“It’s now..”

Let`s end the summer with Jen:

I’m 26, with a steady full-time job in Calgary and am living very cheaply as I save up for a downpayment. I have a pre-approval at 3.79 for a 5/35 mortgage. No debt, but no investments either. I’m not looking to speculate; I’ll hold on to the place for 5-10 years minimum and rent it out if I have to. Obviously, I’m looking for a downtown condo in the sub $200,000 range — a price that seems to become more plausible by the week. I’m already seeing significant price drops.

A friend of mine bought a condo in the SW three years ago. She would stand to lose $50,000 if she sold today. Last week I saw one place in a good area, 800 sqf and recently renovated; the owner paid $247,000 in 2007. Now he’s trying to sell for $197,000 — a price I thought was still unreasonable.

I believe a big correction is about to hit the market and I understand that I’m taking a gamble on a condo at the best of times. But I’m 26 and I have time to recover if the price goes sour. If I get in at the right time, worst case scenario I’ll lose money, but not more than if I were renting.

Annyyyywhoo…..

So here’s my question, and one that I think is probably affecting a lot of first-time buyers like me. When do we swoop in like the vicious vultures we are?

It behooves me to wait. The longer I do, the more money I can save. I would much prefer to put 10% down and shorten my mortgage to 25 years. Right now I’m thinking I’ll wait until December and start making ridiculously lowball offers. Failing that, I may wait until March. Would you consider devoting a blog post to property virgins like me? Thanks, Jen.

Well, Jen, why do you need a response? Haven’t you answered your own questions? After all, one of your young friends has just been slaughtered and eaten whole by her carnivorous condo. Why court the same fate?

The facts are simple. You’ll be buying with 95% financing into a falling market. The chances of losing your savings are somewhere between duh, and 100%. The odds of ever making money on a cheap downtown Calgary condo are slim, and may only come a decade from now. And while you own it, that little condo box will steadily suck the juices out of your financial life.

After you find $14,000 to put down (5% plus closing costs), your cheapo VRM monthly mortgage will be $710, plus $550 for condo fees, property taxes and parking, taking the carrying charge to $1,265. Yes, Jen, that’s more than the $800 a month market rent for a one-bedroom in Cowtown. And once you amortize your downpayment, deduct the inevitable selling costs and face the certainty of a mortgage reset at higher rates, how can ya win?

In five years you’ll still owe $190,000 (thanks to that bloodsucking 35-year am). If you sell for what you paid ($200,000), less commission ($10,000), you net nothing. If you’d rented for five years for far less in monthly costs, and invested the $14,000 at 7% (I’ll show you how), you’d have almost $20,000. Profit vs loss. A baby vulture should know the difference.

But wait, with owning and selling for a net loss, you’d also have kissed off the original downpayment of $14,000. So much for that “throwing money away renting” cliché parents and other fools are always chucking at you.

By the way, Jenny, did you catch the news on this last weekend of summer?

Calgary house sales crashed 32% last month. Condo deals crumbled 42%. Average house prices collapsed at a rate of 1% a week in August, and even the real estate board says it’s not over yet. Of course. And it’s not just cowboys who need a whack on the head.

In Vancouver, sales crashed 36% in August. Prices are down 3% from the spring, on their way to thirty. In Toronto, deals fell last month by 22%. This summer prices have dropped by $35,000 on average.

And should you need conclusive proof real estate is so 2007, you sweet young thing, just muse on the desperation dripping from a bank spokesguy when BMO announced a bond market-induced mortgage cut this week.

“If ever there was a time to buy,” said executive Martin Nel, “it is now.” You could almost hear him mouth, “Oh God, please…”

Jenny, babe, there’ll be a day for you to nab a condo without it eating you. But this ain’t it.

Stay virginal. Always works for me.