As you all know the press release came out today, I’ve pasted it below for those who’ve missed it. The media has picked it up and the press is as bad as we’ve been warning about all summer. Consumer confidence is a very important part of this market, and if the press continues to scare people confidence will be affected.
The Journal’s headline "Prices Plummet" seems extreme when they didn’t fall as much as we’d been expecting, but 3% in one month is a good drop. I can only imagine what the Sun will say, but I’m sure it will be along the same line as the Journal.
**Thursday morning update: The journal has changed its tone, the headline of their new article by Ron Chalmers is "Average up 27% in Single Year Despite $10,000 hit" and further states the cooling of the market is ‘nothing to panic about.’ ***
Ah well, you can always count on Re/Max to come up with something positive, and they produced their Luxury home report today which isn’t really very interesting except that 5 times as many "luxury" homes have sold in Edmonton so far this year than last year.
Anyway, here’s the press release and if you missed them our charts are in the article below:
Growing inventory reintroduces spring housing prices
Edmonton, September 5, 2007: Single family homes in the Edmonton area are selling, on average, for just slightly more than last March. There were 747 SFDs sold through the Multiple Listing Service® in August at an average price of $403,757. This is down 3.2% from the average price of $417,150 in July 2007. The average price in March was $398,476.
For the second month in a row, the inventory of available homes on the MLS® set a new record for the Edmonton market. There were 9,185 homes of all types available as of August 31, 2007. Residential sales (1,299) were below the 2,079 figure for August 2006 and the five year average of 1,657 units. The unusually high inventory has accumulated because of higher than average property listings since May. There were 4,331 residential properties listed in August which is up 63% from the previous August (2,657). The sales-to-listing ratio was just 30% down from 35% last month.
“Eventually, every house will find a buyer,” said Carolyn Pratt, President of the REALTORS® Association. “In this market, buyers have a lot of choice. Sellers must be creative in their marketing and ensure that their home is shown in the best light to capture the attention of potential buyers.” She advised sellers to ask their REALTOR® for advice on home staging or small renovations that might improve the appeal of their home. “Often a few hundred dollars to fix some minor imperfections can result in a faster sale,” she said. “People buy with their hearts as well as their wallets and sometimes the price is irrelevant when someone falls in love with a property.”
Condominium average prices fell by just 1% to $269,139 from $271,908 last month. Duplex and rowhouses dipped 2.8% to $329,764. After rising 2% in July, the average residential price dipped 2.84% in August to $344,792 and the median price was $380,000 in the greater Edmonton area.
“Every homeowner or potential home buyer is keeping their eye on the housing market right now,” said Pratt. “REALTORS® are optimistic and see any price dips as temporary and within the normal range for this market.” She urged buyers and sellers to explore all their options with their REALTOR® and heed their advice which is based on daily contact with the marketplace. “This market changes rapidly and two years or two weeks could require a different marketing approach. Even a homeowner with prior experience of buying or selling a home needs professional representation to understand the new (and changing) forces that drive this market.”
Highlights of MLS® activity
| August 2007 activity |
Record for the month* |
% change from August 2006 |
| Total MLS® sales this month |
1,552 | -36.60% |
| Value of total MLS® sales – month |
$557 million* | -17.50% |
| Value of total MLS® sales – year |
$6.44 billion* | 45.30% |
| Residential¹ sales this month |
1,299 | -37.50% |
| Residential average price |
$344,792* | 27.40% |
| SFD² average selling price – month |
$403,757* | 27.60% |
| SFD median³ selling price |
$380,000* | 25.40% |
| Condo average selling price |
$269,139* | 34.10% |
Everyone bail. Get out now while you can. This is not a drill. Edmonton is toast, life as you know it is over. I’m moving to Saskatchewan (no actually that’s expensive now too. OK I’m moving to Manitoba. Not sure what I’m going to do but there’s nothing left here for me. Maybe I can work for Revenue Canada? Bye all.
I’ll be here when you get back
In Alberta’s greatest city.
The headlines are just to sell papers and the actually article is usually toned down. They can at least have sensational headlines that make more sense but the journalists usually have a tough time with numbers.
