It has been awhile since I’ve had a chance to post. Unlike the rest of the market where sales are off therecord pace of 2006 our sales have spiked. Most of our business is home owners and buyers – investors are not a major part of our active clientele. Most of the investors I do work with have been with me from myearlier days in real estate.
Why explain this? Perspective. Many people in my industry have differentclient profiles. Some work primarilywith builders, some with investors, and so on. Each of these Realtors may have a different perspective on what iscurrently happening in our market. As I’ve said before, it’s a huge industrywith many facets.
So why are we so busy? With the dog days of September uponus why are buyers moving into the market now? For the dozens of buyers I dealt with lastweek they all have their reasons. Someare financial but for many it’s personal. These are some of the people I’vebeen working with in the past few days.
- A young guy who is renting with two long termroommates and wants to become the landlord.
- A young woman, who is being given notice tovacate and after 17 years of moving she doesn’t want to be told to get out anymore.
- A young family with one working parent and theother one really working raising 3 kids. She no longer wants to spend an hour and a half driving back and forth tothe school they’ve selected.
- A young couple who are expecting their firstchild and need more space as they’ve seriously outgrown the place they’ve beenliving in.
- A blended family looking for more space with 5teenage kids and only 3 bedrooms – they are thinking a move is a good idea fortheir family dynamic.
- A familyrelocated from the states. He’soriginally from here.
- A couple relocating from Calgary and really wanta house in the Ottwell area (or close proximity). We had an offer on one except the inspectionrevealed formiculite insulation in the attic which apparently isn’t a problemif lays dormant. They intend to doextensive renovations and therefore the formiculite would be disturbed. The cost to remove it is seriously obtrusiveto going forward.
- A couple looking for their first house. Not sure if they are buying yet, but want tosee what’s available.
- A young couple who already have their dream property buthave now found their dream parcel of land to build another dream home and havethe money to do it without selling their current acreage.
This is just the people I’ve been working with in the lastfew days. Not to mention the calls we’vebeen getting from other agents who are working with other buyers. It is business as usual for us.
Some other things have caught my attention this week…
I had spoken to someone who had made an offer on a Comfreelisting, without a subject to sale condition in regards to selling theirhome. They also didn’t get aninspection – the seller told them theyhad one done when they bought it and they could have theirs. They not only over paid for this property(hand it to the seller on that one) but had grossly over estimated the value oftheir current home. He purchased thiswithout a Realtor and the contract that was drafted by the lawyers isvalid. Where was the advice of thelawyers on the issues that are going to affect them now? Oops it was too late. My advice to them – Don’t use a Realtor, takechances (sarcasm). Hopefully they enjoy both properties.
Seriously it should go without saying rightnow that we’ve been able to get conditions into our purchase contracts for sometime, so if you have a home to sell make your purchase contract conditionalupon the sale of your home. For evenbetter negotiating power sell your home first. That’s what my advice wouldbe. If you chose to disregard my adviceplease call me in a few months time as I would love to introduce one my buyersto a seriously motivated seller such as yourself.
Not to mention I also think it is worth getting your owninspection. As far as I know formiculiteis a more recent concern or at least one that’s getting more attention. Maybe an old inspection wouldn’t identify formiculite as a problem for example. We’ve had three buyers saved byinspections this week – holes in roofs, asbestos scares, and other majorrepairs. Sure they paid a few hundred dollars up front but the saved thousands with the knowledge they gained.
Finally a note of caution for North Edmonton home sellers,especially those selling privately: thereis apparently a buyer who is looking to buy with a VTB (vendor take back) ofaround 25% and no proof of his ability to pay. You should again heed my advice – don’t use a Realtor, takechances. I’m sure he means well and itwill all work out just fine 
Hopefullyit won’t be so long before my next post.
