What’s been happening with real estate in Edmonton? More of the same except we are busy, busy, busy.
Yes we are busier with sellers than we were last year. I’m pretty sure everybody is. Our average time on market has increased and buyers are definitely flexing their muscles with offers.
Sales are still down percentage-wise from last year’s record pace based on what we are seeing. Some sellers expecations are still high and pricing properly is certainly more of an issue this year than last year.
As I mentioned buyers are being choosey, except when it comes to homes under $300,000 where it is still in my mind a much more balanced market.
Lately i am getting a lot more calls from investors who want to sell properties. We’ve turned down many of of these investors since we are limited by the amount of time we have available. At the same time it’s interesting to me quite a few of the offers on our listings have been from investors. Most of my investor clients have not participated in the speculative side of the market and many have held back and are only now starting to awake cautiously to potential opportunities
Inventory is still growing – although not as rapidly as it was – and new listings are still far outpacing sales. Buyers and sellers are constantly adjusting their position in negotitations. This brings to mind a current example (the names, dates, and information below has been altered slightly to protect my ass and the privacy of those involved):
My clients were interested in buying a property that they could build their dream home on. While the property is not the only one for them they liked it enough to make an offer. Our offer included a significant deposit, around the $50,000 mark with the buyers waiving all conditions (against my recommendations). I was against this strategy but they wanted to make the best possible offer, and were prepared to take a significant risk to themselves to get the property. Truly its a very rare client that doesn’t heed that many warnings but they are my clients and I am obliged to follow their instructions.
So off we go making our offer 18% below the list price. Our reasons behind this was not that my clients felt that was a good place to start, but that the property was over priced. The property had been on the market for a significant period of time, in one of the strongest markets I have ever seen, and had no offers on it. Just that deduction alone made us feel comfortable that it was over priced.
The seller countered the offer at almost list price. Although my clients were prepared to, and did go substantially up from their original offer, the seller barely budged.
The Realtor for the seller informed me that the seller was sophisticated (this is where the ass protection comes in, so I won’t divulge more) and their position was they had a strong reason to believe the prices would go up in the spring. (I agree with this but only after they go down a little more, first, me thinks). So I recommended that my clients take one of the following options:
- Drop their shorts and play ball the seller is clearly smarter than we are
- Since the listing was days away from expiring, take a trip to disney and try to find the seller in tomorrow land
- Keep looking. One of you will be right. If you want it badly pay it, if not walk.
- Find another Realtor the stress is too much for me and I can’t take it any more.
(sarcasm)
So depending on your outlook and motivation you might see it more or less differently than I do. For the seller’s sake their Realtor did the best they could to represent their side. But in the end no deal.
Anyway not all sellers are in the need to sell position, in fact most aren’t. Some sellers are just testing the market, while others are definitely more serious. This is just one story from dozens in a very, very busy week.
What a interesting story, you can be in story writing business too, thank for giving the snapshot of the market.
With less people selling or willing to bargain for a sale, will this put a clamp on the number of people upgrading? If home sales continue to lag behind listings, what would be the result next year when the new crop of condo’s and homes are put onto the market?
Could this be similar to the 80′s where a possible interest rate hike and the exponential growth in inventory caused a sudden drop in value?
Things come across as pretty stable for the moment. People that don’t need to sell will hold on to their properties. A hike in interest rates would start a tumble, but that’s not looking very likely now.
I think that it will take another year before we see much change from this point. Up or down, a lot is riding on results of the credit crunch, reduced immigration numbers, royalty review response etc..
I think it will take less than a year for signs of change to show up…heading into the Christmas season with record listings is not a good way to start.
For people who want to sell, but are not willing to drop their prices with the hopes of waiting for a re-ignition of the boom…one should look closely at the amount of money going into hanging-on to the property in hopes of gaining that extra $10k.
Just think…6 months of $3000 investment payments for a $10,000 price increase; BRILLIANCE!!
ATTENTION SELLERS: LOWER YOUR PRICE BELOW RECENT COMPS TO LIQUIDATE BEFORE YOUR NEIGHBORS DO.
