 brazer on 08.04.08 at 10:42 pm

Consumer spending beaten down in U.S.
http://www.reportonbusiness.com/servlet/story/RTGAM.20080804.wconsumer0804/BNStory/Business/home

“Economists believe the $168-billion stimulus program will continue to lift the economy in the current quarter. They predict there will be a significant slowdown in the final three months of this year and early next year, though.

#8 brazer on 08.04.08 at 11:20 pm

Garth, not sure if you saw this piece in the Times regarding Prime and alt-A borrowers….Fascinating stuff.

http://www.nytimes.com/2008/08/04/business/04lend.html

#9 squidly77 on 08.05.08 at 12:27 am

the way garth posts is the same way i post
he shows you whats coming..and its your choice to believe or not to believe
i posted for the past 2 years on the alberta blogs..some agreed some didnt..alberta is now in a free fall heading towards a major and i mean a major crash
the US is the best indicator that we have
its like a mirror..ignorance will be no excuse
its just pure gluttonous greed..and you specs will squeal like pigs for a government bailout when your getting financially slaughtered..there will be blood in the streets soon..garth has given you all fair warning..heed it

#10 David on 08.05.08 at 12:32 am

That is an excellent article and what it indicates that the US housing market has moved from post bust into long term secular decline. Comparatively, the Canadian market is in the early stages of an oversupply of listings and few willing buyers. As discouraging as it sounds to some folks, the US market is just beginning to tank in earnest and the bottom is nowhere in sight. It is pretty common knowledge now that real estate in Canada is poised for a most severe beating and those who did not exit when the getting was good better invest in some ice bags.

#11 Jon B on 08.05.08 at 12:50 am

Kind of like something out of a science fiction novel. Scary.

#12 islander on 08.05.08 at 1:02 am

Mike writes: Living in Toronto I can honestly say that I do hope we see some degree of correction in real estate, hopefully without all the heart-ache and tragedy BUT I also feel we won’t and aren’t currently seeing these ghost town scenarios in any part in the GTA…

So it’s true what the Rest of Canada says. People in Toronto can’t see past the city’s boundaries. How far is Windsor from Hogtown? Oakville? Any town involved in car manufacturing?

#13 calgary on 08.05.08 at 1:13 am

In Calgary, the Condos that are under constuction is staggering. The market is saturated now, just wait till some of these projects are completed… or abandoned.

#14 Canadian Expat in NC on 08.05.08 at 8:57 am

Talk about lucky. I live in Cary, NC, a suburb of Raleigh right next to Research Triangle Park and close to three universities (UNC, NC State and Duke), and I think because of this house prices in my area haven’t gone down. Properties take longer to sell because the usual influx of people that used to come from Florida, California and NY are stuck unable to sell their homes, and therefore can’t move here.

We are looking to move back to Canada in about a year and I have been watching the housing market in the areas east of the GTA (Pickering and eastward) for about 1.5 years now and I have noticed a HUGE difference in how the market is from last summer. Some houses are sitting on the MLS listings for months (particularly those that have asking prices based on last summer’s prices, and even some that seem reasonably priced), I have seen lots of homes being removed from the MLS only to reappear at lower prices. A realtor friend said to me that if a house doesn’t sell in the first few days of coming on the market then it’ll struggle to sell, and I think that is so true now.

I don’t see Ontario getting as bad as some parts of the US, but everything points to a downturn (or maybe it is my wishful thinking because I have to buy a house there soon :-))…in fact I think it has started downwards already (albeit, only slightly right now).

Thanks Garth for this website and allowing people to post comments. This is one source where actual people living in various communities are giving me true insight into the housing market in Canada. Otherwise I’m at the mercy of weirdly worded newspaper articles and quotes from CREA and other RE agents (and we all know what they want us to believe).

#15 mike on 08.05.08 at 9:35 am

To Islander… Most hoggers do look beyond our city. We went to several small towns including Oshawa on the weekend. No signs even close to what the US are feeling and we are witnessing. However we did see the Polywheels plant for sale… Just a massive building and right on the QEW for all to see. I am not optimistic about Toronto but just like to post the things I do see so that we all don’t just post doom .

