I can’t believe it and I don’t think you will either. Average residential prices in Edmonton remained unchanged in September, unless of course you count a drop of about $500 as change. I know, unbelievable! The press release isn’t out yet so I don’t know what happened with the median price, but here is what it looks like:
Inventory is up slightly (we just stayed under that 10,000 number some people have been predicting), and the number of new listings has dropped, just as we’ve been predicting on the blog.
Sales have also dropped seasonally relative to the past few months:
But it is the lowest we’ve seen for September for years. What does this mean? Sales are down and prices holding steady…I’d say sellers are flat out refusing to sell! This weekend we’ve had five deals go nowhere…the buyers came up a bit from their first offer, and the sellers came down a bit from their asking price, but there was no meeting in the middle. The fact of the matter is, it’s a solid buyer’s market in our opinion and at some point sellers are either going to have to walk, hold or meet the buyers’ demands:
Sara,
Thanks for getting info out fast.
I can’t understand how you can give us very hungry people info faster than EREB. They are so slow. They must keep a running “tab”. CREB is much faster and they have more info to share.
Although it may not be popular, I have to say I am smiling. No up, no down is a good thing in my opinion.
Again thanks for the stats.
With sales well below 5-year lows buyers are standing their ground as well….
What we are seeing is very typical before huge problems appear, it happened in the U.S market, its called Buyer Seller Disconnect, where Sellers wont sell and Buyers wont buy. As proven by the market in the States that the buyers can hold out a lot longer than the sellers can..which resulted in historic amounts of foreclosures and a credit crunch that required the help of Federal Reserves to pump in hundreds of billions of Dollars into the economy.
Further more with such few sales the average price is not a good indicator of pricing, I think that better than average homes are selling for average prices, with so many choices why would’t you buy the best house in the block. every home that I have watched has dropped, dropped and dropped in price and has not sold, I am seeing resale Condos drop by 10% from the peak and still not getting sold, for this reason S&P has adopted the Case Schindler index of Real Estate as a better indicator of the direction of pricing, you can buy and sell this index and make money if you are good at predicting the American Real Estate.
I agree with Shawn. This “disconnect” only spell trouble for sellers. It is not like buyers are “choosing” not to buy. The simply cannot afford these prices! The only chnage is going to have to come from the sellers’ side!
I doubt prices will go down much more – maybe 5%. Unless Real Estate tanks right across Canada or the Royalty Rates do some serious damage then there is not much downside risk in Edmonton. If you are a flipper who bought at the peak of this year and is trying to sell you may want to consider renting for a year? I think we are getting close to price balance. If sellers will not sell they can rent. If buyers can’t buy because sellers won’t sell is it really a buyers market? I think balance is getting closer every month. Many investors think prices will resume 5-8%/year increases? I don’t know if investors are buying here as we speak but I suspect there are some still picking up property during this dip.
Well we will see soon what the stats say but I predicted in earlier post that the drop would be no more than few percent. I also predicted Calgary condos to rise and they did. It looks like I may have actually been wrong and the drop was not that much in Edmonton? There could still be a few percent drop in the future but after that price should be very close to balance.
AA,
I like reading your comments, and hope you are right, that is what I said balance is good, 5-7% growth a year is normal and does not make the market volatile and uncertain. Hope we achieve balance.
AA:
Sure you can just rent out your $300k investment condo. But in my neighborhood, there are a lot of people moving up to $1M houses and got to sell their $600k old ones. Tell them to rent out? What kind of rent can they expect? Can the rent even cover the damage that the renters cause?
sure all is good, ignore the fact that inventorys are at historic highs, also ignore the fact that sales are at a 8 year low, the sun is shining, all is good, wheres the kool-aid bowl
edmontons market has crashed, its done
The rental market has turned around quite a bit as well. We’ve had several new employees over the last few weeks that haven’t had any problems getting units in the choice buildings and areas around southern edmonton. Landlords are actually soliciting renters!
I see this whole situation building up some more over the next while. Sellers that bought in the last year are losing money everyday. Whether they’re subsidizing someone’s rent, or sitting on an empty house with a monthly mortgage.
The other sellers that are looking to upgrade are holding out and causing the inventory levels to swell even more as new home builders keep pumping out new units.
On the other side of the fence, buyers can see where things are going, so they aren’t going to jump into an obviously risky market only to find out that their home is $40k cheaper next summer. So they’ll sit on their down payments which are growing steadily while owners holding out are hemorrhaging funds.
I suppose those capital losses will help out on next years taxes.
AA
I find your question “If buyers can’t buy because sellers won’t sell is it really a buyers market?” pretty funny and ironic because you seem to be making the point that the market is in balance (or nearly in blance), but also that no one is selling or buying. I guess that is a type of balance.
I don’t know how anyone can talk of balance? Are you not looking at those graphs? Look at that red month-end inventory line…its significant (it looks a lot different than the previous ones). Inventory is MASSIVE! And this does not take into account all the stuff coming on to the market and in progress. That inventory that is showing and all that is coming on to the market is like a tidal wave. Used home sales prices, rents, new home incentives are all going to be impacted by this for quite some time. Perhpas we will be in “balance” for the next couple of years and prices won’t need to come down at all, because no one will buy or sell.
can people give their objective views without bashing other people’s views, or are they really enjoying it?
Renting a $600k house is a little tough? The people trying to sell houses in this range are in a tougher spot than people with $450k houses. Many people figured on selling their house at peak prices and using the money to buy a $1M house maybe should not have banked so much on their old house selling so high? I do know some people renting $500k houses though instead of trying to sell right now? I don’t know who would want to rent a house like that but I guess some people do?
I do see some new home sellers adding incentives to their houses now. Say $12k in free upgrades but I do not see them lowering prices much if any yet? Can they lower prices with the cost of land and labour? If they can’t lower prices then this also sets a mark for house prices. If no one buys them they stop building and inventory shrinks. This could take quite some time to effect the market but the fact is they have some control over supply/demand and they will/are adjusting. In 2003 builders were also offering the same type of incentives as I bought a house then and got a bunch of free upgrades. My wife was freaked out over how much it cost back then and did not want to buy. Prices exploded after so this is not really a good indication of the market being in trouble? It’s easy to see the past but hard to know the future. I still feel about the same about the market as I did then. I did not expect such a huge price increase back then but I did know Alberta would beat anywhere in Canada. Hopefully demand will increase or inventory will drop in the future to add some more support to prices? I know it is hard for first time buyers right now but I still think owning anything is always better than renting?
I would call this the calm before the storm. At a guess I would say that realtors are telling the sellers not to panic.. not to buy into the press that RE is crashing etc and everything will be fine in the spring.
Come spring I think we will see the storm. All the expired listings over the winter will come back and we will have massive inventory (yes I feel it will be even higher then the records we see now).
Somethings to keep your eyes on in the near future for Alberta:
-Civic Elections (granted this will have limited impact)
-Royalty review
-Provincial election (I predict Steady Eddie is in trouble on this go around which is a scary thing for Alberta)
-Federal election
Cheers!
>AA wrote:
>I doubt prices will go down much
>more – maybe 5%.
Hahahaha. So Edmonton prices can climb by 40% but they are only allowed to drop by 5%? DREAM ON! What goes up, must come down.
Gadwin
“I know it is hard for first time buyers right now but I still think owning anything is always better than renting?
Posted by: Alberta Advantage ”
No. Owning “anything” is not always better than renting.
Would it make more sense for a first time home buyer to purchase a 2 bedroom condo with a monthly mortgage payment around $2100? or rent the same unit for $1000 a month?
Over the yeras, that $1100 a month in savings is going do to FAR better in stocks or mutal funds.
This is what young home buyers face in Alberta now. Only fools choose to be house poor just for the “ego boost” that being an owner might give them.
Traditionally, owning should be cheaper than renting because you’re taking on the risk of ownership.
i am not a seller but a recent buyer of a new house. i am not planning to sell but am curious as to how much my house might be worth come spring. i plan to call my bank and ask for a home evaluation come possession date so i know how much my property is worth. i’m also interested in your opinions, especially sheldon and sara’s. thank you for your comments.
my house is currently being built in the west end and has an estimated completion date of end of february 2008, which really means around may 2008. the house is 2200 sq ft (on a 32-foot pocket pie-shaped lot) and had a base price of 490K. i upgraded, which brought the price to 550K. does that mean that when i take possession in the spring, my house has already depreciated? or is it still worth 550K? or could it be worth more than 550K?
alex, your, joking right, you spent half amillion dollars, and are now asking what its worth?
goodness, is it any wonder why the markets performing with out any sence to it, that house has all ready lost value, if your going to spend that kind of money, you should realy do some research first
i have been pricewatching since 2003 and was well educated and informed when i signed up with the builder in april 2007. thank you for your suggestion that i do my research before spending over 550k. although your suggestion has merit, it is not helpful to me at this point. nevertheless, appreciate your opinion. have a great day!
So what I am reading is that I should lower the price of a 400,000$ home by 10%, so that is 40K, when I bought the place it was 200,000 and my mortgage is close to 1,500$, which means i can lower it by 40k or keep the place running for another 28 months until prices stabilize……..hahaha….too funny
unless i am desprate I ain’t selling
))))
Alberta average price is only 13% higher than the national average. Based on economic factors and salaries in Alberta this is not out of line. BC is way higher than this at 44% above the national average. Vancouver is a big factor with these numbers but average BC wages are lower than Alberta? So Vancouver is WAY overpriced compared to Edmonton. So is Vancouver crashing as well? Not really?
AA said
Nothing wrong with your analysis of inventory. However, you ignored just one issue as builders slow down:
How will the construction workers be paid? Where will they go if they get laid off? Where will they do with their current residence?
To put it straight. The current boom is 30% caused by the strong demand of petroleum workers and 70% by construction workers and real estate agents. It’s either a spiral up, or a spiral down.
Refer to my above post.
AA said:
>If no one buys them they stop
>building and inventory shrinks.
>This could take quite some time to
>effect the market but the fact is
>they have some control over
>supply/demand and they will/are
>adjusting.