I’m stuck right now. I’d love to upgrade to a house but I can’t even get a bite on my condo, which is being well marketed, is priced right, and in a great location. Things have sure changed in the past 3 months. It would have sold in 2 days back in May. The herd mentality rules in this market. Either everyone is on the bandwagon buying like crazy and pushing up the prices or everybody is trying to unload and profit at the same time. Going into the holiday season with this record inventory is really bad news. The way things are looking, I predict 0% growth in prices for calendar year 2007 and I think that’s being positive. Obviously buyers are maxed out now with these huge 200,000+ mortgages and with equity now getting eroded, credit lines and other leverage used to purchase 2nd properties is drying up. I have difficulty seeing the average home price staying around 400K. Joe Blow Labourer from Eastern Canada can’t afford a $300,000+ mortgage and trust me, the good paying professional jobs still aren’t all that easy to get here in Edmonton. People need 50K+/year to live decently in Edmonton and the competition for finance, accounting, & executive positions that pay 50K+ is pretty tough. The boom still means having a good education, going to multiple job interviews, having excellent references, and still being turned down. Even in the “boom” economy, it’s far from a cakewalk when it comes to shoring up a good paying job that’s not in construction industry. There’s lots of those 12-15/hr thankless telephone customer service rep jobs around, but even the big companies are getting smart and reducing staff in Edmonton, while setting up shop in Atlantic canada where unemployment is higher and their staff can still live off 15/hr.
Different properties in different areas are doing well. This market is hugely dynamic with different people looking for and expecting different things. Just because we are busy doesn’t mean that prices will float upwards. Its a normal healthy process. Had an offer the yesterday 77% of list price. Seller declined, buyers (investors) agent has informed me they have come up to 84% of list price without so much as a blip.
Buyers of mine had our eye on another property we looked at it and thought do to it being in the high end (800,000 range) and it sold in days.
What is for sure is that buyers have more leverage now and successful sellers are realizing that, and in some areas there are sellers who haven’t even had a nibble. Not even a teeny one. So whose to say.
I will say it is far from an inactive market. If inventory continues to slow then prices should stabilize. If sales stall and inventory grows look for prices to go lower.
The current environment has made things interesting for certain.
One thing I dont understand how the market has turnaround in couple of months from Sellers to Buyers market.
I purchased a house in Sherwood Park in Feb. 2007 at that time there were only 1500 to 1600 total listings, these days would be 10000 in next monthly report from ereb.
Either demand has gone down ? or were investors in the market at that time and now they want to take out profit? or sellers were waiting for summer to list their properties ? or fundmentals of Edmonton economy have changed I mean job opportunities, migration etc. ?. Nobody is able to answer all these questions.
Sheldon do u have any comments or analysis on that ?
I think royalty would cause some major problems to Alberta.
I am expecting to see big price fall in nearly future.
Jhordan is right. I make $120K but I am not willing to have $300K mortgage to have my 2nd house at this moment because:
1. I want to have extra money to upgrade my living – cars, vacations, etc.
2. Why do I need to buy high/sell low?
Most people are still living in their own dream. People keep say… “today price is still lower than Calgary/Vancouver”. Can we compare with Calgary/Vancouver? Was the price in Edmonton equal to the one in Calgary/Vancouver ten years ago? Why do we have to compare with the other cities? Are they comparable?
My house was $180K four years ago and today price is $420K. Assuming the inflation is 10%, my house should be worth ar $180K x 1.1 x 1.1 x 1.1 x1.1 = $264K. Am I willing to pay the extra $156K to buy the same house?
The Edmonton/Alberta story has not changed. This is just a few speed bumps we have hit. Royalty review will cause little problems for Alberta. Ontario lost 10,000 jobs in August in just the manufacturing sector? I thought I read the losses could mount to 100,000 in the near future? Hmmmm. where are 100,000 out of work people going to go? Where there are jobs of course and that is Western Canada. It will take 6 months to really hit home but I think we are going to see some mass migration again next year.
I doubt 100,000 people without jobs are going to come to Edmonton and buy houses or condos (after all, they have no jobs). Besides, the things that are hurting business in the East will eventually hurt us here as well (slowing US economy, falling US Dollar, credit crunch, etc). Some sectors here are already feeling the pinch…layoffs starting in pulp and paper as well as residential construction and slowing natural gas sector. House prices do correct periodically and it looks like we are due. Edmonton is not the centre of the universe and its not different here from everywhere else in the world. The difference this time, is we will not need high intrest rates to trigger it…the overvaluation will be enough in itself.
