Like many Calgarians, Joss Engen was looking for a larger home for his growing family and found few options within their budget.
They started looking in the $350,000 to $400,000 range. That was four years ago.
They did indeed bid on four homes, he said, but found they had been outbid by people who offered all-cash, waived terms or offered as much as $50,000 above the asking price.
“It’s kind of a dog-eat-dog world,” he said.
After years of searching and saving, they were able to increase their budget to $450,000 to $500,000 and began to find more options that fit their needs. But then interest rates also started to rise.
They eventually bought a home in the deep southeastern community of Cranston, which they moved into last week. It’s a little further out than the apartment they used to rent near Mount Royal University and — at $521,000 and an interest rate of 4.89 percent — quite a bit more than they originally hoped to spend.
But they have consciously chosen to change their lifestyle in order to afford their new home.
“We should actually cut all discretionary provisions – well, not all discretionary — but really all discretionary spending,” he said.
For them it is worth giving their children aged 3 and 5 a bigger house with a garden. They had also looked into renting a house, but found asking prices for rent to be even higher than what they thought their monthly costs would be for buying a similar house.
More and more Calgarians find themselves in similar situations as rents, home prices and interest rates all rise at the same time, while the number of available homes is shrinking.
The reality of finding a place to live in the city has changed so quickly that people who are not actively looking may not know what things are like these days.
‘Two Loneliness’
It’s a problem across the country, says Ron Butler, a longtime Toronto-based mortgage broker who follows real estate trends nationally.
Today, he doesn’t mince words—using terms like “crisis” and “calamity”—when it comes to the situation potential homebuyers face, especially in cities like Toronto and Vancouver, but increasingly Calgary as well.
“We have this rapid rise in interest rates and we have crazy house prices,” he said.
Calgary has gotten crazier in the past 18 monthsthat’s for sure.”
He notes that the rise in mortgage rates has come after a long period of floor rates and basically free money, so the “disaster” may not be so obvious to those who have lived in the same house for years.
“There are two kinds of loneliness in Canada,” he said.
“There are people who bought a house 10, 15 years ago and their mortgage payments are very manageable. They’re increasing — and you’d be surprised how much the first group thinks zero about the second group.”
The Bank of Canada, which continues to raise lending rates in its ongoing battle against inflation, is certainly thinking of the second group.
‘Financial vulnerabilities’
Amid the “indicators of financial vulnerabilities” that the bank tracks is the share of new mortgages where the borrower alone spends more than a quarter of his gross income on mortgage payments.
That share has tripled among first-time buyers, from less than 13 percent to nearly 44 percent, in a year.
Other data suggests that a growing number of people are becoming house poor, spending so much of their money on basic housing costs that little or nothing is left for everything else.
Mortgage delinquencies are not increasing, but people tend to pay off their mortgage first. However, consumers are increasingly relying on credit and missing payments on other types of loans, according to credit monitoring agency Equifax Canada.
“At the end of last year, younger and lower income earners had more difficulty paying,” said Equifax analyst Rebecca Oakes. said in a recent report.
“We’re also starting to see more homeowners struggling now, especially after mortgage renewals where payments have gone up significantly.”
Average monthly mortgage payments for first-time buyers in Alberta have increased 33 percent over the past year, according to Equifax data.
Coupled with the broader effects of inflation, Butler says, rising interest rates have also created stress for families with variable-rate mortgages or those who have recently extended.
“Some of these people need to borrow money on their credit card to get some important things done in their lives,” he said.
“Because let’s face it, if your car insurance is due for renewal and you’re used to paying it annually, and all of a sudden there’s the bill and it’s, ‘How are we going to pay for this? It went up $800.'”
‘Bizarre Feudalism’
In some of Canada’s most expensive real estate markets, homeownership has almost become a kind of “bizarre feudalism,” where most people can afford a home only if they receive an inheritance or other forms of financial support from relatives.
“If your parents got it right and had a paid house that escalated greatly in value, then you can have a house too,” he said. “But by the way, you people whose parents did not own a house, I think your fate is serfdom for life. You’ll never own a house.’
Calgary, he notes, is not like that, but he is concerned about what the current situation will mean not just for people struggling to buy a home today, but for those same people decades from now, when they try to retire. to go.
“Not having to pay a mortgage when you’re 60, 65 … is an incredibly important part of your future retirement planning,” he said. “And if we make it impossible for young people to start, it is a great disservice to society.”
As for Engen, his family loves their new home, even if it involves some sacrifices.
It may mean longer commutes and less money to spend on meals at restaurants and going out for entertainment, but it means more time to have friends over for dinner and kids playing in the yard.
It suits them just right, but they had to walk a narrow path to get there. And with house prices and interest rates still rising, they consider themselves lucky to have found what they were looking for after four years of searching.