AA said: >>Alberta average price is only 13% higher than the national average. Based on economic factors and salaries in Alberta this is not out of line. BC is way higher than this at 44% above the national average. Vancouver is a big factor with these numbers but average BC wages are lower than Alberta? So Vancouver is WAY overpriced compared to Edmonton. So is Vancouver crashing as well? Not really?<<
Well, the average price is 13% higher, but the average house here is way more shabby than the average national house. For the same house, it’s more like 30% more expensive.
As for Vancouver’s overpriced market and low wages, let me give you a hint. Many of those who buy 3-million houses in West Van didn’t make their fortune in Canada and their incomes were not factored into the stats.
I think though that over the past couple of years here, there has been a “can’t lose” attitude towards home purchases. And all along, it seemed sort of strange, but it has been true. Let’s lighten up on alex if he’s possibly just getting in to the market when people are asking these questions and speculating. At least he’s thinking and asking!
I don’t like to predict, but I am watching that inventory graph and the words of another poster “tidal wave” seem to describe it bang on. Keep in mind that ComFree has almost another 3,000 listings to contribute (when compared against other years’ numbers when ComFree might not have been so popular) and so you might imagine the graph to read a bit more like 12,500-ish or more.
I love the owning vs. renting argument and it’s such a dynamic one. All I’ll say is that you can’t really tell someone else what they want, or what they should pay for what they want, and also you can’t predict what something will be worth in x years and so having a definitive yes-this-is-better-than-that is difficult.
I do think however, that people really need to sit down and think about how much money they are talking about here. Do you realize how much money you’re playing with! What is the most amount of money you’ve ever had in your hand. I mean cash. Maybe $5,000, $10,000? Do you realize you’re just playing around with 50 times that much money! Do people realize how long it takes them to make $5,000 in take-home cash? Or how much interest you pay when borrowing some high fraction of that much?
Nate, I think your comment is great and I’ll add that instead of investing… You could go on a vacation etc. – maybe even just live life! The problem in Edmonton is that we’re not all millionaires!
I love the range of comments (optomistic, pessimistic, educated, impulsive, harsh and kind) on this blog and the stories and stats by the owners. Keep it up!
So how come EREB didnt release their “famous” press release, and figures……hmm…I wonder how they are going to spin this one …”Inventory holds steady as market finds balance” or “Spring prices reintroduced as customers explore options” or “Steady Eddie”…..the possibilities are endless….but I can gurantee there will be not even a drop of bad news in it
))))
Wow…
I read a lot of misinformation and incorrect speculation on this site.
A crash?
A correction?
This is oil country. Compare apples with apples.
Is the Middle East(UAE, Saudi Arabia) real estate crashing? Is it correcting?
Have 2.5 billion Chinese and Indians stopped accessing middle class status?
Grow up. This is not Ontario.
Once these 13000 listings sell by spring it will grow 5-6% a year.
You can quote me next summer, amateurs.
ray there is now 13 months of inventory on the market, if NO new listings are added in the mean time, it woild take until november 2008 to sell them all
what is your basis for inventory to shrink, keep in mind that theres 16,000 new coming on line
I wonder how calgary and edmonton have 2 different trends going on.
Keep in mind that not all of these houses “need” to sell. Some people will delist.
I am only guessing, but……
It seems most of the bloggers do not own homes as if they did, they would not be so excited about if our market will crash.
The double digit gains are good for homeowners not just investors.
So we must have many renters blogging here.
ray said: >>This is oil country. Compare apples with apples.
Is the Middle East(UAE, Saudi Arabia) real estate crashing? Is it correcting?<<
Middle East is not an apple IMO. They have multi-million people dwelling in a country the size of 1/10 of Alberta.
Why not just compare to Houston, Texas? They produce and refine much more oil and the housing is half of here.
Maybe some of you should move to the East or the USA as houses are cheaper there? Good luck with that. When I bought my first house it seemed impossible I could ever afford it 20 years ago. It was a dump but it was cheap and all I could barely afford. Had I never struggled to buy this piece of junk which should have been worth next to nothing I doubt I would be moving into my 4th house now. Do I regret ever buying ANY of my houses? NOPE? If you never buy you never own. If that’s what you want then that’s your choice. Many Sellers here are in a good position and they are not going to sell out at any price just because everyone thinks the market is toast. They may lose short term but in the end they will make even more money. Owners carry all the risk of owning. Buyers don’t until they own. So many sellers here simply won’t sell if they don’t have to. I am not selling my investment property. It will go up again after this little correction. I am putting my money where my mouth is! I’m taking the risk with my money? I’ll bet half of you think I’ll lose money. Well my money says your wrong! How much money are you risking?
Laura said: >>So we must have many renters blogging here.< <
First, I am not renting. I have the luxury of staying in my folk’s house. (No, not basement
Even though I have no problem of renting or buying a house, I don’t want to make the life of flippers too easy. Plus, an extra $2k per month is not too shabby. Useful when opportunity knocks my door. I might have jumped into the market, had the price kept climbing. But since it’s declining, I am in no hurry.
Second, wealth is not necessarily a good indicator of insight. The emperor could be naked, and the child could be right.
How are double digit gains good for home owners?
You enjoying your property taxes going up by 100%?
Unless you’re flipping or selling real soon, the price of your home balooning doesn’t help you out.
Especially when the majority home owners are now taking out massive HELOC’s against their homes. Paying the bank to access your own equity? Sounds like a good plan. How many albertans have 40, 50,60, 100k loans against their homes that have been used to buy speed boats and new trucks?
Your home is a great nestegg for when you retire if you end downgrading or renting once you’re out of the workforce. But if you think that your home is going to appreciate for more than 5-8% a year over your lifetime, you haven’t been watching as every market in the world that has had these huge runups in the last century has eventually corrected itself.
You can tell how many people in this province haven’t been around for very long. It’s only a matter of time before a few rough decisions are made in the government to crackdown on pollutants or crazy oil profits and Alberta gets hit like it did in the 80′s again.
Bunny,
US in not all that rosy either, if you know califonia market, you probably know, at one point there was nothing less than 300,000 there with salaries at macdonald at 7 dollars (compared to Alberta 12 dollar)and unemployment. So owning a house was not for everyone.
The other side always looks rosier.
AA said: >>Many Sellers here are in a good position and they are not going to sell out at any price just because everyone thinks the market is toast.<<
I remember you once said only a small number of buyers are needed to push the price up. Now I can use your own reasoning against yourself:
Only a small number of desperate sellers are needed to make housing price drop significantly.
Sure, 80% of the seller are in no hurry to sell. But with the 20% that have to sell, it’s enough of a pool for me to find bargains—in a few months’ time.
tw:
I never compared Alberta to California. AA asked for an apple to apple comparison, and thus I said look at Texas.
Use Vancouver to compare to some of the more expensive cities in California. They are better matches.
people are going to read that report in the news paper tommorrow and totally freak out
Now come one greg,
what do you know? share with us.
Dear Bunny, I don’t know what dreamworld you live in but I hope you like it there? You don’t own property and I’ve heard attitudes like yours for 20 years? In 20 years you probably still won’t own anything if you think like that? Good luck with your wishing for a deal? Granted you may find it as there is a few desperate sellers but I still doubt you are going to buy if you are this negative about everything. You seem to have a touch of Eastern Canada mentality in you. Alberta was not built on attitudes like yours. Prices are not going to fall much more if any. If you got the cash then find yourself a house or sit on the sidelines forever. I still doubt you will ever buy!
LOL, AA, now you cannot refute my reasoning and choose to focus my “mentality” instead.
AA,
Have to agree with your thoughts.
Not surprised certain bloggers are not home owners, you can totally tell by the comments. Thanks for responding to Bunny, now I don’t have to.
bunnys poses good points, it is just to expensive for new buyers, she is wise to show some patiance
and i applaud her, she has a whole life time ahead, why saddle it with debt loads that the average person has no hope of paying back, i dont expect interest rates to rise in the near future, but they will rise, and a 2 or 3 percent increase would cause the vast majority of present home buyers, into bankruptcy
Bunny, did you ever buy a house? You were probably saying the same thing in the past and you’ll be saying the same thing in the future?
Let me summarize it:
———————————-
Round 1
AA: Builders can slow down to reduce inventory size.
Bunny: Construction workers may get laid off and have to sell their own houses.
AA: bunny is too negative
———————————-
Round 2
AA: Only a small number of buyers are needed to move the price up.
bunny: Only a small number of desperate sellers are need to move the price down.
AA: bunny has Eastern Canada mentality.
———————————-
My arguments could certainly have flaws and limitations. But is AA giving up reasoning at all? Say something more like an investor, instead of a kid, please.
Greg, bunny is a “he”, not a “she”.
AA, I was still in elementary school 20 years ago and it’s not your business to worry about me. In the worst scenario, I will inherit my parents’ two houses. But then, I am not that desperate. My cash/stock reserve is out-pacing the housing price everyday. Instead, AA, you should not dodge my arguments.
AA you are fundamentaly incorrect
builders will not slow down, they cant, building homes is what they do, they dont build, they are gone
in the u.s. the builders have only started slowing down now, 18 months into there bust, the fact that only a few numbers of desperate sellers will bring down the prices is true, theres a condo complex here in edmonton that has 15 for sale signs outside
do you think that people wont compare the asking prices ? if someone has to sell, they will drop the price thus affecting all the other units
I enjoy the opinions and comments not the contest of who is brighter. Fact is no one knows anything for sure.
Bunny is more interested in debating . AA, lets not comment on his/her comments any longer. He/She is not fun anymore.
For the doom seekers, stats are very encouraging. Bet that ruined your day.
Laura, you seem to think that a renter’s comment on this blog isn’t worth much.
Aren’t most renters eventually first time home buyers? If the majority of up and coming first time home buyers opt out of purchasing new homes, what do you think will happen to this market? Your home, like anything else, is only worth what people in the market are willing to pay.
I’m a renter because of my profession. I’ve moved three times in the last two years and expect to move again within 2 or 3 years. Buying a home makes no sense financially if I won’t be living in it for more than 5 years.
Bunny are you serious?
In the worst scenario, I will inherit my parents’ two houses.
So what?
That pretty much explains where your coming from?
Yes I’ll probably inherit my Father’s estate as well but come on? To even bring that up just seems a little bit weird?
Laura, you should understand that a RE blog is exactly where house flippers debate with renters.
If there is no renter on the board to debate with, what will you guys do? Just brag to each other about how many bucks your condo has appreciated over the past 10 seconds?