See what realtors have been doing…where to go, whom to trust..
http://www.thestar.com/News/GTA/article/256968
Ask any realtor (if not all, mostly) and he will be telling you that it is last time to enter the market. They were saying the same thing a few months back they are saying it now. The houses of 400 are sitting on 350 and those on 350 are down to 300.
A professional giving away a deceptive advice is liable in tort whether he is charging any fee for that or not.
Sara and Sheldon, I do not mean directing these comments to you…I beleive that you are something beyond what a good realtor could be.
Hi Sheldon, that’s a very rosy picture, but my intuition and own eyes tell me it’s not quite the reality right now. There is only 1 sold sign for every 20 for sale signs out there, and I’ve spoken with other Realtors who have advised that the only real market activity right now is bargain hunters and vultures, who are aggressively looking for deals right now. She advised me that the typical buyer with a decent down payment has disappeared. Also, she said that most couples can only qualify for a 250K mortgage, which still keeps them priced out of the market. These buyers who you’ve been fortunate to work with, what kind of negotiating power do you find they have right now? How much are they getting off list price? Can you provide specifics? Also, I’ve noticed your listings are staying on the market now for 30 days or longer, so what do you advise your clients who are sellers and are getting no offers? What % are you advising them to lower their asking price? Are you recommending that people wait to sell??
Dear First-Time Buyer,
Please come back!
I’ve decided that I really don’t need a second property in the same city anymore. I promise you that you will be RICH in 6 months after YOU buy MY EXTRA CONDO for $300k.
Just think of the money you will make by being a “Home-Owner”. I mean, there has never been a better time to buy than RIGHT NOW!
Besides, you don’t want to wait until my condo is worth $400k next year do you? If you don’t BUY NOW, you risk being priced out of the market FOREVER.
Then you will be forced to pay rent and miss out on the wonderful home-owner liabilities like taxes, condo-fees, utilities, maintenance, and rising interest rates.
After all, haven’t you heard that real-estate is going to go up FOREVER? Your home can truly be your best “investment”.
Just think, in a couple of years after you’ve MADE $100k, you can just go down to the bank and take that money out!! It’s like an ATM really. Isn’t that amazing!!
THEN, you can go buy some cool stuff like a Plasma TV, or…oh I know, you can buy a second property and make TWICE as much money!!!
Geez, I can’t believe I am only selling you this 2 bedroom condo for $300k, what a deal….
Oh, and don’t bother looking around at those other 10000 properties for sale, they are not nearly as good of a deal as mine is. Besides, there are likely 10000 families moving here next month to buy them anyway.
12 Months ago, I got a good deal on this condo for $200k and now I want to give you a deal for $300k.
I really hope you come back!
Sincerely,
Flippy McFlipperson
Ok….I will add to Sheldon’s client scenarios (although he is not my agent). This is my personal situation.
We are a young family just relocated here. Currently in a short term rental that is ending soon. Can bear the idea of moving into another rental after renting for the past 8 years. Finally taking the plunge and making an offer on a great house that has been reduced by over $125K over the past 3 months. Still very nervous that the market will further correct over the next 1-2 years and it may take many more years to make any sort of profit on my investment. Excited though to finally have a home in Edmonton. Hoping that there is a happy ending to my story. Bottom line I think for sellers is if you have a decent home and you price it fairly there are still a couple buyers like me lurking.
Anon Buyter,
Are you serious that this house dropped $125,000 in the last 3 months??
It would be interesting if you could share some minor details about this house to shed some light on the types of situations unfolding in Edmonton.
I am personally a little shocked that someone would take $125,000 off of their listing price if things in the market are supposed to be going well???
Anon, don’t you think that if THIS particular property has fallen by $125000 in 3 months that it may in fact be in YOUR best interest to wait a bit more to see if there is any further declines.
I understand you are sick of renting for 8 years, but another 6 or 18 months may save you far more money than you will pay in rent for that duration.
I have heard a lot of people refer to renting as “Wasting Money”. However, in a market where prices are FLAT or DECLINING, you are actually better off to rent.