#16 RJT on 08.05.08 at 11:05 am

I have some info about a major condo developer in Calgary. In order to secure financing a couple of years ago for a large hi-rise condo, he sold 41 units to the same investor (for a $2 Million deposit). Last week, that “investor” walked and gave up the $2MM deposit.

Obviously the investor was simply purchasing a “call-option” on Calgary real estate, and now that he can see the writing on the wall, he would rather lose his deposit than take possession of 41 under-water condo units.

Meanwhile, the developer is stuck, and the building will be complete in the next few months. How many other developers are seeing cancelations? How many people can afford 400K 1 bedroom or 550K 2 bedroom condos in Calgary? Are they going to be able to rent them out cash flow positive? (yeah right)

Should be an interesting couple of years, as there are at least 26 condo building currently under construction.

It’s different here? I don’t think so.

#17 CANADIAN SOCIALIST on 08.05.08 at 11:08 am

In Canada, we will have our own version of this mess.

Since the credit crunch, the CHMC has borrowed ten(s) of billions to buy the dubious mortgages. (CHMC does it so that the financial institutions can continue to lend indiscriminately and cheaply, collecting processing fees and shipping the stuff to CHMC to take the losses, when they arise).

So, who thinks the CHMC will foreclose non performing mortgages? Who thinks the governing party will do political suicide?

My take is that in Canada, foreclosures will be rare, the mortgagees will pay through the nose, the national debt will balloon, and the $70000-100,000/year guy will be chocked by taxes. These circumstances will be a great equalizer for them, if they still needed one.

For the Bank of Canada the only option for many years might be to keep the interest rates ridiculously below inflation. So for people with capital such as the retirees, they will eat it quickly. But not to worry, they can indulge in a frenzy, with RV’s, boats, and what not, and subsequently fall on the public purse.

As for the oligarchy and its friends, they might continue to bathe in golden rubbles or for the big fish, in their US $.

All this will be progressive, intellectuals will remain silent and main street Canada won’t understand how greed in the higher and lower places took them to the poor house for generations to come.

And won’t the Chinese will be laughing at the West, when it next lecture them on democracy.

#18 Calgary rip off on 08.05.08 at 11:31 am

So Squidly:

To buy or not to buy 2009? Think things will just start crashing dude in Calgary then?

#19 $fromaSia on 08.05.08 at 12:03 pm

Price adjustments in Vancouver reduce inventory.

Buyers are still buying Garth.

#20 Mike.slob on 08.05.08 at 12:10 pm

Today Report:
• Toronto stocks drop as oil prices fall and Canadian dollar tumbles.
From June TSX index was 15,154.80
Today TSX index hit 13,130.54

Oil Price in July/08 was $147.27
Oil Price today is $ 118.89

In November’07 CAD/USD was 1CAD= 1.10 USD
today CAD/USD is 1.044 CAD = 1 USD

#21 Sold Out of Cowtown on 08.05.08 at 1:26 pm

prices are crashing here in Calgary, if you want to sell your home here you must lowball your asking price to move it.

#22 Roger on 08.05.08 at 1:45 pm

Here is an update on the Victoria BC RE market:

– Inventory at highest level in 10 years (up 34% YOY)
– Sales are down 33% from July 2007
– Average and median prices for houses have fallen for 3 consecutive months

You can see all the stats as a slideshow @
http://tinyurl.com/victoria-drop

Use the controls at the top of the presentation to pause and single step the graphs. The big X will switch to full screen mode.

#23 brazer on 08.05.08 at 2:10 pm

Hundreds of banks will fail, Roubini tells Barron’s
http://www.reuters.com/article/newsOne/idUSN0344130720080803

“The United States is in the second inning of a recession that will last for at least 18 months and help kill off hundreds of banks, influential economist and New York University Professor Nouriel Roubini told Barron’s in Sunday’s edition.”

#24 brazer on 08.05.08 at 2:23 pm

Loonie hits lowest level in almost a year
http://www.reportonbusiness.com/servlet/story/RTGAM.20080805.wloonie0805/BNStory/Business/home

“The Canadian dollar along with other commodity-linked currencies such as those of Australia and New Zealand also have been hit by growing evidence that other economies besides that of the United States are starting to slow, which threatens the demand for natural resources.”