On the contrary Nate, of course a renters opinion is as important as a owners. However, at times it seems like someone without kids telling someone with kids how things are. Until you have kids or until you own a home your opinions are only speculating.
AA, so, you have nothing to reply to my arguments? (i.e. the laid off workers, if builders choose to scale back.)
“Until you have kids or until you own a home your opinions are only speculating.”
Sorry Laura but breeding and/or home LOANership are not requirements for informed debate.
That’s right BearClaw. Do we have to be professional hockey players to debate about whether the Oilers can defeat the Flames?
Bear Claw, I had mistaken you for a home owner all this time
Bunny
You’ve pretty much made your case and I’ve made mine. What else is there? Alberta has an economy that rivals any in the world? Real Estate is reasonably priced. Are you saying our economy is weak or that this has no effect on Real Estate prices here? Your looking back and saying prices are high. The stock market is the same way. You pick investments that look good going forward you don’t always look back and say prices are high so I’m not buying? Just because a stock never seems to go down for long do you say it must be overpriced? If a company is so good they keep going up are they not a good investment? If a stock breaks out and runs higher do you buy it because it has made a move that is bullish? When smart money starts loading up on a stock isn’t that a good sign? Edmonton had a breakout and smart money buying. We are now in consolidation and the smart money is not selling. The day traders are exiting. After this correction is done we will be moving higher yet.
Found this somewhere. Thought I would share.
Why would I want to invest in a home?
You are investing in something that has value: When you buy a home, you own it (at least the part that you don’t owe the bank through a mortgage).
Your home can go up in value: You may be able to sell your home for more money than you paid for it. You can use that money to spend on a new home, save, invest, or do whatever you like.
You get to live in your investment: You have to live somewhere. You can’t live in a Guaranteed Investment Certificate (GIC) or mutual fund.
The cost may be about the same as rent: In some cases, your monthly mortgage payment to the bank may be about the same as what you would pay in rent.
It forces you to save: With each mortgage payment you make, you own a little more of your home. The more you own of your home when you sell it, the more money that goes into your pocket.
You guys are providing me a very entertaining afternoon. Advance thanks!
Bunny, Just to let you know my wife an I had a house built in 2005. Since then we have been amazed and thrilled at the levels of appreciation the house had. At the same time knowing how hard it was to get into that house I couldn’t imagine getting into a home at today’s price levels would be very difficult with the resources we had. The large problem for me with the homes increasing in price such much and so fast was that 24 hours per day it seemed like that this was the talk of the town. I really hated talking about how much value my house was. I really wanted to think of my house as a home. Not a money maker. After all “Home is where the heart is”.
AA, I definitely like your confidence in the Alberta Economy.
I don’t know if I agree with everything you believe but you seem to have been involved in a few RE deals that you made good on. That gives you some credential.
In the end what I am trying to say is that taking the step and purchasing a home was on of the best things I have done. I gave me a good amount of equity and has provided me a good start for my family. Yes I was one of those people that tapped into their equity through HELOC, but I invested that money into other Real Estate purchases that I know will make me some additional money when I go to sell them in the spring time.
I hope this market continues to increase I truly do. I love Alberta. May sound funny, but I love winter. Makes me really appreciate the summers.
In the end of it all regardless of the RE market going boom or bust 20-30 years from I am sure that average single family homes will be $1,000,000 + just from inflation alone. This is the cycle of things.
AA:
I never said “our economy is weak.” It was you who said that the builder may slow down to reduce inventory.
Since you are into stocks as well, you should know that the price of a particular company cannot move without regard to its peers.
And any experienced stock investor would know that it’s very dangerous to always be a bull (or bear). Those who make money are bulls that turns into bears at the peak (or the bears that turns into bulls at the rock bottom).
I never said I won’t buy at any price. I am just not going to catch the falling knife. Let me make this very clear:
I believe that the real estate will appreciate at historically proven rate of 8~10% per year. But 50% was just ridiculous. 2003 was a balanced market and the start of a bull’s run. So, I will use the 2003 price as a starting point and compound it at a rate of 10% per year. When the projected price meets the market price, I am in.
In most parts of the world where real-estate values sky-rocket, there is a limited amount of land to develop on. The true value of what you purchase is in the land. In Vancouver, the lots are worth 600k and the homes on them that are being torn down to build compact mansions are worth 100-200k.
Alberta has a lot of land, but housing inventory fell behind the massive influx of migrant workers a few years ago. Inventory is catching up now and land is still abundant.
Do you think that home builders will stop doing business and lay off their employee’s to prop up inflated home prices? Or do you think that they’ll trim down costs and continue to build homes?
There is lots of interest in the market, which is a good sign, and we’ll eventually know the fair value of Edmonton homes. Wow, the September charts tell me a showdown between buyers and sellers looming! Those charts also must be raising a few eyebrows at the bank!
bigbucksnobucks, congrats on your wise 2005 purchase. Unfortunately, I was still in school at that time.
I am not against homeownership at all. I am simply sick the flippers pumping it all day. Buying a house is almost always right. But not at this very moment in Edmonton.
First time poster. Thanks to the hosts for an interesting site.
It seems to me that even a short period of no price increases will crush the speculators. How many people have the stomach to carry a $400k+ mortgage (even when offset by rental income) in a flat market? Every month’s payment (plus taxes, insurance, etc) is essentially money down the drain. Worse, those who bought an investment property using equity in their primary homes are in for a rude surprise as the primary home drops in value. Leverage is nasty when it works against you.
Assuming the speculators are a significant factor in the market (and given the gap between rent and cost of ownership, it seems likely that they are), it seems that once the market peaks a downward spiral back to fundamentally-driven housing prices seems inevitable, as there is no more “momentum” investment pressure from the speculators.
I’m interested in hearing other opinions, although I don’t have much confidence in “the world needs oil, therefore Alberta real estate will always go up” handwaving.
Thanks.
ken, very good choice of word.
Showdown!
Bunny was still in school in 2005. Still very wet behind the ears.Yeah, I value his opinions. This blog is intended for grown ups, go back and play little bunny.
bunny,
Good luck with your wait. Looks like you’ll be living in your parents house for a long time.
Laura, there is nothing wrong with being young an inexperienced. It was a child that pointed out that the emperor was naked.
But it’s a shame to see someone as old as you who lack the basic reasoning and respect.
I’d be interested to hear if any of these real estate investors have lost money in real estate here in Alberta and what they learned over the years – I think that’s what would truly separate those who are experienced and those who aren’t…
Sort of like the saying, it’s better to have loved and lost than never to have loved at all!
The amount of traffic/activity on this blog signifies that something is in the air. I never visited a real estate blog before May 2007. I started reading once we decided to buy a home and then once in the market, prices had me a little worried, started some research then thought twice about buying AT THIS PARTICULAR moment in Edmonton. Just because one (a renter in particular) does analysis before buying does not make them a loser! Eh Laura, AA?
AA you are fundamentaly incorrect
builders will not slow down, they cant, building homes is what they do, they dont build, they are gone
in the u.s. the builders have only started slowing down now, 18 months into there bust, the fact that only a few numbers of desperate sellers will bring down the prices is true, theres a condo complex here in edmonton that has 15 for sale signs outside
do you think that people wont compare the asking prices ? if someone has to sell, they will drop the price thus affecting all the other units
I would love the opportunity to have a debate over coffee with Bunny, Laura & AA as the master debaters (hehe I said master debate). If you guys are interested and whomever reads this blog wants to spectate I’ll set it up.
dont know how that post showed up again. is it desperate renters or is it desperate sellers. it seems that the dumb renters are poking fun at the desperate sellers, and the sellers seem so so touchy, the price of every thing, be it gold, wheat, oil or houses are all determined the same way
supply versus demand. and at this time there are way to many sellers
and way to few buyers, so sellers keep demanding high prices, the smart money getting out of dodge now, while you sit there and watch all your paper profits getting washed down the drain.
the only way that prices will increase, is if sales reach rates that are 4 times today, and that aint happening for a long, long time
Thanks, but no.
It’s fun here to debate and type whatever I want. But if I know my counterpart in RL, I have to think twice about what I am going to say.
You’re right…..I don’t believe it!
You don’t believe what?
This:
I can’t believe it and I don’t think you will either. Average residential prices in Edmonton remained unchanged in September, unless of course you count a drop of about $500 as change.
Don’t believe the hype ala. Publi Enemy
>Round 1
>AA: Builders can slow down to >reduce inventory size.
>Bunny: Construction workers may >get laid off and have to sell >their own houses.
>AA: bunny is too negative
I totally agree with AA on this one. Bunny, construction workers work on contract with home builders, they need not worry about getting laid off work. There are tons of trades work around here for them to worry about not having new homes to build. If new home building stops, theres reno work, commercial work, industrial work.
“Those charts also must be raising a few eyebrows at the bank!”
No kidding. Why would the banks continue to back 40-year zero down mortgages. Mayne its because they can just pass the hot-potato off the the CMHC!
Still too early to tell. The trend may become more clear next spring.
Remember that the boom was largely attributed to the unseasonal upbeat sales of 05 winter and 06 winter? I suspect it will be the same this time.
The market will likely still be a deadlock this coming winter. It’s the next spring that makes it or breaks it.
If all the “renters” decide to buy at that time, AA wins. If all the flippers decides to list their now de-listed condos at that time, I win.
got this from the albertabubble some time ago
since ereb removed or hid all the old edmonton stats here they are
tinyurl.com/2lebc2
As long as sellers are willing to only have 10% of listed homes actually sell, I’m sure the price of homes will remain stagnant.
Buyers now and will always control the market. Market price is always dependent upon what people will willingly pay for a property. Buyers drove the market up and buyers can drive the market down. No money exchanges hands if there are no willing buyers. As there is record levels of inventory, make sure you are getting a good deal. Time is on our side.
hmx5 said: >>I totally agree with AA on this one. Bunny, construction workers work on contract with home builders, they need not worry about getting laid off work. There are tons of trades work around here for them to worry about not having new homes to build. If new home building stops, theres reno work, commercial work, industrial work.<<
First, I have to say, even though I don’t agree with you. I like your attitude. I prefer rational debate over personal attacks.
