The CBC just reported that according to the Association of Edmonton Realtors prices have dropped from $426,000 to $412,000 in the first half of June:
Well, in my experience, the Market Pendulum swings between 3 and 9 o’clock, and it doesn’t stop at 6. The reality is, market value is defined by what a reasonable and willing buyer will pay a reasonable and willing seller. We all know the reasonable side of things has been out of whack, but the market dictated by supply and demand played a factor in that reality.
So with the advent of higher inventory we will see a new reality (having sat down and talked with a number of sellers recently, many of them believe they are immune from this new reality. "I have a better location," "The upgrades we’ve done are superior to other similar properties" and so on). Having just returned from some industry meetings in Canmore there are others, Real Estate professionals who disagree with my prognosis and feel the market will just keep roaring along.
The reality is there is more supply, and buyers will not be forced into making overly aggressive. decisions, and if the buyer is smart they will utilize this new power to their advantage. For sellers, marketing and how they choose to sell their home is going to become even more important. For buyers, working with someone who understands the market is crucial to not overpaying. Simply put buyers no longer have "fear" of losing out. So buyers will rejoice and sellers will have to be prepared to adjust their expectations.
These are interesting times and even with strong sales in my opinion the Pendulum is swinging the other direction at least for now.
p.s. Up coming Interest rate hikes will make affodability even more of an issue. So even if prices go down slightly there maybe no immediate affordability relief.
Finally I might be able to start looking to move.
Could this be the end of buying without conditions, including house inspections, having to offer over the asking price to have a chance at buying a good property, If this is the case I welcome it and I can finally start looking to move. Or am I still wishful thinking?
Not entirely but those will become the exception not the rule. Really good properties that are properly priced will still be sought after.
I’m suprised by the dip. I wasn’t expecting any real decline for another 4 or 5 years.
It will be interesting to see how things play out in July. If the median takes another dip, what do you think the chances are that a lot of people will attempt to cash in on their gains and sell off? Could create a lot more downward pressure.
“what do you think the chances are that a lot of people will attempt to cash in on their gains and sell off?”
I think that is precisely what is going on as we speak.
You guys didnt really think Edmonton would be on the same level as Toronto, Vancouver, Montreal did you?
C’mon, lets face it, sure we have parks, a valley etc., but to people who have lived in other cities, this is still “Edmonchuck”
But it’s the Cultah Capital of Canada!
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Jobs are a hell of a good reason to live here. I doubt that the market can soften much as long as we are offering work to people moving out from eastern Canada.
$400,000 for a shack can be a huge stumbling block when you’re moving out from the east though. I wouldn’t be suprised if median dropped just enough to make moving here look attractive again and then shoot back up with the next surge of immigrants.
What kind of jobs are you referring to Nate?
The kind of migrants that are streaming into this province are mostly MB/SK high school dropouts whose only ability to make money is to hit the rigs at 60-80 hours a week. Or newcommers to Canada, who will most likely end up making your doubble doubble’s. (They will certainly keep comming, but what will happen is what has been happening in Toronto as well, which is up to 5 families living in one house. Edmonton will in that case be the next Scarborough. I am certain that if you take drive through you wont wish your children to grow up in that kind of neibourhood.) I havent heard of a mass of intelectuals heading this way
It seems it does not matter how good things are, some people will still see the glass as half empty.
The market is balancing for a bit which is needed. However I would be much more worried living in Eastern Canada right now. If interest rates climb and the CA dollar remains strong (which it will) then look for many more jobs to be lost out east. Interest rates could dampen the housing EVERYWHERE so this is not an Alberta specific argument for anything? Alberta is still short workers of all types and projections are for the labour shortage to actually get much worse over the next 5 years. This is a blessing in a way as it will ensure continued migration to Alberta from the rest of Canada for many years to come. The downside is the wage pressure (UP) could dampen business in general. Is business slowing down yet? Not from my vantage point. I know of many companies who would like to increase there skilled workers right now by like 50 percent but just can’t find the workers? In short Real Estate is pausing at these levels but I can easily see the average home increasing by another 100,000 within 5 years. This is by no means a wild number I am throwing out. As stated above many realtors will agree with me on this one. We could all be wrong but then so could those who claim prices will fall. I know this sounds crazy another 100,000 from today’s prices but I believe it will happen and I am a very conservative estimator. Time will tell but those who think it is going to fall are going to be really surprised I think.