#25 jrochest on 08.05.08 at 2:42 pm

Roubini is one of the world’s more radical bears; he’s a professional pessimist.

That’s not to say he’s not right, but his slant on things is “as bad as possible”.

I’m bearish on housing and convinced that we’re in for a sharp and painful downturn generally, but even I think that Roubini needs to, you know, go for a walk, get out of the basement, look at the pretty blue sky….

#26 Market Watcher on 08.05.08 at 2:51 pm

Bancroft This Week —Local News

Impact of declining tourism

Posted By Dan Schell on July 23, 2008

The summer has always been the most profitable time of the year for the Town of Bancroft and for cottage country. With tourists coming from different places to enjoy the natural beauty of the area, many local shops and businesses record sky-high sales as a result of the seasonal increase in people going through the town.

But, with fuel costs also going sky-high and an economy that limits household spending outside of the necessities, there lies a fear that not all will be good for towns like Bancroft that rely on a strong tourism economy.

Numbers from the Ministry of Tourism indicate that there has been a significant drop in tourism. Since 2001, the total number of person visits to Eastern Ontario has dropped by 30 per cent. And the impact of this drop has been felt by a number of businesses in the area.

One industry feeling the brunt of the drop in visitors is real estate. The trend this year in waterfront cottage sales has been that there is an influx of cottages that are going on the market, but little leaving the market sold.

“Well it has certainly caused a lot of conversation within the Board,” says President of the Bancroft and District Real Estate Board Bonnie Scott.

She says that times have been rough for real estate agents all over cottage country with the recent decline in waterfront sales in the area. According to Bancroft District Real Estate Board statistics, the overall sale of homes is down 25 per cent compared to the numbers from last year, nine per cent less in dollars earned.

And there are signs across Canada that the cottage industry might be under significant pressure. A recent poll from Royal LePage showed that two in 10 people who currently own cottages stated that they would sell their cottage property if gas prices continued to climb.

…..

http://www.bancroftthisweek.com/ArticleDisplay.aspx?e=1126899

#27 Future Expatriate on 08.05.08 at 3:15 pm

$fromaSia… ever hear of a dead cat bounce?

Check it out. There will be at least one of these, maybe a few, before the final bottom is in. If people are smart, only one.

And another thing about dead cat bounces; they don’t last long, and the aftermath is horrific, with the downhill slide several times steeper than before as people realize they were nowhere near the real bottom, the real estate industry and media was full of excrement, and ride the thing all the way down.

The savvy buyer waits for prices and sales to level and then rise for at least two months straight to make sure the bottom is really in. And there’s no harm in that, as the rises are often minimal and an excrutiatingly slow creep up.

After this crash, it will take decades before prices rise to peak levels.

#28 Calgary Rip off on 08.05.08 at 3:22 pm

Sold out of cowtown:

Prices are “crashing” in Calgary? Where???

For example, in Hidden Valley, prices are only down $70,000 from last year!! How is that crashing when most of those homes are really only worth around $200K? Doesnt seem like crashing to me!!

Crashing would be if housing in Calgary was worth LESS than what it was when it was built. That’s NOT likely to happen, here, unfortunately, prices are STILL outrageous and demand a person make around $120,000 a year to move into one of those “crashing” prices single family homes.

Calgary is still a RIP-OFF!!!!

#29 Calgary Rocks on 08.05.08 at 3:33 pm

the national debt will balloon, and the $70000-100,000/year guy will be chocked by taxes. These circumstances will be a great equalizer for them, if they still needed one.
================================

Wishful thinking from you. But if that happens I think I’ll just work 6months/year. I will gladly let someone else pay those ‘chocking’ taxes while I take it easy and allow the government to help me out with some socialist handouts.

#30 everythingzen on 08.05.08 at 4:59 pm

I’d like to raise a couple points:

First, Calgary prices are hardly collapsing, although they certainly are adjusting downward as most would expect after such a steep run-up. I believe that the strength of the local economy will continue to support high housing prices due to the higher incomes earned in this city. I can’t speculate on where prices will settle but I would think that will all the investment capital still floating around that median housing and condo prices wouldn’t move significantly below (ie more than 10%) where they are now.