**For example, lets compare a $350,000 mortgage(0 down) at 7% and 25 year amortization VS. $1500 monthly rent for a new 2 bedroom condo over a period of 18 Months in a FLAT MARKET:
Home Ownership:
Monthly Mortgage Payments
>>$2473
Average Monthly (Phone,Power,Water,Sewer, Land (storm) drainage and garbage collection) 2006
>>$166
Average Monthly Propery Tax 2006
>>$158
Monthly Natural Gas Estimate
>>$100
Monthly Maintenance (1%Original Home Cost/12)
>>$291
**Total Monthly Ownership Cost**
>>$3188
———————————
Renting:
Monthly Rent $1500 (Utilities In)
>>$1500
Utilities
>>$25 (Basic Phone)
Maintenance Costs as Renter
>>$0
Property Taxes
>>$0
**Total Monthly Renter Cost
$1525
———————————-
Outcome:
1) Over 18 months, the Renter has paid $27,450 out of his/her pocket and has $0 in equity.
2) Over 18 months, Home Owner has paid $57,384 out of his/her pocket and has $8242 in equity.
3) “Money Wasted” by Renter
>> $27,450
4) “Money Wasted” by Home Owner
>> $49,142 ($57,384 – $8242)
In this above scenario of Homeowner vs. Renter in a Flat Market, there is no monetary advantage in being a Home Owner.
The bottom line is that carrying a mortgage and all of the associated costs and liabilities mean the Renter would be $21,692 wealthier than the Home Owner in this 18 month period.
Paying $21,692 ABOVE what a Renter pays and having no return on this money is “Wasting Money” from an investment perspective.
**Keep in mind that this is in a Flat Market scenario…the numbers would be way more in favor of the renter in a Declining Market**
However, if you absolutely must have a house at this time for whatever reason, then it is up to YOU what is important, and ultimately YOUR DECISION.
I just want to shed a bit of light on the details, and the possible dollar for dollar impact of a decision between renting and purchasing in this scenario.
I am not an Ownership hater, I am simply tired of hearing the rhetoric of “RENTING IS WASTING MONEY”!!. This drives me wild, and it is sad to see so many people use that as an excuse to jump blindly into Real Estate like Sheep.
Like all major purchases:
Look at all Associated Costs
Do the math
Compare the alternatives
Decide if it worth it.
Regarding the $125000 drop, you sure it wasn’t priced insane before the drop?
From my own observation, the best deals out there now are at about mid 2006 price levels.
Sorry for leaving you guys unattended but since we are a huge real estate empire (5people) I have to work. Yes there are lots of properties but WE have been equally busy with buyers. I do believe that the trend is down for prices for the short term anyways given the inventory and demand. Albeit at much more marginal rates then others are predicting. areas, price ranges and products are performing differently. In Sherwood Park there is only 45 single family homes with 3 bedrooms between 350 and 450. Some of those I wouldn’t buy no matter what the price.
I wrote four offers this weekend. One substantially below list – 90,000. property had been on the market quite awhile and we came in 30,000 under where its lowest value would be now. Still waiting to hear on it. Although my buyers may have to be patient if they want that one.
3 other offers didn’t get accepted. All 3 properties accepted other offers from other buyers. Wow. Just when you think you have all the time in the world.
My observation from this is very similar to experiences I had in the late 80′s. Good properties priced well Sell.
So is there a buyer for every property? in my opinion Yes, several. Some are more motivated and emotionally interested than others.
There is huge disparity with pricing right now. prices are all over the place.
So this comes into play on the property that had the price reduction of $125,000. It definitely started too high to begin with for whatever reason.
I have seen other examples of this and some of those are still overpriced in the current reality but they started way over priced.
Others are exceptional deals that even if the market drops further the buyer in my opinion still has a good deal.