I see way too many people in Edmonton than I used to see 3-4 years ago? and still we have way too many houses for sale than there were 3-4 years ago, I do not understand what is happening?
TW, I think a few things are happening…
1) Investors/speculators are trying to dump their “investment” properties as they see prices flattening/falling. This is particularily true with those thinking short-term profit gains.
2) A lot of people who moved here from other provinces are now leaving because of affordability issues. Sorry, but 100,000 autoworkers are not going to suddenly become Refugees in Edmonton…just isn’t going to happen AA
3) Builders are overshooting demand in multi-family units. These units take a while to build, and builders were going Full-Tilt when everything they could build would sell. Now, the market is Softening and these projects underway are going to be completed whether the inventory is high or not.
4) Apartment-Condo conversions. These bloody things are quickly converted to Condos and have quickly saturated market listings. I personally would not want to buy my crappy little apartment!
5) When Credit conditions or lending standards tighten, the effect will be the removing of many potential buyers from particular price ranges. So if you suddenly change the mortgage limits of 50 people from $450,000 down to $350,000 then it becomes obvious what the impacts will be.
6) People are waking up? Is it possible that people are snapping out of their daze and asking themselves if they should commit to buying a $450,000 single-detached house. Is it really realistic? A mortgage takes a long time to pay off, and those mortgage payments can be quite an elephant in your living room for a very long time.
There is tons of land left to develop in Edmonton, so the old saying “they aren’t making land anymore” doesn’t quite hit as hard.
And considering the SHEER SPEED at which the real-estate market changed directions here (3 months), I would personally be a little shy about jumping onto a moving train.
The condo conversions of late have completely screwed the downtown real estate market. Owners of these 40 year old wood frame rental buildings who paid $50,000 per door less than four years ago have created a nightmare for legitimate home owners who are trying to sell. They’re trying to flip these places with little or no renovations and make $100,000+ on each unit. While there is no law against making money, they should show some class and invest money in new windows, doors, landscaping, and bring these buildings up to current construction standards. There were some good condo conversions a few years ago. Those buildings were completely renovated, however in the rush to cash in, this last round of conversions has really hurt the public perception of the quality of downtown housing. All downtown owners are paying a price for this garbage that came on the market over the past six months, which has inflated inventory and deteriorated the quality of that inventory. It’s sad, but in this greedy world, doesn’t surprise me one bit. I can’t paint every recent conversion with the same brush, as there are a small % of buildings which have been completely refurbished. Those however, are few and far between.
I totally agree, I think the reason for too many properties is too many condo conversions and overbuilding, so people want to get rid of older houses and want to move to new houses, 2 of my friends bought newer houses thinking they will be able to sell there old ones, but none of them could sell their old ones. So if people who are thinking of moving from one house to another should sell first and buy after, otherwise you are stuck with big mortgage payments.
well another question, few days ago our people were crying for affordibility, goverments wanted to make affordable houses, now even affordable things which are in good condition are not selling?
So what is government planning, are they still going to build, if so, then is it justified or buying from the market will make more sense.
tw:
Regarding the affordable housing, is the market really affordable now? I highly doubt it.
It’s true that some listings dropped their price. But it’s just a decline from the spring 07 peak level, and still more expensive than spring 06. I remembered housing was not affordable back then.
Let me put this way, in the United States, single detached houses have a medium price of about $220k. Houses with 2200 sqft, 4 bdrm and double garage have a medium price of about $440k. How about Edmonton?
AA:
When auto workers lose their jobs, petroleum workers shall tremble.
Condos are not the reason for high inventory:
Data Last Updated September 26, 2007, 3:13 pm
Total Properties 11972 – Res 6326 – Condo – 3324
I’m still optimistic. Even if we lost 2007 increases, we still enjoy the 50+ % that 2006 brought us.
I think they are saying we still increased 27% thus far this year. So even if we totally dive at say 5% a month from now till years end, we still gained 7%.