Some more applicable headline ideas:
“Whos gonna buy all these houses?”
“Residential sales tank”
“Sellers run to the exits”
Like others have mentioned, when buyers start to notice that if they wait longer, the house prices will go lower, that will start a deflationary trend.
In light of the stats that are showing up recently it appears as though we are in a perfect environment for such a mentality to take place.
Look for “Experts” to use media and other advertising channels to tout’ “It’s never been a better time to buy”, etc…This is the type of approach that was flogged in the U.S. at the BEGINNING of the housing recession by the realtors, lenders and builders who will see the writing on the wall first-hand. Their hopes are to shore-up the market by selling it as a Value and a Sellers Market.
Yes, I know there is a lot of $$ and credit floating around Alberta, but people usually want a good value for their money and if they see prices declining, they won’t drop $450,000 if they think they can save $50,000…why that’s a new Pickup truck…YEEEHAAWWW!!
I don’t think that was the usual Alberta Advantage. I smell a bear poking fun. Let us all just wait and see, do whatever it is that you think is right for you. How about this, Calgary experienced something similar last year and listings plunged December and prices well, you know what happened early this year. It is a comfort though knowing that they are retreating once again. Mind boggling these markets are. Nice to know that even the BoC is uncertain about the future.
Great comment fence
How about these for headlines just to show the other side.
Prices barely budge as investory surges
Panic Monkey’s spanked as market stays upbeat
and just for laughs how about
President Bush declares war on China…says the war will help boost the economy
Heck my favorite would be
Edmonton voted worlds best city after Vancouver judge arrested for vote rigging
I have really enjoyed reading this blog. It’s good to read a good opinion out there, not only from the authors of this blog, but the many readers that post their thoughts as well. Keep up the good work.
I am currently in a situation and maybe some of you would like to give me some of your thoughts as to what I should do.
I have a house being built in St. Albert that I locked into a price 3 weeks before this market decline. This is a hard hit for me because if my current house value falls then my mortgage payments would go sky-high. As well, I would have to deal with the possibility that the value of the house I am building will be far less than what I am paying for it right now.
I do have some RE investments that might equalize this situation for me, but even right now I am having some doubts if I’ll see any substantial return on them.
I have a partial down payment already in the house and it wouldn’t be the end of the world if I walked away from it. I would try to get it back, but we all know the builders contract only favors themselves.
There are 2 more down payments for me to make coming up, but I don’t want to make them because right now I can walk away only losing what I have in it right now. Which is still a substantial amount. Anyhow, by not making the the other down payments it’ll keep the ball in my court to walk away with what I know I would lose right now.
My situation right now is should I not continue building this house the way the market is right now and risk losing a good chunk of change? Or should I proceed with it because maybe there’s a slight change of the market recovering by May – June 2008?
My wife and I are being torn in two figuring out what to do. For every 1 person I talk to that says this is the end of the Edmonton RE scene there is 1 person that says I’d be stupid to walk away from a down payment.
Any good opinions out there for me?
What I would do is, rent my old house for a year or two until I get the right price, in the long run market will go up again as boom is followed by burst and burst is following by boom, so right now being patient and renting one out will be best option possible and you know you will get really good rent as I have couple places and if you know the game it is good money there.
Maybe the math is wrong?
2 sold at 500
1 sold at 400
Average is 466
1 sold at 500
1 sold at 400
Average is 450
That drops the average 3.7 percent.
Maybe more product at the lower price point is selling than product at the higher price point? This does not have to mean all product dropped in price just that more of the affordable product is selling?
I would talk to your Realtor, your builder, and your lawyer. Don’t make these decisions in a vacuum. Otherwise I can’t comment on specific stiutations.
@Alberta Advantage
Are you trying to reinvent something here with your new math theories?
How comes you never questioned the math when prices were going up?
St. Albert guy,
hopefully you purchased a home at a price you can afford. I think you will be fine, and it will be worht what you paid come April again.
This market is declining because of lots of shitty inventory out there. If you have a NEW home, that shows well, then it will not decline as much Its all about quality rightnow.