As for the rent vs own calcuation. I’ll just say that the above version is biased. Renting is not bad. So don’t think for a second I’m saying everyone should buy nor should idiots go around saying noone should buy that rent is the answer.
One thing that is curious to me in a scenario where people mathematically save money by renting. these people don’t automatically set this money aside into a forced savings program. Which would benefit them from an asset perspective.
The vast majority but not all tenants in my experience don’t set up forced savings programs, That set aside their savings so for Therefore on average the home owner over the long run comes out way ahead of the renter in terms of assets. (This is not to say everyone should go out and buy based on this)
Most economists I think agree that it is not a matter of timing the markets but time in the markets that count. So Anon buyer – if you’re going to be in your home for a few years, then I think you’ve made a good decision for you.
As for the lady who commented on our listings staying on longer. That is indeed true. Our average time on market is upto 15 days, even with some properties that require very specific buyers pushing that average up. We’ve had good activity on our almost all of our listings. Normal activity. Not the first buyer in bringing an overlist price offer after a few hours. I’m sure my sellers would gladly consider any who did.
Several have had a couple of offers that are taking longer to finalize. Most in fact pending with condition dates taking longer but we continue to market them should the buyer not complete for any reason. although our marketing and experience give us a definite advantage over most in this market.
As for pricing advice. I generally meet with my sellers on several occassions. In person and via online meetings averaging 3-4 hours per seller before we even take the listing. reviewing, market information so they can make informed decisions. Its their home they are in charge of the pricing strategy. If I think they are out to lulu land than I have the decision as to whether or not we think that we have any chance of success. As I said earlier I believe there is a buyer for everything.
Quite frankly we carry lower inventory then many people who don’t have the team, support,marketing or experience we do. That is up to the seller to determine if the people they are using are simply playing a numbers game. I know our clients won’t say that about us. We are all in or all out. We have turned down numerous requests to help buyers and sellers at this time simply because we can’t service everybody.
I can’t answer everybody’s questions either nor can I respond to everything that I think is completely irrational.
Its up to people to do their research whether they are buying or selling so they can make informed decisions. Its my experience though that people tend to work with people whose ideaologies line up.
But generally to be in this business I’d say I’m a glass half full kind of guy.
Hope you’ve had a safe weekend.
Renting versus owning, I simply do not see it as much as investment as the kind of comfort and freedom you have in your own house, I have seen people renting and how they are unhappy in those conditions, so it is something to enjoy not to see in terms of money. Like there is no price of mental satisfaction.
@Michael. I agree with most your analysis. I have never viewed renting as wasting money. It made sense before we had kids since we moved quite a bit but now our priorities are different. We want our kids to have a bit of stability (ie. be able to attend the same school etc). Moving at the end of every rental agreement is no longer a very attractive option regardless of the financial benefit.
As to the property. It was initially relisted at a slightly lower amount. Then reduced by a lot larger amount. We underbid for a total of 125K less than the original listing price. It has been on the market for about 3 months being sold by the original owner (definitely not a flipper). Was the initial price unrealistic? Probably. But I am hoping the price now is discounted enough to weather a further market correction. If the market drops 10-15% over the next year we should be fine, if it drops 40% I will obviously be regretting my decision. Interestingly, there is another similar property on the same street in a bit better condition still listed for 125K more. We would have made an offer on it instead if it was priced better.
Anon Buyer,
I understand your situation regarding the stability you want to have for your children. This would be a personal reason to buy a home at this time, and it sounds like a pretty good reason to me. I don’t have children myself, but I still dislike moving around all the same.
It sounds like you have put a lot of thought and time into understanding your purchase. Best wishes!
Sheldon,
I think the apparent resilience of the market in the face of increased inventory and drastically reduced affordability is “the last kicks of a dying horse”. The question is how long will the horse be kicking for?
The August 7 MLS report said the average price of a home in West Edmonton for July was $528,072.00. Our house has been on the MLS website since mid July priced at $524,900.00, after taking it off the ComFree website when it was listed early June for the same price. It would be considered, I think, a better than average home. We have now reduced our price to $485,000.00 and have not had one showing or phone call??