Add that to 2006 increases and assume no more decreases, not to bad. All owners and investors have to appreciate this. If you can’t appreciate this then you must be preeeettttyyyy greeeeedddy.
I beginning to think that a lot of the SFH inventory problems has to do with people who thought they could upgrade to a better home for free. With the market in 2005-2006 appreciating at the rate it was, they probably thought they could hold their current home until it went up enough to cover the upgrade. That’s why there was such a low inventory number in the spring-summer of 2006. But now it looks like it backfired, once inventory number started to increase in 2007 all those people need to get out to make it work. Well as you know this caused the glut in inventory and thus lower prices. So in the end as the old saying goes, “There’s no such thing as a free lunch”. I should know, I did it, but I’m glad I don’t have to sell my current house.
The Condo market inventory is a different story, prices are actually holding up fairly well. I think most of the inventory is from flippers, speculators/invetors, condo conversions, etc, all trying to get out at top of this cycle.
So in the short term all of you who thought you could upgrade for free, I don’t think it’s gonna happen. Unless of course you have already sold you previous home. So in the forseeable future the only direction SFH prices are going is down. Well until this inventory glut drys up. When? who knows for sure, but I don’t think any longer that 8 months.
For you renters out there this is a good thing, there may be a lot of rental property coming back to rental market shortly.
you guys should have been reading the albertabubble blog
they knew it all along
Beside the fact that too many get rich fast investors are trying to dump properties cause they probably have negative cash flow, there is another reason for greater inventory. The small portion in the increase is that it is too difficult to make positive cash flow in this marketplace, and investors are either reluctant to buy, and/or are patiently waiting for for good opportunities. It has grown more difficult to buy properties and have positive cash flow. On say an average $250,000 condo if one were to pay for it on a basic line of credit at 6%, the simple interest would be almost $1300. It means that an investor would have to put down signicant capital to make positive cash flow, cause rents will not cover the cost of the interest only payments.
In my situation last year, I purchased a couple properties which rent covers the monthly expenditures. I don’t have any way of buying another without putting down more capital to bring down the payments on either a mortgage or LOC. I can only imagine there are many in my shoes who would love to buy, but don’t want to pay outta pocket every month for properties, and don’t have am extra 50 thousand lying around. In the last three months I have seen one property that would create cash flow with a simple line of credit where interest alone was paid. It was a starter home with a basement suite. The only problem was that someone else saw it, and was quicker on the draw. How many are finding it difficult to find these these good investments. I can only sit and wait for average rents to increase to cover the basic monthly expenditures, or the market falls to allow me to purchase property. I personally thought that 50% last year in growth, and 20% percent this year was great, but I knew there were too many people buying that second property. At the first sign of cracks in the marketplace these investors decided to unload their property.
However I am optimistic that it will be great time to buy something in the next few months if prices drop some more. I have a greater optimism that with the talk of a reduction in interests rates in the near future, this may help people like me out.
Another point I would like to make is as one economist stated today on CBC Business News in regards to buying stocks rings also true for real estate. Money is made when you buy stocks in the dips. The savvy investor should be licking their chops.
Lastly, I would like to point out that many bought in the past year and half because of greed, and are selling out of fear. The same individuals who bought second properties with dollar signs in their eyes, are now freaking out they think the bubble is going to burst. What does the future hold. In my humble estimation there could be great things on the horizon.
To Smokey:
Nothing wrong with buying stocks or real estates on the dips. But they certainly have different time frames.
The housing market in Edmonton has been going up for 10 years without a single dip, until now.
With the stock market, there is usually a peak and a significant dip every year.
Put that perspective, if the current dip in Edmonton real estate is a real one and not a fake dip, then there is no recovering for at least two years.
To: Bunny
You are right to a certain degree about stocks constantly fluctuating. However to provide clarification, there is a history of real estate having price dips due to seasonal changes, although from year to year real estate trends show price increases. Thanks for your post, I appreciate a differing viewpoint.
To: Bunny
You are right to a certain degree about stocks constantly fluctuating. However to provide clarification, there is a history of real estate having price dips due to seasonal changes, although from year to year real estate trends show price increases. Thanks for your post, I appreciate a differing viewpoint.