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Tuesday, April 25, 2017

Wow, Another 26%

Posted by Tim Stobbs on February 6, 2008

So I was reading the news yesterday and came across this article where they are predicting another 26% rise in house prices in Saskatchewan this year. What got me freaked out about this is if they are even remotely correct, I should hit double point in my house value at some point this summer from where I bought it.

So looking back I realized I’ve been insanely lucky with real estate so far. How much so? Let me do a little review.

2004: Invest about $8000 as down payment on my first house.

2006: Sell first house and put down $40,000 in profit on next house as down payment.

2008: If market prediction is correct by summer house value minus mortgage should be around $240,000.

So granted we have been paying off our mortgage as this has gone on, but the vast majority of the equity in the house is from market increases. So in total from 2004 to 2006, is a 500% increase, while from 2006 to summer 2008 will be a 600% increase. Net therefore should be around 3000% over four years or an average of 750% per year.

So granted part of this is just a projection, but it does hit home a very important fact.  I will be downsizing at some point in the future to extract part of that equity.  When I’m not sure, it could be five, ten or even 15 years from now.  I just personally dislike having that much money tied up in something that in the end basically provides shelter.

Comments

7 Responses to “Wow, Another 26%”
  1. FourPillars says:

    I made a similar “profit” on my first house and guess what? Unless you are going to move to Antarctica it doesn’t mean a single thing.

    You might find that downsizing is not as profitable as it seems.

  2. nobleea says:

    the same thing happened to me in Edmonton. my original downpayment on my condo was less than 7500$. the equity built up over the past 2 years from home value increases is about 160K. that’s 2100% (yours should be 3000%, not 30,000%)

    beware though, any runup in home prices that happens that fast is likely to be followed by a hangover as speculators move out of town

  3. Canadian Dream says:

    Nobleea,

    I corrected the typo. I got carried away hitting the zero’s.

    Thanks for your comment. It’s interesting to hear from people who have been in a similar situation.

    Tim

  4. MM says:

    I just bought a house in PEI. Although the market in general is slow and steady here, the waterfront properties are exploding in value.

    I’m hoping to sell my waterview chalet beside the National Park Beach this year at no less than a 500% ROI

    …Anyone here interested in a 3 bedroom chalet for a year round home or summer getaway? :)

  5. It reminds me of my first house we bought as I entered University. Within 5 years it had almost doubled in value. That’s when the boomers were all buying their first homes. If I recall correctly we paid about 12,500 and sold for 21,000 five years later. Our current home is worth closer to $300,000. We also have a lot tied up in “shelter”!

  6. derek says:

    As a real estate investor from B.C. I’ve often wondered about the market in Saskatchewan but not sure which region would give me the best bang for the buck. Any suggestions?

  7. Canadian Dream says:

    Derek,

    Depends on your investing style. If you are looking at buying rentals I would stay out of the market entirely in Regina or Saskatoon. Rents haven’t increased nearly fast enough with the house market increases.

    I don’t know much of the market outside of Regina or Saskatoon, so I can’t really comment to say where is a good buy. Also the increases are fairly area dependent in the main cities. The slums are still cheap to buy in, but they will always be priced that way for a good reason.

    Best of luck,
    Tim

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