My west central condo has been on the market for about a month now. I’ve had lots of showings but no offers.. I’ve been looking to buy a house, but I’m not prepared to place a conditional offer on a house as I may lose some equity if prices drop further. There seems to be few serious buyers out there.. If we go into the holiday season with this level of inventory, I’m thinking all the gains in equity I made this calendar year will be erased. I’m starting to see the possibility of fall 2006 prices again by year end. That’s just my own personal observation at closly watching the market as a seller and buyer. I’m seeing the odd bargains out there, which are getting snapped up quickly. For example, a newer West End duplex sold for 330K, which was originally listed for 379K and then relisted at 339K.
And that is why I am considering renting out my condo….since I already moved into my new one….after living for 3 years in other one – just so you dont call me a fliper
)) … rent it out for a year….or two…..might not gain anything on those two years but i wont lose anything either….so the rental market will stabilize and grow ….hopefully leading in a year or two to the reversal of the current inventory -
another thing i would liek to point out – or rather ask a question to you guys – and maybe this is just me …but when i go on mls and look for my condo in the 225k range….there is about 20 – 30 properties taht alwasy popup from a the same building – its an older building…..now did someone but this place and is selling it for old units….i ask this since i seen this a couple times….older condo/apartment buildings selling on mass???
GREG
Oil is at record highs and going higher. Loonie is at 30 year highs and going higher. Investors are dumping money into Canada like never before. Global economy is still quite hot for years to come.
I posted months ago that oil would continue to rise for years to come and many people responded with disbelief some even laughed. Today some analysts have now raised their oil price forecast by as much as 13 dollars and some now even predict oil to break 100 by next year. Funny how everyone laughed at me a few months ago.
In fact I did say it would break 100 within 2 years without a doubt. Oops guess I was being conservative.
Ha Ha.
Alberta will rise even further. We are not done by a long shot. If you think property is going down here you are dreaming. This little pause/dip in the market could be the best time to buy if you ask me?
We shall see.
AA,
Have you consider what high prices of oil mean to the consumer who happens to demand all goods including housing? Everything will become expensive…there is no escaping it AA (housing crash). if only as Albertans we could consume fuel at a lower price than the rest of the world. But that is not the case! Whoever is making the money are oil companies…how AB prospers in line with this depends on royalties. Meanwhile to the man on the street everything will just become too expensive. Lets see the AB Adv then?
@AA
Sure with loonie going higher it will make “far more affordable” housing for people moving to AB (which is already very expensive).
I never heard this kind of explanation.
Am I missing something?
AA,
Oil actually dropped today when measured in Canadian Dollars. Compare September 17th close with the 18th. All you saw today was the US dollar sliding.
US/CAN $
1.02796
1.01379
Oil USD$
80.57
81.51
Oil CAN$
82.82
82.63
Still not too bad. Im wondering when the yankees will start consuming less of it?
AA,
First of all, congratulations on your unique forecast of $100 oil. Surely everyone laughed at you as they have never heard of the silly notion of $100 before. From anyone.
I guess then AA, it is lucky for you…and the rest of AB that oil is taking off!!! Because that is exactly what we need here is higher gasoline prices, more inflated housing prices, longer waits for health services and higher transportation and energy costs that will ultimately get passed onto the end-user…you and I.
Hey, and since EVERYONE in AB works in the Oil industry, then I suppose we are all offsetting our increasing costs of living by our increasing Oil paychecks then???
Undoubtedly these $500,000 homes will sell like hotcakes, and keep appreciating by 10% annually “for years to come” with no end in sight!!!
Hooray inflat…I mean OIL prices!!! I want a house with a pool in my backyard full of OIL!! Lets all join hands and sing rosy songs because we are ALL better off now right??