This relates to Alberta Adavntage’s math. If people continue to buy more affordable properties, what will eventually happen to the higher priced properties if they need to sell them? Make them more affordable! How? Lower asking prices! That is how you can still interpret prices as going down even if it is cheaper properties selling. the same argument holds for prices to go up.
All I’m saying is that the average statistic is a very blunt instrument. A duplex just sold on my block for $380,000 and that is right at the top range for any units that have sold this year. So that product did not go down in value in my area. In fact it has still went up? So the statistics are not showing a true picture of what is going on in certain areas and price points.
2 units were listed by 2 realtors at $389,000 on the same block. They are identical except the one that has not sold is actually a better deal because it has better upgrades and appliances worth thousands of dollars more? So why did the other one sell 2 weeks earlier? I would have to conclude the quality of realtor is the factor here? There is also a comfree as well for $15,000 less which was the former showhome and has not sold for months?
I’m not crazy about realtors but I would strongly consider speaking with Sara or Sheldon if I was to sell now. I don’t know what their track record is but based on the work they do here I think they may actually be OK? Many realtors do nothing other than stick a sign on your lawn and hope it sells? Trust me I know some of them and they are just plain lazy.
Alberta’s run is far from over.
If you like averages Calgary and Fort McMurray are both way higher than Edmonton. Edmonton is stuck in the middle so why do we all think prices are going down here?
should i or shouldnt i,
band aid solution. If it is causing you grief be gone with it no matter what the market may or may not do. Peace of mind is worth more than a down payment. It is better to admit a mistake and move on than to go down with the ship. -Just my humble opinion.
These statistics or any can just be considered as a tool in decision making. This is in responce to someone’s remark about some property prices that differed to what the statistic told.
Statistics gives you are broad idea that the there are more sellers (listing increased) less buyers (less sales)and the prices are showing a downward trend. To reverse this stuation we have to bring in more buyers or we have to ask BOC to reduce there rates so that the home loanership can be attained at a lower rate. And to convince sellers to go away now and bring their houses one by one.
Now analyse case no 1:
Bring in more buyers: Yeah appears to be acheiveable, these oil companies expand their operations and we will import new buyers from all over Canada.
Reduce the loanership rate:
With all the crises and inflation, it appears to be somewhat unlikely to happen.
Ask the sellers to stop selling their prodcut:
It is difficult to do as well…..it is the mob mentality that is in play….previously it was in the buyers court and now it is in the sellers.
@Trueheart
Your seem to be missing the simplest solution to the problem of too much inventory. Why import buyers? Just lower prices and then more buyers will appear. That is usually the way most businesses deal with too much inventory.
Why do we think prices are going down? because they are…I think people need to really stop comparing Edmonton and Calgary. The two cities are very different. Calgary has been booming for a lot longer then Edmonton and I’m not surprised prices continue to go up and up. Calgary has some advantages like milder weather and mountains. Edmonton’s market was mostly driven by rig pigs looking for a place to park their families while they worked. I think people are finally starting to realize that a house in Edmonton just isn’t worth over 400 K.
Okey….some people are really pissing me off….sorry for the language….YES!! prices will go down….NO!! they will not go down 20-30%…..NO – a home in Edmonton is not worth 400,000 – BUT – its worth 350,000 – YES the price will correct. NO – it will not drop down to 200,000 – Like it was 2003 / 2004 -
This is why – and I will use only one example…to build a new house now compared to three years ago is more expensive…the wood price has come down…but the price of equipment rental and other services has unfortunetly went up….current negotiations with the labour unions for diffrent trades have resulted in an avg cost increase of 4% for a house build this calander year…..increases in gasoline and resources have also influanced the potential value of a home… (IT does not matter where in teh country you build – gas cost and resources cost have gone up (cooper and steal cost are up, nails cost more to buy, the plumber makes 32$ na hour today compared to 18$ in 2001)….
Finally to drive the nail home….yes there is 9000 homes on the market…alot of them are crap which people left after they got good jobs and bought more expensive….allot of them are flips….will a product that costed you 300K to produce go for 250K…..PROBABLY not!!!…..will it go for 400K….today – with 9000 houses – also probably not….
So do compare prices…but also be realistic….correct the price 10%….but dont predict the end of the world…..