Whatever your perspective, you can find justifications.
A few points I’ll address. This market is not unglued it is like many of the markets I have been in the past but the balance of power is shifting to buyers at least for now.
I don’t want to compare Toronto to Edmonton not on Averages anyways. On similiar properties like our Price comparision Index where similar properties and locations are compared.
I used to think Toronto was hell on earth. I avoided it for nearly 10 years. Until Sara who is from Ontario opened my eyes a little. But it is not fair to compare one to the other just as Denver to New York ect… What I will say and most information I’ve seen suggest that there is a population shift east to West….For a long time Toronto was in a league of its own then came Vancouver…So I believe each city will have to stand on its own. Honestly Calgary is a great city but in my mind pales to Edmonton for many reasons. Thats another blog for another day..
As for whether to buy or not…that depends a number of things. A cooling real estate market is good news for buyers because it’s easier for them to negotiate a deal. But it shouldn’t be the main reason that pushes people into the market. In fact, buying a home is a personal decision that you should make independent of what the market may or may not be doing. It is a long term proposition. Much of what I have today stems from homeownership and the freedom that has given me. But the world needs tenants too. There’s no right or wrong choice just your choice.
Maybe this decline will start picking up steam a lot sooner than we all expected.
I anticipated things to slow down in Sept and Oct. Simply because things slowed down last year at that time.
Its in no way a melt down. We’re still looking at record sales. Things are adjusting.
Average sales prices coming down could have a lot to do with an increase in listings selling in lower price ranges – simply because there is a lot more to choose from because of condo conversions hitting the market recently.
Correct me Sheldon, if I am wrong, but wasn’t May a new record month for sales in Edmonton? Also, if we follow the Calgary example of last year, their market paused too but this year a large increase in listings also brought about a large increase in sales earlier this year in their market. Maybe that is what we are seeing here?
I will make a very strong statement here that the only things that will bring the Edmonton market down in price for is:
1. More people leaving than coming here – not happening yet!
2. A substantial rise is mortgage interest rates – hasn’t happened yet! Talk a bout rates nudging up shortly will probably get the fence sitters buying sooner than later.
3. A large increase in residential building starts. I think starts are slipping – aren’t they?
None of these is happening yet, so why panic?
steve,
I don’t agree with your conditions for price decreases. But I agree the current decrease could be statistical.
1. More people leaving than coming here – not happening yet!
Building has ramped up to accommodate high levels of net migration. This only needs to slow and not reverse for a shift in supply/demand.
2. A substantial rise is mortgage interest rates – hasn’t happened yet! Talk a bout rates nudging up shortly will probably get the fence sitters buying sooner than later.
I think its wildly optimistic with prices doubling in 2 years that increasing mortgage rates will drive even more people to buy.
3. A large increase in residential building starts. I think starts are slipping – aren’t they?
There was a record # of starts in 2006 and i think 2007 is slightly below this. However the number of units under construction is very high. This is because with longer construction times there is a glut of unfinished homes. Is there a CHMC report that shows the amount of construction in Edmonton?
It’s also worth noting that higher interest rates reduce borrowing capacity for would-be buyers. Interest rates have started to trend upwards since the beginning of 2007 (5yr discounted rates have increased approx 0.80%).
This market (like any other) is all about perception – all it takes is the perception that housing prices are starting to flatten out (or decline), at which point group perception will start to shift regarding what constitutes a reasonable home price in Edmonton (and other areas of Canada incidentally).
BearClaw: Would you agree that a modest amount of inventory buildup in new housing will not put much downward pressure on Edmonton home prices? I say this because new construction is very costly anywhere but especially in Alberta where the shortage of skilled trades has driven labour costs through the roof and also added greatly to carrying costs because of the very long backlogs caused by this shortage. There is no such thing as low priced new construction any more – even if Habitat builds it.
In my humble opinion, large unsold inventories of used homes sitting around for a substantial period of time will make sellers reduce their asking prices to where they can attract buyers will bring down prices everytime. These types of sellers can usually afford to come down – afterall, their homes have doubled in price in 2 years. If sales numbers decline and inventory increases to a point of say 4 months supply, then I’d be worried. All I’ve seen from May’s numbers are more sales than ever before and that can’t happen if inventory levels are low. There are more people just plain buying homes, which is a sign of a growing city as far as I can see. Maybe I’m just blind?
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