Actually, I just want my old Aberta back.
It has changed…and not for the better.
@AA, I totally disagree with your analysis. The price of oil has at best a very indirect relationship to housing prices.
From economics 101, the price of any product is determined by supply and demand. Edmonton unlike other cities with high real estate prices has a very low population density. It is easy to increase the supply of housing here. I see it every day on my drive home from work. There are homes being built everywhere. I personally think this short term blip (ie. rise in prices) was driven by a temporary supply shortage. But this has been taken care of now by the massive amount of new home construction. In fact there are so many new homes that people can’t sell their old homes. Sure oil prices are going to ensure that there is a steady migration of people to this city but it is relatively easier to further increase the supply of housing. Edmonton is not Hong Kong, London, or Vancouver. If you have visited, these are densely populated cities where you can not easily expand housing. You to get used to the fact that the rapid rise in prices was an aberration and not the norm. If there is enough housing for everyone there is no reason for housing here to shoot up in price just because oil goes up or a new refinery project is announced.
So once again i will ask ….compared to what it is now…what in your opinion should the avg price of homes be in edmonton?
Crude oil is up, houses go up, blah blah. That, I can understand. But please tell me why is housing in Alberta cost twice as much as in Texas?
I mean, out of the US$82 per barrel, they have $70 profit and we have $40 at most.
One difference is that they have a better network of highways. Lands are developed at a much faster rate. The similarity is that both Alberta and Texas have almost unlimited amount of residential land.
Over the past 2 years, housing in Edmonton rose 100%, while empty lots rose 200%. I suppose once the land development bottleneck is over (due to the current high level of existing inventory), the price of new lots should come down.
There is a lot of negative people on here? I could throw arguments, facts and figures at you for hours but you know what? I think you people have your mind made up that housing in Alberta is going to crash? I am no big time investor but I do have a few properties that I am NOT selling right now because they will continue to go up. If I wrong I’m wrong but my money says I’m right. Everyone can think what they want but from my experience most of the time the masses are WRONG while a few people are right? So when I see that everyone here thinks “that prices will fall” then that in itself is a pretty good argument to the contrary. I am not saying housing isn’t going to fall some day just that it is not going to fall in the next few years. Maybe you have made millions from your infinite wisdom and maybe you are smarter than me? If this is the case please tell me why I am wrong and why investors are dumping billions of dollars into Canada right now?
If you are a larger Real Estate investor then please tell us little people the truth about wether you are selling Alberta Real Estate now or holding on?
I like to believe that we are at a ‘lull’ in the market, the calm before the storm so to speak. Our realtor still feels prices will have still risen by 10% overall by January of next year (yearly average) but that things are just now slowly normalizing-meaning it is taking longer to sell. Our home has been sitting since a week before Mother’s Day of this year in one of the most desirable Sh Pk locations and still nothing. Lots of interested parties over the course of time but just too much to choose from and people are waiting it out to see if ‘something better comes along’ because more and more is being listed every day. We are priced incredibly well and have a former showhome but not adequate enough in this market. While we are priced competitively and ‘motivated’, we are not DESPERATE by any means-thankfully our home was paid for before we ventured to purchase our new one unlike many more motivated vendors out there who are now desperate because of two mortgages. I think honestly what is KILLING the market right now are the flippers and speculators. They do not know how much they are hurting the market for families who HAVE to sell! I’d like to see THOSE people end their listings and clear the Board and then in turn are they not going to get top dollar for their home? Hmmm….think people!!!
I’ve been reading this blog for a while and it’s really great (nice work Sheldon and Sara).
Just thought I’d post my experience in the current market…
My wife and I bought a house in the NE two years ago for $200K and on the advice of a realtor at the time of possession (last September), we began building another house in the west end for $340K.
As the year went by, I watched the NE home (like everyone else) rise to an astronomical value of $400K+ at one point (some people in my area are still selling their 1400 sq foot home for this price – but that’s besides the point).