Second, the way I see it is: most other opportunities are tightly related to the construction boom. If residential construction slows down, other industries slows down too.
But of course, these workers won’t starve overnight. They can certainly wait for a year. And we will see the outcome then.
If you are a buyer, I recommend to go ahead a buy. Why?
1) Almost everywhere in the world, house prices increase faster than the average inflation (examples are abundant and almost ubiquitous). Thus, real estate investment pays off in the long run (and in some cases in a few months, as happened in Edmonton over the past two years).
2) Take the advantage of the current market where you have a lot of choice. When I bought my home, I had to choose among only a few. If you find something that you really like, you should not wait or worry about the next month price, knowing that “eventually” you make money.
3) Some of the investors that I know, have already started buying homes in Edmonton, and if the prices drop more, more investors will start buying. The result can be another panic, where everybody wants to buy. And the prices will go up again.
4)Over the past 4 months, only a few homes are sold in Edmonton. There is a large number of buyers who are not buying hoping a lower price. If this does not happen, all of potential buyers will be back to the market together. Just imagine, what can happen to the prices. We already have seen the effect of all sellers being in the market (a few percent drop), but the effect of all buyers being in the market will be much more significant.
5) Sometimes, it is good to have a look from distance and see the big picture. Edmonton still has a good economy and oil prices are on the rise. 12 billion dollars of investment will happen in Alberta and a good part of it in Edmonton. So, it should be more than clear that in a year from now, the house prices will be up.
There will be no buyers in Spring.
Place your bets.
What else is there to say?
those wishing for a crash just don’t get it.
they only way the local RE will crash big time is if the rates go up high enough that owners and flipper are forced to sell or a massive job loss occurs and owners are forced to sell.
I am going to buy in the spring. So Radley77….you’re wrong.
Betta:
1) As I stated before, I do believe the housing price should increase at a 8%~10% per year, which is much more than the CPI. However, 50% per year is getting it way ahead of inflation.
2) Valid point. I agree that there isn’t too much risk to buy now if you want to stick around for more than 10 years. But I feel that’s too much of a restriction, for me.
3) More investor are selling. There are quick investors and there are dead investors.
4) The same can be said for the sellers community as well. If a price recovery is proven to be impossible, all the seller may stampede to the door.
5) No one can predict the price of crude oil. If I can, I would put all my cash into crude futures trading and become an instant millionaire.
1)House prices increase universally. False. Educate yourself, there are lots of real estate bubbles in the world. We have poor P/E ratios and poor affordability. This translates into declining prices, not increasing.
2)Loads of inventory. False. If there is high inventory, and continued supply growth, prices must come down. Therefore, wait. Besides, rent vs. buy economics are in favouring of renting. Personally, I would have $600G more wealth if I invest instead of buying over a 30 year period. http://strategis.ic.gc.ca/epic/site/oca-bc.nsf/en/ca01821e.html
3)More investor buying. False. Where is this latent demand for housing? If investors were to think it was a good time to buy they would be buying this in hoards already.
4)More home-buyers. False. See rent vs. buy economics.
5)Economy good. False. US-recession. Low affordability of housing will continue to dig into the economy. TD predicts 1 in 4 chance of hard landing. Irregardless, there is going to be a hard to medium bust from this irrational exuberance in real estate.
bunny said >>Second, the way I see it is: most other opportunities are tightly related to the construction boom. If residential construction slows down, other industries slows down too.>But of course, these workers won’t starve overnight. They can certainly wait for a year. And we will see the outcome then.<<
workers going starve? not here in Alberta.
Correction, there will be at least one buyer in spring.
Wow…I read on this thread that “builders are offering incentives”.
I followed the market in the U.S. out of morbid curiousity for the last year and a half…and when Builders start throwing incentives into new houses, it may as well be considered a house price reduction on the Builders balance sheet.
There are so many signs that I am watching unfold here in Canada now that I was reading about from a year ago to now in the U.S.
We aren’t invincible. We aren’t in a fundamental market. It is a global credit bubble, and Real-Estate was the equity that got sucked into the vortex.
It sucks, but it is true. And if you want to find out the further steps of our real-estate market, just have a look at our neighbors down South.
with the CAD>USD, it’s the local industrial sector we should be looking out for. not everything in edmonton is fed my oil. a lot of manufacturing and services company could get affected. once they cutback, there will be recoil in the real estate market.
Radley77 said >>Correction, there will be at least one buyer in spring.<<
at least more than one, i can’t remember how many people i’ve heard are selling their vehicles to free up cash for downpayments.
Poof: There goes another $150 million worth of investment.
http://www.theglobeandmail.com/servlet/story/LAC.20071003.RCRESCENT03/TPStory/Business
The businesses will follow the greatest returns on investment.
Bad P/E ratios and low affordability will tie the Alberta business community in knots.
Betta, thank you for the post.
Some comments:
“1) Almost everywhere in the world, house prices increase faster than the average inflation (examples are abundant and almost ubiquitous).”
True, although this ignores opportunity cost. For example, the stock market has historically outperformed real estate over the long run. For example, if I rent for $1000/mo instead of owning for $2000/mo and invest that additional $1000 in an index fund or similar, what is better?
“2) … If you find something that you really like, you should not wait or worry about the next month price, knowing that “eventually” you make money.”
Certainly, buying something you like is good advice. That said, do so for quality of life reasons, not as an investment. “Eventually” can be a very long time. I recall seeing figures that suggested that if you bought a home in Calgary at the peak circa 1981, the real value of your home did not increase until the late 1990s. Ouch. (this is from memory, so I may be off a bit, but the general principle holds)
“3) Some of the investors that I know, have already started buying homes in Edmonton, and if the prices drop more, more investors will start buying. The result can be another panic, where everybody wants to buy. And the prices will go up again.”
You’ll have to work harder to convince me here. Why are people going to start buying houses when they are decreasing in value? And why will there be a “panic”? Flipping doesn’t work in a declining market.
“5) Sometimes, it is good to have a look from distance and see the big picture. Edmonton still has a good economy and oil prices are on the rise. 12 billion dollars of investment will happen in Alberta and a good part of it in Edmonton. So, it should be more than clear that in a year from now, the house prices will be up.”
There are plenty of “big picture” indicators to the contrary. Stretched housing affordability, tightening credit, a possible US recession, the impact of the royalty review (which admittedly may just be fear-mongering by the resource companies), a Democrat as president in the US (and thus lower oil prices from possibly greater stability in the middle east). Nobody knows what will happen for sure, but its far from clear that housing prices will increase in the next year.
There will be a small drop, no one can give a sane argument against that. The amount of the drop is up in the air.
But for those of you that think a crash will never happen… Are you truly that naive? Haven’t you seen what’s happening all across the states? Hell, it’s happened in Alberta many times as well.
Do some research. Britain, Denmark, Ireland, Spain… They all had a massive run up of real estate inflation starting around 2000. They’re all stagnating or dropping now.
Is a strong economy going to cause our housing industry to ignore the rule of supply and demand?
Selling their vehichle to free up cash for downpayment is DUMB. Maybe they should think about spending less on their house. Selling your vehichle to pay for a down payment on your house should be the definition of irrational exuberance.
I can see that with all the chatter people didn’t actually go and get the EREB Stats for themselves today.
Hey AA and Laura. I’m not a renter and I still think the market is going to correct. Actually have a nice bungaloo that suites my needs in a historical neighborhood in Edmonton. Quite like it actually and my loan-to-value is very low too since I’m not leveraged to the max holding multiple properties. Bunny is smart to not buy know. In the investing world we call it exiting the market and having a cash position. You too should try it, soon.
Not sure how EREB came up with the average figs. Single-family detached fell -1.04% on the month or -$4,202. And have been falling EVER MONTH since May 2007′s high of $426,028. So that’s an erosion of $26,473 dollars or 6.2%. Price came in at $399,555 back below $400,000. Or a “rollback to March pricing” if I were working at EREB.
The only product type that has appreciated are condos. Why? Because they actually have an affordable market since they had an average price of $270,745 in September. Up 0.59% on the month or $1,606.
Duplex and Rowhouses fell 5.96% on the month or $19,654 to $310,110 but the sample size was small so I’d take this number with a grain of salt.
Days on market went from 36 (Aug) to 43 (Sept). And the Sales to listing ratio kept crashing through the floor going from 30% to 26%.
So yeah, being one that works with data, I’m sure some “massaging” went into getting a nice -$500 price decline for the headline number that no one looks behind.
Not sure why we think “Spring 2008″ is going to be so much better than “Spring 2007″ but at least I’m not a renter saying this (sorry bunny) cause AA and Laura would just have field day.
O
2 years up means 2 years down in my books. Only the people that buy in the meantime will be hurt.
This market is trading on pins and needles. The stat to look at is total sales. Anyone that trades stocks knows that a high price with weak volume does not indicate strength like a high price and strong volume would.
People are expecting a price correction too quickly. A couple of months is a very short period of time to see any huge price movements. One thing people should know is this market is not like the stock market where the price reflects all available information. I believe this will take a few months for the large inventory to start affecting prices.
Pete, I concur. It will take several months for costs to start to erode. Considering carrying costs might range from $2000-$3000/month. It will take larger and larger inventories before we start seeing some bigger corrections. It is possible that larger and larger inventories build up until there is a massive oversupply for the market. At which point, an oversupply squeeze may occur yielding a race to the bottom.
Pete and Radley… I also agree it’ll take some time for this mess to re-price to sctual value. Suspect the prices will continue to fall straight through winter. And yeah, high prices on really low volume is not good. If people ar bridginf mortgages or carrying 2 to get to spring that better be one hell of a rally. Cause otherwise it’ll be panic…
K
Laura and AA,
If you are that much sure about the increase in property next year then why you don’t tell investors to stop selling…why the hell they are in hurry..
And try to call a few mls listing and you will find that the Real Esatate agent is himself the seller…why is the smart money running out of the market…tell them to take it easy and sell in spring when the market is hot..hot..hot..
the market has crashed
Edmonton’s going down. Like it or not. Crash & burn. Sorry folks. Alberta is not as good as most think. Come Spring you’d be lucky if your houses are worth what you paid for them. I got my house listed (as well as my lake property) and getting out while I can and let some other sucker take the fall. There’s no use debating it. Real Estate here in Deadmonton is gonna be as fairy tale as thinking that the Oilers can keep good hockey players.
i have had my house on the market for 7 months, damn the realtor that put me in it , i am so pissed
i got in for 0 down and a forty year mortgage, but i cant afford my payments, i am paying with my credit card, why wont my house sell, i was told, no i was guarranteed it would increase 30 per cent, now i have already spent ny daughters education fund paying for the piece of crap
Very shortly we’ll be seeing what was known as tent city filled with Realtors that nickeled and dime us into what we all thought was going to be a good deal.