Second, with the reluctance of new buyers to enter the housing market it would appear to be a very good time to be in the rental housing business in cities with fast rising populations such as Toronto and Calgary. Immigration still looks to be very strong in the GTA and if newcomers aren’t buying then there must be renting. Now, the 50,000 new condos that were constructed in the past 3 years probably will end up as mostly rental but older rental buildings will probably have an edge over the newer more expensive ones because the landlords can afford to charge less rent. Older rental buildings are also usually in better areas so that also gives them the edge.

I don’t think there’s much danger of many places in Canada turning into dust bowls but clearly we have seen the pinnacle for prices for the current real estate boom end in 2007 in most Canadian markets.

#31 dotava on 08.05.08 at 5:10 pm

#28 Calgary Rocks

There not gone be socialist handouts for people if government follow the US and give that to the banks and other “non replaceable” corps. Future belong to small to medium local businesses not multi-nationals.

#32 Keith in Calgary on 08.05.08 at 6:33 pm

Everythingzen……

Prices here are already down 10%.

The average family income in Calgary is $81K…….that roughly qualifies you for a $285K mortgage amortized over 25 years. Of course, taxes, insurance, and utilites are additional to that.

We still have a minimum of $150K of hot air in our house prices.

#33 My_view on 08.05.08 at 6:59 pm

What are you guys smoking?

“For example, in Hidden Valley, prices are only down $70,000 from last year!! How is that crashing when most of those homes are really only worth around $200K? Doesnt seem like crashing to me”!!

$70,000 is a huge reduction. Who the hell would like to loose that much money? No one is predicting R/E Armageddon because Canada is different. That’s a savings in my book, and this is only the beginning.

#34 David on 08.05.08 at 6:59 pm

Certain parts of the housing market unraveling will prove to be quite painful, especially so for those who overpaid on houses they could not afford, for developers who created inventory gluts and speculators who purchased housing units and condos that were not intended for owner occupancy. If the housing market was full of irrational exuberance the past five years what in fact does this say about our banking and financial system caught up in the market mania? As Garth likes to say, all booms end badly and those who could not exit will be playing the crying game financially for the next 40 years. As far as condos being converted to rentals, that sounds ridiculous. Condos are supposed to provide pride of ownership even if the prices represent nothing close to fundamental value analysis on price/rent ratios, local median incomes or normative cap rates. A healthy dose of economic reality will not be such a bad thing to delusional real estate enthusiasts who pushed affordable housing far beyond the realm of middle class affordability.

#35 Peter on 08.05.08 at 7:31 pm

No one understands that when stock markets hammers, real estate markets does get hammered too, as one invests money into the stock market may also leverage themselves into buying loads of real estate to make more money (on the upside) but as soon as the market retracts, these people will suffer a crunch into their bank account and assets they hold, it will soon goes for a firesale when these people (investors) are pixxed off and want to leave the market (an example would be mls listings popped up and no buyers, look just like loads of bulls crashing thru the gate) asap..As market goes downturn, the housing market will soon hit the fan with these people wanted their money back and it creates a domino effect on the price and it hurts buyers that load up their home 2-3 years ago and those will soon be hitting for a sale or foreclosure as investors encounters negative equity and homeowners encountering serious negative equity with maxed out mortgages and home line of credit and crazy property taxes with loads of expenses (gas, hydro, credit card, big item purchases (0% for 24 months tends to reset to 28.8 – 34 % interest now) that they cant meet obligation to…Lastly, it blows them with wages only increases by 3 – 5 % of their annual or they will soon find out, their jobs are unsecured and they will be out of the door real soon…

#36 Jim on 08.05.08 at 8:10 pm

Cottage prices definitely are dropping. My wife and I have been watching for the last few months. Real estate agents always said waterfront properties will never drop. Well, they are flatter than pancakes right now.

#37 Brent on 08.05.08 at 8:23 pm

mike.slob

It was a great day in the U.S. markets, it’s just that heavy resource TSX didn’t join the party. I could care less as I don’t play the Canadian markets. Resource was yesteryears play.

#38 Shifty on 08.05.08 at 10:38 pm

Number of homes for sale highest in a decade
More evidence that Greater Victoria’s red hot real estate market is cooling
Carla Wilson, Times Colonist
Published: Tuesday, August 05, 2008

Slowing sales and rising inventory in Greater Victoria last month show how the once red hot real estate market is cooling down. Buyers are getting more choice now that inventory is up by 34 per cent compared with July of last year.