We listed our house in the NE in July for $370K and over a month and a half had several offers that all fell through as banks would not lend to these particular buyers.
As stressful as this was, we aggressively decreased our price and eventually sold for $330K.
The moral of the story…my wife and I were happy with a profit margin of well over $100K in under 2 years despite advice from our agent to stay the course at our current price.
Sheldon’s point about it being “business as usual” is true but as the seller, you have to be realistic about your eventual return on investment (i.e. what type of property do I have, location, age of the property, etc).
Hopefully things will turn around in the near future and good luck to those who are still selling.
Alberta Advantage:
Let me summarize your point in one sentence:
I was right for the past 5 (or any other number) years and thus I have the credential to predict the future trend from my past experience.
Did I do you justice in this summarization?
Such arguments are not rare, if you invest in stocks and visit Yahoo message boards discussing about them. If you are a long on a certain stock, there will be shorts yelling “I made $100,000 last year shorting this pig!” And vice versa, if you are on the short side.
The problem with these arguments is that they failed to see that the past knowledge is already priced in. Everyday is a new chapter. To make the stock go one way or the other, we need new developments and new insights.
For instance, your prediction that the crude oil will break $100. I am not saying it won’t happen. But it’s not a sure thing. If it’s so certain, the big traders will make it happen today, right now. It’s sitting at $82, indicating half of the big boys predicting a price jump from $82 and half of them predicting a price drop from $82.
As for the pumpers/bashers on the stock investment forums, they simply vanish when they are proven wrong. I have seen it so many times and I don’t expect you to be any different.
AA,
It is not that we are negative. We just refuse to keep our heads buried in the sand that’s all. Positive or negative depends on how one looks at things. I seen an Alberta advantage where jobs are plenty and housing is affordable. Your alberta advantage constitutes of world class housing prices.
@AA, I don’t claim to have any special knowledge about the direction of real estate prices. The only knowledge I can share with you is I have lived in 3 other major North American cities and I can tell you that by comparison housing here still way overpriced. I don’t care what the price of oil is or how many billions of dollars are coming into the economy. I just think for a relatively small city with lots of developable (is that a word?) land housing here should not cost what it does. I am a resident of Edmonton that only wants affordable fairly priced housing. My vested interest is that I don’t think real estate should be in the domain of speculators. That is what created this inventory mess in the first place.
To BeeBee:
Don’t blame it on the speculators. Even though I believe the price is unreasonable and I won’t buy at this price level, I never blame it on speculators.
Speculators are just short-term investors. They may have sizable gains at their own considerable risk. They don’t break any law. If they earn money, it’s because of their good judgment. If they lose money, it’s their own problem.
If there is someone to blame, it’s the central bank. It’s Alan Greenspan, the infamous Fed chairman who used a real estate bubble to bail out the high tech bubble. He dropped the interest rate to 1% and encouraged subprime and cheap credit to all, thus causing the greatest inflation in the recent history. Real estate speculators are just people who realized this faster than us.
But from this point on, thing may be a bit different. Greenspan has left the Fed and investors in the mortgage-backed-bond business got their fingers burnt. In the near future, no matter how low the Fed interest rate is, the total amount of mortgage supply will be very limited. Thus my calling a sizable correction in the real estate market.
gas price inflation – negative
food inflation – negative
HOUSING inflation – ?
whos being negative? All i said was that oil went down yesterday in terms of the mighty loon. That should be considered optimistic.
Housing prices are so arbitrarily high that calling for further increases is calling for a grim meathook future where homeowners can tap their housing ATMs and shine their homeowners mighty glory at cocktail parties while jealous bitter evicted renters can huddle in their cold Honda civics.