ATTENTION ALL OWNER’S GET OUT WHILE YOU CAN!!! WE CAN AVOID THE ICEBERG!!!
It’s been fun,
see ya all at the end of the month when every starts freaking out again.
For the newcomers… find something to do with your month, this is not very productive.
Curious why sheldon hasn’t expressed anything considering there is 110 post on here. I suspect he knows he should stay out of this heated debate. Wise!
For all yo info’ this market is crashin’ & burnin’. It the same people that think this market’s gonna go up that thought Britney was gonna keeps the kids. But guess what? I got em’. Buhleed dat!
Wow….the sheer number of posts in the past 24 hours is a sign of something bad brewing. This board is starting to sound like the tech stock discussion groups during the height of the “dotcom boom”. I hate the remind people how that ended. I am worried…very
zz, i get the same feeling, something bad is going to happen
“4)Over the past 4 months, only a few homes are sold in Edmonton. There is a large number of buyers who are not buying hoping a lower price. If this does not happen, all of potential buyers will be back to the market together. Just imagine, what can happen to the prices. We already have seen the effect of all sellers being in the market (a few percent drop), but the effect of all buyers being in the market will be much more significant.”
Sales are not low because buyers are consciously deciding to wait. They are low because people bought earlier than they would have otherwise from the fear of ever rising prices and availability of new types of loans. Sales were artificially higher throughout 2006 and the first part of 2007 because of this rush. This has created the demand vacuum we see now.
Edmonton and Calgary have very high levels of home ownership. Many young people are already in the market and are not looking to buy.
1800 sq.ft 2 storey house in St. Albert. Fully Loaded Hardwood, Tile, etc…Built 2 years ago.
I wanna get out…now. I am scared. Very scared. For my families sake. I can hardley afford the payments. I think selling now and moving into my parents place with my wife and 3 kids is the best move.
What do all think I should list my home for?
390k – 420k?
Please let me know.
well to each his own. Bunny has some pretty good points, I have to agree with the guy if I was in his position I would not move either. And I am a home owner, and a landlord…..and a seller….
Still someone tell me how do you like latest EREB headline : “Lower resale housing prices create choice for home buyers”….
Its good ehh…..they know how to make (sorry for this word but it is the true and I call it as I see it) shit smell like roses. These guys call themselves professionals!!!! Lower resale housing prices create choice for home buyers!!!!! What the hell are you guys smoking, and if its from BC sell me some since I will pay 25$ per gram!!!!
You have record inventory, you have another price fall (not large but hey its a fall), ratios down all across the board – in military terms you are routed and you need to get the hell out of dodge and quickly before the enemy comes over the hill and wipes you out. I could almost compare EREB to the old Commisars in the Russian Army telling you the old party lie that things will be so much better under communism if we all sacrafice
))))))
Viva the capitalist dream!!! As for EREB call a spade a spade and in the future provide some professional advice and not some bull about “Prices are great, buyers are awsome, things are good, there is no bubble, and dont panic the Titanic is indestructable and will not sink”
))
Wow, 120 posts.
I get the feeling that 25% of the posts are from the same fear monger using different names though.
I’m pretty sure that Sheldon can see IP’s too. So what’s the point of spamming doom and gloom? You’re just discrediting your arguments.
I wish ip addresses were shown on this website, cause there are starting to be too many nonconstructive blogs. I imagine that some people on here who are fear mongering are posting multiple times. I enjoy a good post, but lately the posts have been so negative. A opinion can be well written, without the relentless end of the world rants. The negative rent verses buy blogs reinforce the bitterness I hear from people who have not had success as others. For those who are bitter cause they missed the boat on the real estate, should take the opportunity to learn from those who have been successful in this realm. I am not disgruntled by those who have been more successful in life than I, I just want to learn what has made them successful. Sometimes when I read these blogs, I wish people who check their emotions at the door when they write these blogs, because it impairs constructive criticism and well thought out analysis.
Give it a break people. There may be some softness in price but there is no crash coming in Edmonton! You seem to all forget that Alberta was way way way UNDERVALUED 5 years ago. So to say prices went up by 100% or whatever is a bit misleading. If we started out worth 60% less in the first place then over half of the gain was just bringing Alberta into what property was really worth. The rest is due to economic factors. I will say it again. Edmonton is only 13% over the National average. Alberta is blowing away every other province in wages, GDP, employment etc etc etc…….. This is not changing anytime soon so it is only natural house prices will rise even more. Investors are not selling here. Flippers are. Big difference. I know people with over 25 houses and they are in no hurry to sell? They are quite amused that you think the market is going to crash. Smart Investors are not being spooked by this little blip. Rents are not going to go down in Edmonton and if you think they are your dreaming. Look for sizable rent increases again next year.
AA i only found this blog yesterday, the thing that struck me about your postings, was your tone, you keep preaching over and over about all the money that you are making, but at the time you sound so desperate, its confusing
AA it has been my experiance in life, that people who are making some good money, are usually very modest and quiet about, i mean keeping it quiet so that they can profit more, quietly
but you are like a bloody blowhorn making claims that you can not back up, and screaming about all the money you will make in the spring, what gives
Smokey, you are simply dumb to say that rent vs. buy economics doesn’t matter and it is “bitterness.” I am happy to rent as long as I can make more money renting. It will be those that buy now and are housepoor that will be “bitter”. Maybe you should start reading about P/E ratios instead of launching “ad hominem” attacks. Also, your whole argument mixed “bandwagon appeal” and “confusing cause and effect”. Thanks for pointing out how bulls do not have a single logical argument for buying.
Interesting blog here…..I post on Alberta Bubble regularily and on Bob Trumans blog occasionally.
Here’s my situation, we’re from Calgary……wifey and I have $214K in PC Financial which is earning us $715 a month right now in interest. My rent is $1,100 and I have a 12 month lease. So our net cost of shelter is $400. This does not account for tax treatment of the interest income…..but as we have not paid additional taxes for 4 years now…..I see no reason why it is an issue.
This money was accumulated by renting and not by buying thru equity appreciation. We managed to save the equivalent of the monthly mortgage/tax/utility payments we would have had to make if we had bought a property 4/5 years ago. I guess that makes me a “bitter renter” as some have stated here. LOL !!!
Why buy today ? There is NO VALID REASON whatsoever to do so. Property values here in both cities are not supported by incomes or basic value for dollar scenarios. We own outright a property in another country that cost us $60K USD…….a condo that if it was here it would cost $500K+…..but there is no beach 4 blocks away, nor is it ever +40 degrees celcius in Alberta.
Investors own 45% of the listed properties for sale in Calgary (vacant and rented listings)……and if the bulls are heading for the doors…….why buy ? They obviously sense something that the average consumer does not.
But I am not the average consumer. Having been a bank maanger back in 1980-85 I know what is coming and how it wil play out…..and everything that happened last time is exactly like what is happening today.
Good luck to the suckers who bought in the last 18 months……..you’ll need it.
I am not desperate or in a hurry to sell anything. In fact I am not even trying to sell but I could if I thought it was all over? I just can’t understand why people think so negative about this market? Some people just see the bad I guess? Investors and Sellers in general do not seem too desperate to me either as they are not rushing to sell at low prices? Flippers who had no real plan in the first place may be paying the price. Smart investors though are going to ride this out without a problem. Maybe this will change and we are all wrong but my camp says the market is still strong. Someone has to be positive otherwise this blog is just a bunch of doom and gloomers. Most of which don’t seem to be homeowners or investors.
AA whats your problem, if the market is good why keep screaming about it ? and why do you see affordable housing as doom and gloom ? to a lot of people including businesses more dollars in the consumers pockets is a good thing, also energy companies would welcome lower housing costs, as it would take the pressure off of pay raises
i am afraid that there are many forces at the moment working against re prices, forces you wouldn’t recognize. stop panicking AA the vast majority of people will welcome lower re prices as an extremely positive event, freeing up more money to spend else where
AA,
You are wrong: I invest heavily. Calgary and Edmonton have some of the WORST P/E ratios in the country. Why should I invest here when I can make more money on rental properties elsewhere? Companies like Boardwalk are simply not developing in the meantime. If now is such a great time to buy, investors would be buying up property by the boatload.
In summary,
Investors (no buy): Better P/E ratios elsewhere
Homeowners (no buy): Rent vs. buy economics, poor affordability
Flippers (no buy): Why flip if the market is possibly headed down?
In chess, you would call that a checkmate.
With regards to the multiple posts and trying to use IP addresses to figure out if it is happening…
Doesn’t a Dynamic IP address like the ones issued to you from your internet provider (unless you have a static IP) mean that they can change, thereby rendering your IP Address investigation without merit????
I know…totally off topic, but I just think that a lot of these posts are from Genuine people, not a small group of name-changers.
So this tells me that more and more people are having their eyes opened up about this.
I have been posting in this blog for a while, and it has absolutely exploded with Bears in the last few weeks?
That in itself says SOMETHING IS UP.
Whatcha think??
For posters comparing texas to alberta “as apples to apples” They are not even close they both produce major oil but you have to remember they have no basements, way cheaper labour, sub prime mortgages, and good working weather year round. I am looking for a property in texas right now due to strong canadian dollar and hoping to take advantage of the great prices. but i wold not compare there market to ours. We just need to get through some of this seriously high supply!
Re: IP addresses. This type of blog program always provides the administrator with a log. It would just give the name and location of your ISP and your individual IP address. Sheldon wouldn’t know who you are personally, but he likely gets a chart and statistics, which map where the hits and blogs are orginating. The fact that the blog is anonomous is great. It means and open and honest discussion. If Sheldon and Laura were into censorship, they could block any IP address who disagreed with them or make posts subject to their approval. I applaud them for the way they keep this forum open.