#39 Alan on 08.05.08 at 11:29 pm

To: Canadian Expat in NC

You do not have to buy. You can rent for a fraction of what you would pay in interest, taxes, maintenance and/or opportunity costs and invest the rest in an rrsp.

#40 Bluesman on 08.06.08 at 12:00 am

Squidly77: Everything you said is true. I’ve been following Alberta Bubble Blog for at least a year now, and Vancouver is now following in our next door neighbor’s footsteps. Benchmark price down 2.1% from June to July 2008. See Vancouver Condo Info http://vancouvercondo.info for details. Woohoo! The chickens are coming home to roost. The train has left the station, ladies and germs.

#41 calgary on 08.06.08 at 12:29 am

everythingzen,

No… everything is not Zen in Calgary!
When rent is not covering mortgage payments, that’s when Zen will hit the fan.
Going back to the last Boom (80s), there were abandoned construction sites of half finished buildings scattered around Calgary. Some taking a decade to see new life.
Oil prices can be fickle, and oil companies are just as whimsicle, known to lay off as quick as turning off the employee key card.

#42 Bev on 08.06.08 at 1:41 am

We sold our Vancouver Island condo last month and are about to buy a rancher, with a mortgage….after reading through all the comments we are not sure whether we should just leave our money in the bank for a year or two! Maybe prices will be back down or closer to what they were before the boom.

#43 Mike.slob on 08.06.08 at 1:53 am

1.Wow,now is a good time to buy a home in Calgary?

http://www.economicnews.ca/cepnews/wire/article/106195

2.Inflation pressures could start to build . . .higher interest rates!

http://www.financialpost.com/story.html?id=702422

3.Soft recession or brutal recession in Ontario?

http://www.financialpost.com/reports/credit-crunch/story.html?id=690633

#44 pbrasseur on 08.06.08 at 8:27 am

It is true that with weakening $CAN and oil prices, inflation pressures could become stronger in Canada. So far we have been protected by our strong currency.

What this means is that our purshasing capability will be weaker, leaving less to buy and pay for things including the big house… Exactly what is happening in the US.

The question is: will it be a “soft landing” or a crash for the Canadian economy?

I bet on both, depending on the region.

#45 everythingzen on 08.06.08 at 10:19 am

To #39,

Your ego is your greatest enemy. Consider an open mind is the path to a prosperous life and heart.

I agree that prices for condos are no longer rising. That is not a debatable point. However, with the strength of the underlying economy I believe that many of the non-owner occupied condos in this city will be scooped up as rental and that owners who aren’t particularly overleveraged and who can manage the operating costs will witness a sharp rise in rents in the coming years as the trend from homeownership shifts to rental. Calgary has had a big shortage of rental units for years and I think you underestimate the growth in the local economy for personal reasons that will ultimately lead you to further frustrations and suffering.

May all beings be happy and at peace!

#39 calgary on 08.06.08 at 12:29 am

everythingzen,

No… everything is not Zen in Calgary!
When rent is not covering mortgage payments, that’s when Zen will hit the fan.
Going back to the last Boom (80s), there were abandoned construction sites of half finished buildings scattered around Calgary. Some taking a decade to see new life.
Oil prices can be fickle, and oil companies are just as whimsicle, known to lay off as quick as turning off the employee key card.

#46 Calgary rip off on 08.06.08 at 10:23 am

In regards to “my view”

How is $70,000 loss from $400,000 market value a loss on your home when you paid $180,000? Please explain this to me. You have more or less doubled your money. Typical bull attitude in this cowtown.

“Calgary”: The local economy in Calgary is too strong to support a massive loss on house prices. It wont happen. The overpriced shacks with 8 feet inbetween will stay overpriced. Good luck to anyone wanting to move here that makes less than $120,000 a year. Unless you have double incomes, forget about living in a single family detached reasonable home. Forget about getting a condo. You’ll be stuck renting!!!

It doesnt look like there will be a bust here like you mention Calgary. No mass exodus of people from this city.