Why is Edmonton being the victim, no prices should not be so high, Edmonton is not worth it, people who do not like it should move to where they are cheaper houses and there are jobs, prices are increasing in each big city, so giving negative views about Edmonton is not a very nice thing to do. It hurts a lot of people.
Twinkle, jobs only go so far in determining housing prices. Climate and geography place arguably a much bigger part. Look at all the boom (or ex-boom) markets in the US. It is not just a coincidence that most of them are on the coast in warm climates.
I think Edmonton is a great place to live and work. But I think people have to be realistic about what housing should cost here. Of course some of the cost is going to reflect the price of labour and materials but I personally think there is just too much of a price premium right now being placed on the fact that Edmonton is in the middle of a booming labour market.
Bee Bee,
Cliamate is irrelavent to pricing. Hence Africa, South America, Miami, ect. Jobs are a much more important driver than climate. Hence pricing in Ft Mac and Yellowknife and anywhere where there is strong employment.
Calgary milder weather only if you live in with Rose colored glasses.
Inventory is tied to pricing. Yes.
Are prices coming down? Yes. Honestly I think the resiliency of pricing for good product will surprise many people.
However no one should get pissed off about other peoples opinions made in a respectful manner.
When BeeBee says”people should be realistic about pricing in Edmonton” that is her opinion.
I am in a similar situation as shoul-i-or-shouldn’t-i, however we are a little further along in the process. Personally I think that this blip will even itself out. I doubt houses will continue to climb they way they have been the past 18 months, they simply cannot, however I do believe that they will return to moderate increases each year once things level out.
Greg said [quote](IT does not matter where in teh country you build – gas cost and resources cost have gone up (cooper and steal cost are up, nails cost more to buy, the plumber makes 32$ na hour today compared to 18$ in 2001)….
[/quote]
That is why you can build a new 1130 sq ft bung on a 50 ft lot in Newfoundland for $182k and what around 400k here in Edmonton on a 22ft lot.
Quite the Alberta premium if you ask me.
Cheers!
In response to KendalH.
You are correct but I am still not wrong. If 2 sell for 400 the average is 400. If 1 sells for 400 and one for 480 because the price dropped 20 from 500 then guess what the average goes up not down! The average is dropping because less expensive product is selling better. Even if people with 500,000 houses sell for 460,000 the average is still going to go up! This inventory problem and mild drop in the average is going to be out of site soon.
Mortgages are going down soon.
Canadian Banks are still raking in the dough and these mortgage rates won’t last. They will drop soon. The BoC is also going to be hard pressed to raise interest rates anymore if you ask me. This will cause even more grief out East. Inflation is already slowing so they do not even have that argument on there side anymore. We’ll see what happens. These are my predictions. But as Sheldon hinted at I think everyone is going to be quite surprised how little good houses really do drop in price.
Whoops.
I meant to direct the above post at fencesitter.
Isn’t your buns getting sore or splinters yet?
Where’s the grammar and spell checker feature? I sound like a redneck? I guess I should have went to school. OK I’ll quit posting now. Doesn’t anyone work around here?
Sean,
yup point taken….but …consider this: five years ago your bugalow could have been build on that lot in Newfoundland for 120K..right…..the same way 5 years ago that bungalow was build here for 180K….
today your bungalow in Newfoundland is worth 180K….and mine here is worth 300K…..we both gained a large sum of money on our investment….except lots here are not cheap:)
Sheldon, I respectfully disagree. Climate does affect the demand and therefore the price of real-estate. To say it is the only factor is an overstatement but to say it is irrelevant is equally an oversimplification.
That doesn’t mean hotter is better. Rather it is fair to say that less severe climate is preferred by most people over extremes in hot (ie, Africa to use your example) or cold (Yellowknife). Now I will be the first to admit there are exceptions to the rule like Yellowknife. But I maintain in general if all other factors are equal most people would rather in a milder climate.
My evidence? Look at the USA, most (again not all) of the real estate boom has been in Southern States (ie, Southern California, FLA, Arizona….) or the Canadian equivalent, Victoria/Vancouver.