Now to my main point: From my own recent experience, the market is still really tight at the entry level point for detached. I’m looking for a detached house right now and my Realtor is sending me everything that has been reduced to 320K and under in zone 27 and 28. Within days, all these reduced listings have been sold. I have three examples. 1.A 1980′s two story in Belle Rive on a zero lot line. LP299K SP286K 2. A 1975 1200sq ft Evansdale bunagalow on a small lot with/DAG. LP320 SP310. 3. A smaller 1986 Lago Lindo bungalow with single attached garage. LP 325K SP316K.
The market is still really strong at this entry level price point, which is just over 300K.
Hi Carioca,
I’ve read some of your posts on the other sites, and tend to agree with your viewpoint.
Just wondering how you know this:
“Investors own 45% of the listed properties for sale in Calgary (vacant and rented listings)”
I didn’t realize a breakdown of this sort was available.
Thanks,
-rj
Vacant units plus rented units (CREB stats)……it is a bit if an assumption to a samll degree, but quite frankly……the only vacant units IMHO are those that are owned by flippers……as normal folks usually live in their home until they move into their new premises, once their existing house has been sold. Rented properties amounts to some 7% of total listings.
Carioca what about the poeple who upgraded and held their current house in the hopes it would appreciate in value, but now have put it up for sale. Bob’s site says of the 38% vacant listings 22% of that is new builds. I don’t doubt there are more flipper house on the market than usual but there not all flips.
Micheal, all broad band systems use a semi-static ip address, meaning it rarely changes. If your on dial-up you probably still have dynamic address though. If your want proof, reboot your computer, modem, router a bunch of times and see if it changes, bet it doesn’t.
Well, we’ve never had a response to an article like this! Sheldon and I decided to let it ride yesterday, and not get involved in what seems to have turned into a back and forth screaming match. Like many, I do wish people could state their own opinions without the name calling and emotional outbursts, but I do also appreciate the opinions and the effort put into writing them.
I think the negativity we’re experiencing this week on the blog is due to a couple of factors, first, the overall public opinion on real estate in Edmonton is starting to turn – it is definitely not as negative as what we’re experiencing here though. Second, there are a lot of visitors from another real estate blog this week, a blog where they seem to enjoy misery and sincerely hope that not only the real estate market but the entire economy in Alberta explodes.
We do see a lot of exaggeration and probably false information in the comments on this blog and to be honest, Sheldon and I do not have to time to look into every post and find out if everything everyone is saying is right or not. We’ve contacted Edmonton Economic Development Corp., hoping that maybe they can correct some of the “facts,” we’ll have to wait and see if they call us back.
We also want to keep this an open forum, and unless things get really, really ugly, edit or delete comments. Do keep in mind that a lot of the people who live in Edmonton love this city, and are proud to live here. Also keep in mind this is the face we are putting on to the world, many people who are considering moving here read this blog, many people who are curious about Edmonton and Alberta read it too.
My final thoughts… a slow down/correction is a good, healthy thing to happen to the market here. It’s good for home owners and buyers alike. We are definitely looking forward to the normal markets ahead.
There is a fine line between being negative about the short term RE outlook and being negative about Edmonton.
After all, we all chose to live here and it’s natural for buyers to expect a price decline.
A lot of discussions on affordability. We are far from (and I emphasis, far from) the borders of affordability. In Vancouver, the salaries are less than Edmonton, and not as many jobs, but the prices are much higher.
Maybe I am wrong, or its my middle east mentality. In my home city (in an oil-rich country) the price of a SFD is about $600,000, where the average income of a Doctor is $1000/month and an average person would make $500/month. Even funnier: The bank mortgage is maximum $20,000 at 14% interest rate. Yet, the real estate market is very active (although homes by our standards are anything but affordable).
Thanks Carioca,
Seems like a reasonable assumption.
I wonder how many of these “investment” properties were financed using equity in a primary home in the same market? If prices decrease significantly, not only is the investment property at risk, so is the equity in the primary. Things could get ugly.
Thank you Sara! I’ve been reading your articles and this blog since our house has been on the market last August. Your articles are resourceful, however I agree that a lot of the comments we can do without.
I love Edmonton, and am selling my home in Edmonton to move to Calgary for a job transfer. In fact- I am already working in Calgary… but shacked up in the folks basement until my house in Edmonton sells!! I am not an investor or a flipper, just your average Joe. It is an interesting time right now, because although we really do need to sell, I am not that comfortable buying – a bit of a catch 22. But I’m sure that not all buyers out there have a futon to crash on in their parents basement either.
Listening to CBC Eye Opener on the radio yesterday, a real estate speaker in Calgary said: “If you have to buy- wait. If you have to sell- do whatever it takes.” This is a very frustrating situation for people who have to move.
Regarding the article Sellers Stand Their Ground: It’s true. Most listings in our neighborhood did not reduce their prices in the past few months, and the listings have now expired. I know for a fact that most of the expired listing in our neighborhood are the ‘market testers’ and the flippers. We have reduced our price 10% since mid-August. Being a ‘real’ seller right now, I can honestly say that we will consider going down 15% from original asking but that’s it- then it’s a rental property.
Ken: You’re on the other side of the fence from me right now, being a buyer in todays market, what would you consider ‘Entry-level’ pricing- and do you get the sense that a lot of buyers are holding off for a few months- waiting for the market to ‘correct’ itself??
JMAG spelled out exactly what many sellers are doing? Becoming landlords. I know of many who just said forget it I’m not selling now because offers are too low. I’m renting it out. They are not having a problem renting houses for $2500/month. My friend just did this and had a renter in 2 days who handed him $5000 dollars just like that? He didn’t even blink? I have also talked to some new home builders and I really don’t think they can lower prices much? Replacement cost is also affecting this market and new homes are not getting cheaper. I would be really interested in some more views from people who have moved here from out of province or country? Do you think we are insane or what? Its harder to be objective with this situation if you’ve lived through it all. Anyway – good points by all but you are not convincing me that Real Estate is overpriced here yet.
AA,
You should go over to the Alberta Bubble Blog and show them who the boss is.
AA i looked at rentfaster.ca out of the 159 available, only 7 rented for 2500 or more, most rented around 1500, where did you find your information, you see, when you say things that you can not back up, how do you expect to be taken, not trying to upset you, but you seem to be motivated by some thing else
Talking about renting out a house, I remembered that back in 2004, there was a house for sale in Eagle Ridge. Very nice one, with 1900 sqft main floor and 700 sqft 2nd floor. It was asking for $375k in the end, a 30% discount to similar houses at that time. Why? Because the house was owned by an investor in Vancouver and somehow he had some sort of argument with the tenant. The tenant painted “Asshole” on the garage door. The painting was there for a couple months while it was for sale. Guess that is the greatest showing condition.
AA:
On Craigslist, I see some seemingly average+ rental houses in Edmonton listed for less than $2000. Once you consider taxes, upkeep, insurance, and mortgage how much does $2000/mo cover… maybe $250k? What would one of these places supposedly sell for now… $400k?
I think there’s a rental/ownership gap, which => bubble.
AA, good luck finding many renters willing to pay $2500 a month.They are few and far between.
My company has a lot of international workers here on Visa’s and most can get a 2 or 3 bedroom condo/apartment for $1000 a month. Landlords are actually calling us and offering deals now. The rental market has opened up and landlords are competing for tenants.
I has been certainly most entertaining blog so far this month, I am totally enjoying it.
Apart from that, if people give the opinion on some serious question like if some one want to learn how to be successful homebuyer or investor, people should give more thought to that bring some creative thoughts. I want to learn as well how to be successful investor.
This has certainly been one of the more enthusiastic discussions here, though I could probably do without some of the more effusive overstatements on both sides. But hey, it’s the interweb, and overstatements are the stock in trade when one posts in reasonable anonymity, I suppose.
I’ll pose a question, though, for everyone, because it feels ignored to me. If defaults do come, and surely over the winter some will, should we expect that to create some upward pressure on mortgage interest rates as the banks attempt to recoup their losses? It looks to me that mortgage rates in the U.S., in the face of the bubble and the resulting credit crunch, have gone up significantly. Will we feel those increases even if the RE market manages to avoid a serious problem here?
I ask for two reasons – first, an increasing interest rate could bring about defaults that would have more downward pressure on prices, particularly from the heavily-leveraged. But second, I’ve been considering purchasing for a couple months now, with a healthy down payment and mortgage rate guarenteed for me through to the end of the year – not a large enough loan, but it might make for a reasonable offer on something by December. If the prices look like they’re still falling, I’m going to want to try to pick the right moment, and as bunny was suggesting, that might not be until next spring or later – I certainly don’t want my down payment to disappear as equity in a falling market. At the same time, the increased carrying cost of the loan might eat up any savings I’ll see in the prices, if I have to renegotiate at a significantly higher rate.
So I ask all the financially-oriented minds here, no matter what prediction you might have for the market: What factors could force a significant increase in mortgage rates right here? What downward pressures exist to oppose them?
Don:
From my experience in stock investing, never try to predict. The market is dynamic and thus unpredictable.
Just view it as a chess game, Don vs. Anti-don (which is the entire market minus Don). Don opens with E2-E4. Can Don predict a counter of E7-E5 for sure? Not really. It could be D7-D5, which is also good. Or even A7-A5. Strange, but valid nonetheless.
As an investor, you want to make sure that you know your game plan and don’t worry too much about predicting your opponents next move.
As for bunny vs. Edmonton RE, it’s fine if the average price shoot up to $500k by next spring. I will know there is a much greater chance of a hard landing, given that the US is declining (i.e. less fuel consumption).
Excuse me while I fil the holes where the goalposts used to be.
“New Builds”…….what is that code for ? Some new “realtorspeak” term ?
More like fools who bought pre-construction properties on “spec” and can’t rent them so they’ve listed them. It doesn’t matter what they are called or who owns them…..they are nothing but vacant listings…..and vacant listings have to be owned by someone…..if you’re not living in it…..you’re speculating with it.
Plain and simple.
Now a quick comment ont eh rental amrket…..there are lots of places here in Calgary for $1000-1200 or so…..a hoard of them at $1500 that are vacant and have beenvacant forever….and next to nothing above that.
No one pays $2500 rent…..you can buy for that…..but not that you would in this market….that would be crazy.