#47 Dave in Calgary on 08.06.08 at 11:34 am

From: http://www.economicnews.ca/cepnews/wire/article/106195

“The market is presenting a good selection for homebuyers, but waiting too long may present less opportunity in the future as we continue to move into a normal market,” said CREB president Ed Jenson.

Oh my, that’s priceless “The market continues towards normal prices, but please don’t wait for that, buy now!”

What BS.

#48 Peter on 08.06.08 at 11:56 am

TORONTO DOWN!

June 2008 -$395,866

July 2008 – $371,427

6.2 % down for one month!

#49 Calgary Rocks on 08.06.08 at 12:14 pm

There not gone be socialist handouts for people if government
=================================

My reply was to Mr. ‘Canadian Socialist’ who like most socialists is more concerned about other people’s pockets rather than their own.

If Canada thinks that people earning 70-100K are wealthy and they need to be equalized then I will just cut my hours (and income) in half and sit home for 6 months. No need to work extra hard to feed underacheivers like Mr. Canadian Socialist.

#50 APCM on 08.06.08 at 12:44 pm

“How is $70,000 loss from $400,000 market value a loss on your home when you paid $180,000? Please explain this to me. You have more or less doubled your money. Typical bull attitude in this cowtown.”

Sure, in this case, a person has doubled their money. But you’re forgetting all the people in their ’20s, early ’30s who have purchased in the past couple of years at the height of prices and got a mortgage to do so because real estate can never go done. I don’t think a large debt is ever a good idea. But some people have let’s say half the money as a downpayment, are being told rent is a waste of money, house prices never come down, etc. So they jump in and buy. Then the following year, they still owe the $70,000 to the bank, but they can’t sell their house for the same amount.

#51 Mike.slob on 08.06.08 at 1:24 pm

Good news and bad news for RE in GTA:

“Good news in GTA is there are currently 26,543 active listings, a 28 per cent increase from a year ago.”
“Bad news is that only 12.4% decrease of sales and
Prices still going up throughout the GTA in July. At $371,427 the average price increased slightly more than one per cent from $366,012 recorded in July 2007”.

Still we can see big pressure with Zero down and
40-year mortgages and probably will see less than 15% decline in August/08 and September/08.

http://www.torontorealestateboard.com/consumer_info/market_news/news2008/nr080608.htm

#52 smwhite on 08.06.08 at 1:44 pm

#42 pbrasseur hit it on the head, while most of you are still nit picking about whether Calgary or Toronto will boom or bust (All Canadian real estate is in for a shakedown), the Canadian dollar has just had its worst day in ages.

Without financials performing and the speculators(We’ll call the banks and brokerage houses) pulling their money out of energy and oil (To make up the shortfalls in profits because of bad mortgages) the TSX is sliding, we’ve had a couple bounces back to 15K but it slides right back down to 13K. Its been flat for a year now.

The TSX is the best gauge we have to judge how the economy is performing, its lost 20% from its high.

As pbrasseur states, we’ve been insulated from inflation because of the rise in our dollar, if oil drops another 20% to around 100 a barrel, more pressure on the TSX, more pressure on our spending power. Its going to take to the end of next quarter to see what kind of damage the spike in oil for the first half of 2008 has on inflation and the whole economy.

Housing prices move in tandem with stock markets…

#53 David on 08.06.08 at 2:14 pm

EverythingZen writes very much like Vultur of previous blog postings.
The dumb and the desperate will find peace and happiness buying overpriced condos in Calgary with negative cash flows and negative cap rates.
Calgary Rocks has it wrong about Socialists. Do you actually know anything about socialism in the first place and more importantly who on the political left is clamouring for bailing out the real estate cowboys and financial wunderkinds who wrought this disaster? If you want to complain about the free lunch crowd, it might be advisable to aim your finger wagging in another direction.

#54 everythingzen on 08.06.08 at 2:51 pm

I’ve owned many rental buildings in Calgary for quite a while now. Over the past several years I’ve seen rents continue to climb sharply. Even now rents are still climbing in many of my buildings.

My point is that the while the market value of my properties may fluctuate with the overall trends, with rents and cash flow increasing I feel no urge to liquidate my investments, pay taxes, and look for alternative investments to replace my cash flow.

I am not over leveraged and thus can afford a drop in my income, but I must be honest in stating that I just have not seen any drop.