Alberta Advantage,
Yeah, the splinters in my bums not yet bad enough to cause me to jump off hehehe.
Aren’t you curious though that our re markets (hot spots), media and blogs are reliving exactly what folks in the US went through exactly 2 years ago?
I am no alarmist but as my name says, I am the kidn fo person who likes to appreciate there always are two sides to everything.
When the splinters get to be too much handle I will certainly jump…to which side I am not sure.
Splinters on my bum! Good one AA. Think about this would it really kill anyone if prices went down to affordable levels for firt timers? Increases have been su huge that noone would really lose! Even those who bought recently if they intend to live in there for years to come, they certainly would regain whatever equity has been lost in the last three months.
I’m really surprised so many didn’t believe there would be a correction. When the average starter home is/was around 400K requiring an annual family income of say 100k, of course new home buyers will be dropping off. Leaving only those who are trading up…and once the majority have traded up you have a market flooded with lower end homes which aren’t being backfilled.
It also surprises me at how people over the last year(s) would analyze how much equity they have (monthly even) and consider it money earned. Until you cash out for good you haven’t earned a royal nickel. And even if houses drop 10-15%, if you are staying put and hadn’t planned on getting out, really how does it affect you. Your equity/purchasing power remains the same relative to other property in Edmonton. And I also agree with other bloggers…no prices will not plummet, why…because the fundamentals of our province have not changed. For the time, every individual who can tie their laces has/should have a job. Spurring this is the Oil sector which will not be collapsing anytime soon.
Sheldon,
I am currently in situation where my house was sold on paper dated July 1, however, it does not financially close until Sept. 31. My buyer has not sold his current resident and the deposit on my sale is not large enough to cover the market/price downturn. With this in mind, I am getting nervous as the market has changed dramatically. How often in your experience has buyer’s walked away from a deal due to a change in market dynamics, how can I protect myself from this situation and what are my options.
Actually, I heard yesterday that unemployment is rising and we are now at 3.5% in Alberta…so the “fundamentals” are starting to change.
In my last comment, I certainly wasn’t bashing Edmonton. This is my home town. That said, I don’t know if I would necessarily choose Edmonton if my family and friends weren’t here…since I’m not in the oil industry. I’m also sad to see the direction this city is going in. I find the violence in this city really disturbing. It’s not only the murders but also all of the stabbings and fights. Maybe it’s too many young, uneducated men with too much money and not enough connection to the city. Boom time transient populations aren’t really a good thing.
I’m beginning to wonder what all of these massive fires will do the prices of new homes in new subdivisions. I read in the journal today that the insurance industry may begin charging the owners of new homes more for insurance in those neighbourhoods.
Ken,
That’s why deposits are important. Talk to your Realtor about your personal situation. In 20 years I’ve never had a buyer walk away from a deposit of any size but having said that it does and can happen in all kinds of markets.
Moonbean I’ll agree with you that growth has caused some problems. I think we have some law enforcement and leadership issues that could help there. There are many cities that are larger than ours that have faced growth similar to ours and have been able to deal with these challenges. However this civic election looks like it will be status quo.
KEN – Sorry, but a house sold “subject to sale of existing home” is not SOLD. It MIGHT be sold IF the other house sells. I personally would NEVER accept that condition; your house is off the market, but the sale is far from final. Moral of the storey: Get a big deposit, clearly indicate it is non-refundable should the deal fall through, and weed out the tire-kickers. As indicated previously, there are more and more of these “subject to…” sales, which are all a big maybe, to be generous. How many of last months sales will actually close? That would be an interesting piece of information.
I disagree with Bear. Several of our properties that sold this month were subject to the sale of other properties.
A Realtor knows how to properly market your property with a subject to sale where as if you are doing it on your own, you are on your own to figure it out.
Definitely assessing the property the yours is conditional to is important. I guess most sellers who are handling their own sales are pros at this so its no problems.
Deposits are a factor but legally not required. If a buyer has 200,000 in non cashable investments and can’t provide the deposit immediately there are alternatives.
Subject to the sale conditions are going to become more common so knowing how to deal with them will be EXTREMELY important.
To recap.
Assess the offer on its merits
Assess the other property and the options.