Like I say, bunny, I’m not trying to predict what the market will do, so much as trying to put a finger on the cause and effect of mortgage interest rates. To take your metaphor probably beyond its breaking point, all the Ruy Lopez preparation in the world does me no good if the world comes c5, but I can only memorize so many lines. If I know some of the Sicilian principles, I can muddle through even if I don’t have every variation mapped out. I’m trying to prepare for as many openings as possible by knowing the principles behind them.
Don, unfortunately with RE, we don’t have a cookbook. We know the legal moves, but we have never played out the many types of openings in our leisure time.
Back to topic. This recent RE boom across the entire world is caused by a loosening of loan credit by the US Fed, to bail out the high tech bubble. According to RBC research, 10 year ago, the average family earning $100k per year would have a total debt of $190k. Now, a family with the same earning would have a total debt of $410k.
With the recent credit crunch across the entire world and investors refusing to buy mortgage-backed bonds at a low rate, will the banks allow that number to grow from $410k to, say, $600k? Unlikely if you ask me.
Without a further loosening of credit, the current construction boom will cool off and commodity prices may come down after Bush steps down (i.e. less war spending).
For the rest of the world, it’s likely a soft-landing. For the resource heavy Alberta, it’s either a double boom in a good time, or a double bust in a bad time.
I know this article is out of the Calgary herald, but i am curious as to what peoples take on this article about a high end condo market selling out last weekend.
http://www.canada.com/calgaryherald/news/calgarybusiness/story.html?id=72437d81-7bef-49a5-b152-d6a3852cd85f&p=2
gregg, I’m deleting your comment. chill dude.
Smokey, sell outs are not always what they seem to be. Especially the time lines. Project sales are sometimes elongated processes the fact of the matter is its nearly impossible to properly do the paperwork and logistical issues with a large sell out in one weekend.
If its important to you it merits further research.
I visit a few BC real-estate sites and forums and we’ve been seeing a lot of Condo sales reps astroturfing and fudging information to hype projects.
Definitely best to look at those types of condo pumps with a bit of skepticism.
Regarding the “sell out” of the Calgary condo project planned for completion some 2-3 years from now.
It is a sham and a lie. These all are. As we have roughly 11,000 properties for sale in Calgary (which we do) why would this condo sell out when there are others available “today” just like it in our city ? Think long and hard about that. We have about another 5-6 towers under construction downtown.
I have sold cars to condo developers, and while I won’t mention names here, Sheldon is welcome to e-mail me privately for those. I have been in the high end luxury car game here in Calgary for 19 years now and pretty much know everyone or know about them.
They get their friends and long time investors together to sign on for the units at greatly reduced prices in order to give the impression of a “retail” sell out. The developer then has sufficient deposits and contracts to take to the bank to get the construction loan started…..and off we go. There is no sell out to end users…….and only a sell out to end users is what would give us a sign of a healthy RE market.
Just look at all the projects in Calgary right now that have been “sold out” long ago but have fully operational sales offices, consistent advertising and available suites. If they were truly sold out this would not be the case…..as to do so would be a wasste of money. Why advertise and have staff if you are “sold out” right ????
But they are not…….
The Calgary Herald publishs 3-4 RE sections with 5-20 pages each, every single week……at roughly $5K per page…..you do the math……$1MM a month in revenue directly from RE. They have a vested interest in continuing to shill for the RE market…….and shill they do. Some of there reporting is outright fraudulent and dishonest……just like this article.
just wanted to share an article referenced at bob truman’s site in calgary…
Canada Dollar Dominance Shows Break With U.S. Dollar (Update3)
By Haris Anwar
Sept. 17 (Bloomberg) — Currency traders are concluding that there’s nothing the U.S. economy can do that Canada’s can’t do better. Much better.
The U.S. and Canadian dollars, which traded in tandem 94 percent of the time since 2000, decoupled in May and now have diverged for the longest stretch this decade, according to data compiled by Bloomberg.
While the worst housing slump in 16 years threatens to slow U.S. growth, record oil prices and rising costs for copper and zinc are boosting Canada’s exports and allowing the government to balance its budget. Energy accounted for 19 percent of Canada’s exports this year, compared with 12 percent in 2002, government data shows.
“Canada is in a very strong position,” said John Taylor, chairman of New York-based FX Concepts Inc., which manages $12.1 billion in currencies. “Its economy has significantly diverged from the U.S., and it’s got all those things the world needs. My longer-term bias is that the Canadian dollar would be stronger than the dollar.”
Canada’s currency, nicknamed the loonie after the image of the national bird on the one-dollar coin, has risen about 4 percent against its U.S. counterpart since June 12 amid growing speculation that losses related to U.S. subprime mortgages would prompt the Federal Reserve to cut interest rates.
Of the 16 most traded currencies, none has done better than the loonie’s 13.5 percent gain against the dollar this year. It reached a 30-year high of 97.66 U.S. cents today. The currency has rebounded from a low of 61.80 cents in January 2002.
Diverging Currencies
Futures show hedge funds and large speculators are raising bets that the Canadian dollar will extend its gains. Investors held a net 58,754 contracts on a rise in the currency as of Sept. 11 on the Chicago Mercantile Exchange, up 14 percent from the prior week, according to the Washington-based Commodity Futures Trading Commission.
The U.S. and Canadian dollars rose and fell against the euro in similar patterns 94 percent of the time since the introduction of Europe’s single currency in 1999 until May. The Canadian dollar has mirrored the euro’s gains against the U.S. for more than three months.
The currency climbed 2.4 percent last week amid speculation in the futures markets that Bank of Canada Governor David Dodge will hold the key lending rate at 4.5 percent this year, while the U.S. Federal Reserve cuts its target for overnight loans between banks from 5.25 percent.
Two-year Canadian bonds yield more than Treasuries for the first time since 2004, adding to the currency’s appeal.
No Escape
Canada can’t escape a slowdown in the U.S., said David Mozina, senior currency strategist at Lehman Brothers Holdings Inc. in New York, the world’s fourth biggest securities firm by market value. He recommends selling the Canadian dollar against the Norwegian krone, the Japanese yen and the Swiss franc.
“It’s a matter of time before the negative events spill over the border,” said Mozina. “The monetary policy is joined at the hip. It’s a matter of time when people start penciling in a rate cut by the Bank of Canada.”
In the meantime, rising prices of oil, copper and gold are fueling Canada’s economy and reducing its reliance on U.S. manufacturers. The oil sands in Alberta contain the largest crude deposits outside the Middle East, and Canada is the world’s No. 2 producer of nickel and zinc.
Oil, Zinc, Copper
Oil trades near $80 a barrel compared with about $30 at the beginning of 2003, while gold has doubled to more than $700 an ounce. Zinc prices have soared over the same period to about $3,000 a ton from $750. Copper for delivery in three months costs about $7,500 a ton, compared with $1,600 four years ago.
Auto-part exports mainly to Detroit-based General Motors Corp., Dearborn, Michigan-based Ford Motor Co. and Chrysler LLC of Auburn Hills, Michigan, accounted for 17 percent of Canadian exports, down from 26 percent in 2000.
Canada’s economy is set to expand 2.5 percent this year, outperforming the U.S. for the first time in five years, according to a Bloomberg survey this month.
“Canada is a current-account surplus country. Its fundamentals are sound,” said Samarjit Shankar, director of global strategy for the global markets group in Boston at Bank of New York Mellon, the world’s largest custodian bank, with more than $20 trillion in assets under administration. “Global investors are not cutting and running from their Canadian exposure. That suggests that the Canadian dollar should remain well-supported.”
Loonie Parity
Shankar predicts that the loonie will achieve parity with the U.S. dollar early next year.
Rising tax revenue and energy royalties have allowed the Canadian government to post 10 straight budget surpluses, the only country among the Group of Eight nations with a balanced account. Canada’s total consolidated revenue rose 25 percent during the past five years to C$601.26 billion.
The government has used the excess to pay down about C$90 billion in debt over the past decade. The U.S. had a budget deficit of $318.6 billion last year.
“The Canadian dollar has held in much better than many other currencies,” said Eric Takaha, who helps manage about $160 billion at Franklin Resources Inc. in San Mateo, California. “We’ve been constructive on the Canadian dollar, and will hold on to our long position.”
To contact the reporter on this story: Haris Anwar in Toronto at hanwar2@bloomberg.net
The uneducated comments coming from this blog blows me away…
Kendal:
Why don’t you educate us instead of complaining and provide us with your own insight…..
the fearmongers out there will be proven wrong in due time.
Alberta has an unemplyment rate of 3,4% right now. Sure we ship half of our oil down south but still…China and India want our oil.
Edmonton still sold over 1000 homes last month. Is that what a bust is???
People move here to work.That is not indicative of a bust. All stats and figures do not indicate a bust. CIBC, RBC and TD all project growth here for Alberta…The prices of homes in Toronto and Vancouver are far higher than here. Where’s their bust? Why would Edmonton crash? Did we just ran out of oil?
Are people moving away to find work in Ontario and the Maritimes? (sarcasm)
Come on posters. Give yourselves a shake.Get real.
If anything, a lower price will attract more people!!!!
If anything, a high price (as it is now) will drive away people!!!!
BTW, China and India won’t be able to afford much oil, if the US goes into a recession and the Americans buy less of their crap.
Bunny:
Who are you, what is your background and what is your job to be able to post insane statements like yours?
“If anything people will move away”… that is a discredit to yourself.
China and India can’t afford much oil? China is refining in Iran, in Sudan and Nigeria, among others. The reason that China is sending peacekeepers to Darfur is to highten their influence there against the SLA and to help protect their $10 billion+ investments there in the oil sector.
You have not researched this claim of yours. Another lack of credibility on your part.
Enough time wasted on you.
Thanks Ray,
I totally agree with you, is bunny trying to say that America will start consuming oil, and anything from india and china, I laugh at his logic, people don’t start, eating drinking and wear clothes and driving cars, America will still need everything, and America will not be in recession forever. Time to wake up. and india and china do not depend on America, there population is enough to drive their economy. grow up child.
-Actually, I just heard on CBC radio that unemployment is now 4% in Alberta.
-If 1000 houses sell but there are 10, 000 on the market…then only 10% have sold…that doesn’t sound great.