Leverage is very dangerous to those are cannot afford to absorb the vagaries of the market. Always be cautious in your use of leverage friends!

May all beings be happy.

#55 smwhite on 08.06.08 at 3:17 pm

David, I was thinking the same thing about Zen’s post, talks about “feelings and emotions” (two things you should never consider when investing) and a lot of baloney talk about Calgary still being the place to be for RE (We’ll call that denial) and more GTA immigration propaganda. You know its an RE biased individual when they keep claiming immigration is going to save the day. It smells of desperation and delusion. If the majority of Canadian citizens(that don’t curently own homes) are having trouble purchasing homes how is a landed immigrant going to?

The only immigrants that are going to save Toronto from its self induced misery is a mass influx of immigrants from Dubai!

For all you that are tapping your toes wishing for, hoping for RE to turn around in Canada immediately, keep tapping. Your wrong on your guess-timations or dreams or wishful thinking.

The sooner people stop denying whats happening to the market, the better off they’ll be and the sooner they can move to the next ponzi scheme.

#56 CalgaryRocks on 08.06.08 at 3:22 pm

Calgary Rocks has it wrong about Socialists. Do you actually know anything about socialism in the first place and more importantly who on the political left is clamouring for bailing out the real estate cowboys and financial wunderkinds who wrought this disaster? If you want to complain about the free lunch crowd, it might be advisable to aim your finger wagging in another direction.
================================

Oh please, coming from an Eastern European background I have 1st hand experience with the socialist losers.

Regarding the bailouts, homeowners are too rich for the left to help. Need to wait until they lose their home, their kids quit school and start getting into crime and the marriage goes kaput.

In the meantime, find a seasoned criminal and they will get in line to set him free into society, with some cheap housing, counseling, medical, dental and welfare.

#57 smwhite on 08.06.08 at 3:32 pm

#54 Zen is Vultur, read how he talks about how smart he thinks he is and as he goes on about his own personal situation, ignoring all statistics, economic indicators, and circular RE trends!

BUT I’M OK IN MY LITTLE BUBBLE WORLD!

Serenity now, serenity now!

So your own situation is secured, then hold on to your RE investments. You won’t be selling any off them if need be in the next 5 years at a higher price then they’re worth today.

The game you talk about is cat and mouse, those in denial will hold their rents too high, they will keep the price of their properties too high, Zen, you may be able to play the waiting game on your big pile of money, but when speculators that have a lot smaller pile of money have to liquidate, they will, those that have to lower rent to lease out an apartment to cover a mortgage payment, they will. All this puts downward pressure on the system, that you have know control over, the power has moved from the hands of the seller, to the buyer.

The fact you have buildings filled to the brim with immigrants is fabulous, CLAP CLAP, you should start selling “How to get rich on Real Estate” books, hey, maybe Garth will give you a little spot on his blog.

Now go back to the mirror and practice telling yourself how sexy and smart you are!

#58 Dawn in Calgary on 08.06.08 at 3:42 pm

I doubt ‘everythingzen’ even lives in Calgary, let alone has multiple rental properties here — or he’s just a liar.

I’ve been closely watching the rental market here since we moved in the beginning of ’06. Prices went up and up and up until about the fall of 2007 when they started to flatline. As more and more units have come on the market since about March of this year, I’ve witnessed rental prices softening. Many units are staying on the market longer and many can’t be rented for what they were charged for last year — including the unit we gave up because the greedy landlords wanted to increase the price again. They tried to rent it at the higher price, couldn’t and dropped the rent three times to finally find someone who would pay $50 less than what we did when we first moved here.

Many owners are turning to ‘rent to own’ options to try and unload their properties.

Should be an interesting two years.

#59 Brent on 08.06.08 at 5:49 pm

APCM,

Your post….

“How is $70,000 loss from $400,000 market value a loss on your home when you paid $180,000? Please explain this to me. You have more or less doubled your money. Typical bull attitude in this cowtown.”

Sure, in this case, a person has doubled their money. But you’re forgetting all the people in their ’20s, early ’30s who have purchased in the past couple of years at the height of prices and got a mortgage to do so because real estate can never go done.”