Thats right i said prices are ARBITRARY and they market is searching for the true value (lower) with exploding inventory and low sales volume. Is that bottom from 350 to 300K or lower? I don’t know. Probably depends on the property but i think generally down, maybe not a crash is an optimistic viewpoint.
house price crash..dead ahead
iventory has blown up..sellers are panicked..free fall at hand
its a bottomless pit..prices will fall faster then anyone could ever imagine
Well, remember how the market was 3-4 years ago, it was not slow, it was not fast, prices were increasing year after year but slowly, I see eventually after all the rise and all the fall, that is the turn market will take or at least I hope that happens. A balanced market.
We are in a real estate correction but you may be surprised at how well the market holds up.
That is my view but I could be wrong. I’m not going to waste time trying to convince anyone here of that.
I don’t think you are wasting your time AA. that is your point of view. My experience on the street is that more people are optimistic about the future. And most (who are not selling for motivated reasons) see this correction as necessary and positive for the market in the long run.
Prices are going down. Some people have adjusted their thoughts and mentalities around that.
This is a inventory demand issue. All the rest of the stuff is just B.S.
If all things were the same, liquidity, oil, loonie and we only had a 1000 listings on the market then guess what prices would be trending up.
This swing will correct itself eventually but in the mean time. The trend is down.
There is still no other place that I believe is as fundamentally insulated.
However we are swamped. Obviously more with sellers and cmas, but still buyers.
I am moving out of this province. I hate this province. I am unable to sleep at night knowing housing is too expensive. $500G for the average house in Calgary? How does the average family afford that?
Jared,
I won’t miss your attitude. Awesome province. Awesome opportunities, and Awesome people.
I hope the grass is greener on the other side for you.
btw…this is an Edmonton blog. Not Calgary.
Jared,
If you want to live in a major city in this country, the going rate is 300K+ for anything decent. 50 year old Vancouver Bungalows that once sold for the same price as Edmonton homes back in 1970, are now 1 Million dollar+ properties, while they’re still only 400K in Edmonton. I understand how you feel. Personally, it really sucks knowing a crappy townhouse is all I can afford in this market, even though my parents bought a new house in 1983 for $65,000. Unfortunately, life isn’t fair and the real estate market is a prime example of that. People who bought in Vancouver 30 years ago are now millionaires, while people who bought in Edmonton 30 years ago made less than 1/2 as much in equity.
I am a motivated seller for reasons i will not go into here.
I think that we have a correction, not a crash, going on.
Though I wish that I had not missed the spring peak prices, I would still rather see a balanced market than the situation we had then.
Due to investment/speculation, we now have excess inventory. I figure that the last speculative purchases would have been made in may so we will likely still have more new homes coming on to the market for a couple of months. The actual amount prices lower will depend on how many ‘must buy’ and ‘must sell’ folks are in the market. However, it would seem obvious that with excess inventory, prices will drop and then bounce back as the inventory is taken up.
It also seems common sense to me that prices have to drop to a point that allows more first time buyers into the market in order for a balanced market to exist. (I don’t think that the vancouver situation will play out here as we have more land available – otherwise we could not have created the excess inventory that we have now.)
The larger drop in row house condo prices is already taking care of some of that. Some investors may buy these, figuring that sound fundamentals make them a good investment – but only if the low end gets low enough to support rental cash flow purchases.
IMHO, builders can and will reduce the pace of condo completions in light of this.
Builders will continue to complete houses for which they have sales – why wouldn’t they? This leaves speculators holding the bag so I guess that house price reductions will depend on how many speculators are overexposed.
My scouts in the business tell me that rather than lower their prices, that new home sellers are adding upgrades so that a purchaser is getting more for their dollar now than before.
Of course buyers are wary in this kind of market. Who wants to lose?
Anyone who can postpone their transactions is likely doing so right now, unless they are knowledgeable enough to recognize a bargain when they find one.
As far as a crisis with not enough work for tradesmen – the pace of building would be seriously reduced by eliminating overtime and some job loss among the least well qualified. I don’t think that this would create an economic crisis.
It’s certainly an interesting situation, that’s for certain!