Personally I don’t know why you would not accept an offer with the condition “subject to sale of existing home”. This condition allows you to still market the property but it only requires you to give notice (24 or 48 hours) if you get another offer such that the condition can be removed and the first buyers can buy the property. This is practically no-loss to the seller except that the second offer might be higher than the previous and if the first offer condition is removed you have sold for that lower price oterwise you accept the second offer. This effectively removes the possibility of a bidding war and I wouldn’t worry about it in this market.
As Sheldon mentioned knowing how to handle such situations is EXTREMELY important so choose your realtor carefully.
In Alberta, for every 1 guy that got a job from Big Oil, there are 3 guys building a house for him.
And there are 10 more construction workers needed to build houses for these 4 guys and themselves.
And there are 10 Realtors needed to match the buyers to the sellers.
And we need more construction workers to build houses for these Realtors!
The Alberta economy is more of a residential construction economy than a petroleum economy.
bunny,
Definately. A slowing housing sector will not be a linear unravelling…it would have an excellerating curve to it. The amount of money that is spent in all aspects of housing is amazing from the tiles to the plasma’s to the labour.
At the end of it all…it is/was a credit bubble that financed it. Huge sums borrowed at low rates to fuel consumption. It is the mentality of “I want it now” that makes people furnish their homes on credit.
Thank you that some of you are finally dealing with reality. You have housing prices that have put the average family out of the market by speculation and flipping and for those who are caught at the top, and you know who you are, the only option is to hold onto your house and wait for the turn. Talking to your realestate agent is a wonderful idea on how the market is going. That is like talking to a used car saleseman asking if it is a good time to buy. The object of the realtor is to make money just like you and me.
Seek other sources such as blogs to the u.s. downturn in housing. Watch for layoffs in the automotive industry. The two big purchases are house and car.
Interest rates are going to have to drop in the us which will weaken the us dollar and will strengthen ours. This will spur our exporting economy into a furter slowdown. You do realize they are talking recession.
I have worked in the homebuilding industry 12 years and have rarely seen what I saw in may-june. The plumbing trenches to new lots were cut drastically by builders. We get calls from plumbers now asking if there is any work, (new housing). I smell something that the big money knows (developers) and that won’t say
do the math with a 400000 mortage at rate and see if you qualify and if you are willing to throw down a huge lump of cash on the hopes that the market will turn, Its fence sitting time.
Eyes are opening and reality is here.
Alberta is great when markets are rational.
But…tar sands!!!
Tim
What your seeing in the housing industry is a return to normal… Not to take away your experience,but you probably have never seen a real slow down in your 12 years. I worked in the industry up and during the last big slow down…. called NEP (1982), what your starting to see now is a return to normal,(even though starts are up compared to the norm) and it’s about time.
Can someone tell me what is “NORMAL”. I keep on hearing it is returning to “NORMAL” – is normal 180K for a house, or is normal 10% less than now, or is normal a 3.9% yearly increase on price equivlant to a mean over the last 20 years????
anyone:)
Normal level? The housing price should keep up with the inflation rate, which is 10% per year.
Note that I said inflation rate, the rate at which government prints more paper money. Not CPI, the subset of products that the government wants you to believe.
As for Alberta, in anticipation of a great inflation, the housing price are actually pushed well beyond the 10% inflation rate. It doubled in the past 2 years in Edmonton. So, it’s not surprising to see a correction.
Personally, I would draw a straight line ascending at 10% per year, starting with year 2001 (a balanced market). When the actually market dips 20% below the straight line, it’s time to buy. The 20% is to compensate for the market volatility.
I just saw another apartment conversion with 20+ units show up on the MLS, which will further saturate the downtown condo market… These units actually look renovated, but I’d say there are about 200+ unrenovated apartment conversion units on sale in the downtown area right now. The rental market is very tight and these places could easily be rented out. What are these people thinking? One of these condo conversions, the Hargate building at 101ave and 114 Street, is in dire need of renovations and should have been upgraded before being sold as condos. There should be better rules in place for conversions, such as bringing a building up to current standards before being resold. That would put the brakes on these profiteers and keep the market better balanced.