….and to add, it’s the ones that bought in the last couple years mortgaged to the max that pushed up those prices for the people that have been in their homes for a decade.
These newbies can also push the prices down by having to unload or there stops being anymore newbies.

#60 David on 08.06.08 at 6:52 pm

Dawn in Calgary those rent to own or vendor will carry deals are always dodgy. The person renting to own probably should not be thinking of buying a house and the vendor probably should not be thinking of becoming a landlord. In the event of default, the would be owners might find out how much ownership they really have in that property.

#61 everythingzen on 08.06.08 at 8:15 pm

The anger, rage and vitriol is literally leaping off the screen at me! Remember to breathe friends, your life is too valuable to waste it on such negative emotion!

I am not your enemy- I am your friend. I wish no one any harm. I am merely pointing out some facts that I witness first hand as a building owner. I realize the market is softening but even so I am seeing my cash flow increase as rents are strong and tenants are plentiful. Perhaps it’s all those people sitting on the fence and deciding to stay out of the market!

Please, people, consider that the rise or fall in real estate values in Calgary is neither good nor bad. It just IS and make reasonable decisions based on that reality, not on emotion. It serves no benefit to you or to the city, province or country to express such rage. I understand many of you appear angry that you either can’t afford a home or refuse to pay the asking prices because you don’t believe they represent fair market value to you. Well, I greatly respect that opinion and your decisions.

But why all the hatred and anger? What does it accomplish? Ask yourselves that several times then consider that your happiness lies within yourself, not outside yourself and I believe that you will each be able to lead happier more fulfilling lives.

May we all be at peace.

#62 everythingzen on 08.06.08 at 8:22 pm

#57 smwhite on 08.06.08 at 3:32 pm

“So your own situation is secured, then hold on to your RE investments. You won’t be selling any off them if need be in the next 5 years at a higher price then they’re worth today.”

You are probably correct Mr. White. I agree that these investment probably won’t be increasing in value any time soon however I am content with the income that I receive from them and don’t have confidence in other investments that I can believe can return the same or better after-tax income for the same risk.

I am only able to live in my own present reality as all of us are uniquely. We all must deal with our own situations and not concern ourselves with others. That only leads us to frustrations from attachment and suffering. I read the data on the housing market and try and understand the economic trends that are affecting Calgary but in the end I, like the rest of you of course, need to make decisions based on my own personal experiences and circumstances.

That is my journey, you have yours. Live it to the fullest!

#63 dotava on 08.06.08 at 11:15 pm

#56 CalgaryRocks

If you are coming from East Europe as you proclaiming – definitely you barely finish elementary school there.
Garth – TNX for excellent book and blog, also like to thank most of the bloggers with sincere and wise comments.
David you are the MVP – keep doing what you are good in.

#64 jelly on 08.07.08 at 4:46 am

Everythingzen,

Well said!
We may not agree on the topic, but anger is such a toxic emotion,
and is especially unecessary when dealing with
money.
There are certainly going to be some very eventful
changes in the next few years as it seems
that people will become less materialistic and more
“real” as priorities will have to reset since they have
been so skewed….hard times should bring positives
along as well.

Peace…

#65 The Coming Ghost Towns: Is Garth Turner a Fool? — Grandinite on 08.08.08 at 5:08 pm

[…] Turner has a post that you might want to check out: Ghost Towns USA. Do you think it can’t happen here? It sure can. Entire communities can belly-flop due to a […]

#66 Insider on 08.09.08 at 12:25 pm

Working in the financial industry, it is really eye opening to see the huge mortgages people are carrying. Daily we are getting requests for people to increase their LOC mortgages. I cannot understand why they are looking to increase their borrowings when they already cannot meet their minimum payment requirements…scary! It’s unfortunate that the limits these individuals are able to carry is based on the value of their homes. Being on the inside of this I can see how things are heading for trouble in BC, AB and SASK. House values are going down, but people’s mortgages are going up…………

#67 Jas on 08.09.08 at 10:39 pm

Enough of this doom and gloom….
Ok, its obvious…what’s the point of stating the obvious?
Folks, let’s hear when the trun around is going to be…
Let’s talk about the next phase…and not keep repeating the same old stuff…

#68 George on 04.03.09 at 1:12 pm

Great post, thanks for the info