-How can you compare Edmonton to Vancouver or Toronto? Where’s Edmonton’s mountains, ocean, mild temperature, culture, night life, shopping ext. and Edmonton can’t even boast a low crime rate, easy access to health care, good roads, good service or affordable housing.
- A report by the Parkland Institute (I believe) found that Albertan’s make 5% less on average then they did 5 years ago due to inflation ext.
I’m sick of people calling those that are looking forward to the end of boom, doom sayers and fearmongers. I think this boom has been really hard on a lot people.
Ray:
“Edmonton still sold over 1000 homes last month. Is that what a bust is???”
It may not be a “bust”… but its certainly trending downward. Monthly sales are the lowest they’ve been in 5 years. Inventory is the highest its been during that time, with (apparently) lots of new places due to be finished. Real estate is currently priced at speculative levels and the financing behind some of that real estate may not be very sound. Most (all?) who’ve bought in this year with the intention of flipping must be taking a beating. It looks like substantial price cuts are in store, which is not a bad thing.
Ray,
U.S. is by far the largest consumer of oil. Their market is much more important than China and India. I do recognize that China and India are important growth markets but we are still very dependent on the US.
http://www.nationmaster.com/graph/ene_oil_con-energy-oil-consumption
Now I have to qualify this because I don’t wan’t to be labelled doom and gloom evil bitter renter. I am posting this to challenge the idea that economic activity only occurs in Alberta. I dont think this is a widespread trend however.
Hebron project could lure some Alberta workers back to Newfoundland
http://dcnonl.com/article/id24323
Sask. continues to gain people from Alberta: StatsCan
http://www.cbc.ca/canada/edmonton/story/2007/09/27/saskatchewan-alberta.html
“Edmonton still sold over 1000 homes last month. Is that what a bust is???”
A 45% year on year sales plunge combined with all time inventory looks like a housing bust. Yes. Not necessarily an economic bust though.
“Why would Edmonton crash? Did we just ran out of oil?”
Just because there is oil in the ground does not prevent people to overbid on housing during a frenzy. Im not in the camp that thinks that 2002 prices are ahead, but i can definetely see a solid 20% haircut followed by weak growth. Some properties much more.
ray said
>>Who are you, what is your background and what is your job to be able to post insane statements like yours?
“If anything people will move away”… that is a discredit to yourself.<<
If you can claim “If anything, a lower price will attract more people!!!!”, why can’t I use the same line of logic and claim “If anything, a high price (as it is now) will drive away people!!!!”?
I see much parallel in the two statements.
Whether your statement sounds more reasonable than mine, people will judge for themselves. You don’t really need to try so hard and claiming I am “insane”.
Just to clarify my own idea of boom and doom.
A true boom would be that the salaries are increasing and the housing(or anything else) price is declining. Since most would want to move up to a larger house, this won’t hurt existing homeowners.
A true doom would be that the salaries are decreasing and the housing(or anything else) price is ascending. People may have more paper money, but they don’t get more purchasing power.
Of course, it could be that the salary level and the housing price moving in the same direction. That’s more delicate.
There is a difference between expecting your cash to retain some purchasing power and wishing others ill, which I don’t.
But, of course, if you are flipping condos, you are on your own risk. My words won’t change your investment any bit and we don’t even need to start a conversation.
well if you are not happy with Edmonton, there is a highway that will take you to ontario. Housing should be cheaper there. Plus they won’t refuse to provide new arrivals with welfare payments since there are little work there.
win win.
Anyway, I own my nice house here in Castlewood. My family is super happy, I have a communiuty lake in front of my place, it is a dream life in the burbs. I am happy. I also paid a lot for my house. I am very happy in the end.
So all you nay sayers, envious and fearmongers can keep being unhappy.
ray,you are obviously not happy.i have things to gain after the prices crash, sounds like you have things to loose, or else why would you post with such emotion
whatever. you people keep bashing alberta. I actually love it here, I will thrive here.
this is not an Alberta bash site. this is my last post here. there is no crash what so ever. If you are not liking it here just leave.
Humans are dumb.
i have lived in Calgary my entire life, who is bashing Alberta, you are not an Albertan, how ever you will soon realize how Alberta works, boom bust baby, and i aint talking about the oil industry, just the housing scam
Economy looks good, i wouldn’t worry about a US recession. Dow and S&P500 are at all time highs so market is saying let the good times roll! Same with Alberta, oil is over $80, wheat is at 25 year high, unemployment is at 33 year low, dollar is at parity. Short term interest rates are not going to raise in the next quarter to two thanks to a 50 basis point cut by the US fed. But I’m not sure what to make of this high housing inventory. Sure some of it is seasonal, but still its abnormally high. The other thing is there hasn’t been a price collapse. So I’m thinking there are people testing the market by listing, after all it doesn’t cost them anything. Also, the profits are too tempting. A $200K house a few years ago is now over $400K. Thats a $200K gain tax free, not bad! So for these folks they are not going to sell at rock bottom prices. They will want at least as much if not more than what their neighbor’s home sold for. So if this is the case prices won’t go much lower, but also prices won’t go much higher either until this inventory glut is soaked up. Any one else have any other theories on whats going on?
Ray brought up a fantastic point about the correlation between homeownership and having a profound sense of happiness. To prove this i will put forward a couple scientific papers on the subject.
http://recenter.tamu.edu/TGrande/vol9-4/1588.html
“Homeowners rated their life satisfaction significantly higher than did renters responding to the same poll. Moreover, homeowners’ satisfaction remained higher in a follow-up survey three years after their home purchase.”
http://www.sfgate.com/cgi-bin/article.cgi?f=/chronicle/archive/2006/01/29/REG8SGSU7I1.DTL
“You are happier and more satisfied with your life your children are better educated and less likely to get into trouble your daughters are less likely to become pregnant as teenagers you vote more often and are more active in your community you are more likely to recycle and less likely to get mugged.”
And finally,
http://anythingbutsad.files.wordpress.com/2007/07/kool-aidman.jpg
ian, just remember, the oil was at about CND$90 last year, and CND$80 now. And the cost of retrieving that oil is increased slightly.
Or, if you prefer to use USD as a standard, then the oil went up from $78 of last year to $81 now. And the cost of retrieving Alberta oil is increased drastically (i.e. more than 20% cost hike on everything).
Ian:
“So I’m thinking there are people testing the market by listing, after all it doesn’t cost them anything.”
You may be right, there may be a lot of people testing the market. Although this raises the question… where are these people expecting to go after they sell their homes? They don’t realize that profit if they’re buying a bigger house in the same market. If they’re becoming renters, its because they have recognized the current gap between the cost of ownership and the cost of renting (which is indicative of a bubble). If they’re prepared to move away from the city because its more economically effective to live elsewhere, that doesn’t speak well for Edmonton’s future growth – at least at the current price of housing.
The speculators are a different story, of course. But the problem there is that most can’t afford to sit on properties waiting for a market rebound. If, for example, I pre-bought a home from a builder earlier this year, and the home has just been completed, how long will I be comfortable paying out mortgage, tax, insurance, etc waiting for the market to rebound? Almost all of that is expense, directly off the expected return of this “investment” property. Even with renters, in most cases I can expect a substantial negative cash flow on the property for the foreseeable future. Most speculators can’t afford this, and even those that can will eventually recognize that its likely better to cut their losses now then wait for a “miracle” rebound in the spring.
So, it seems that even a short period of no price increases is going to take its toll on the speculators, who seem to be driving the market. Once they start getting chased out, we’ll see a return to a more fundamentally-based market and less on hype. How far below the current pricing levels that is, I don’t know. Although I think MLS listings for Winnipeg are a more useful predictor than those for Vancouver.
-rj
does it really matter if the cost for getting oil out of the ground is higher? Put it this way, say cost increase by 20%, so someone making $50/hr last year is now making $60/hr this year. Guess what, he now has more money to spend! Cost increases for goods and services just mean that someone is making more money, and ultimately those dollars then get recycled back into the economy. If there wasn’t cost inflation then the oil companies will get more profits and again ultimately those dollars will get recycled back into the economy. What really matters is the price of oil and will that price be sustainable. We are still in an up trend so I say yes. Higher oil prices means that what was previously uneconomic to produce now becomes economic. If its economic then oil companies will want to start a project to recover that oil. So more consumption of goods and services, which means more people, more people means more housing required.
Ian,
I totally agree with you, the Oil will be around $100/barrel at the middle on next year according to the economists will stay there for the rest of the year. I am an engineer and working with EPC company as an Estimator, I know the companies need Oil prices around $40/ Barrel for their new investments and expansion projects and $30/ Barrel for running and operation of their plants, the current prices of Oil are $80/ Barrel, way high and they are making millions of dollars in Alberta.
Government knows about it thats is why we are seeing Royalty issue came in the market. I have heard about 1980s gloom where Oil prices went down around $ 8/ Barrel in world market and NEB was major issue, this will not happen again becuase energy demand is increasing day by day in the world. So these companies have very high rate of return on their investment, sooner they install / expand plants earlier they recover. Now discuss about wages, I have moved from Toronto at the end of 2006, I was earning around 70K+ there and now I am earning aroung 110K+ here with same job level, Alberta is way higher in wages, and comparing housing prices with Ontario we are still lower than Toronto even with higher affordability. Actaully we were sitting way below with rest of Canada, first we made that gap and then demand increased, increased the prices in just two years about 50%, it is hard to believe for most of the people, price will definitely increase next year, becuase demand is still there and people are still moving here in Alberta. I too purchased a house in Feb. this year after doing all my research. I am an immigrant here, in our home country the prices of real estate also increased three times in just three years from 2003 to 2006, three time means about 150% increase, people were hoping that prices will go down never happened and most of the people didnt but in that hope.
One has to do all research before putting negative comments on the blogs becuase it hurts so many people.
Let me add some further prospective…Upgrader alley in Ft Saskatchewan alone has the following projects lined up. Shell upgrader expansion $27 billion, Synenco Northern Lights upgrader $3.5B, Northwest Upgrader $5B. So $35.5 Billion getting pumped into the economy. To put that in more imaginable terms, I’m going to say that there are 355000 households in edmonton. That equates to $100 thousand for each household. Now imagine each household has to spend that $100 thousand. They can buy whatever they want be it a new truck, plasma TV, home renovation etc, the only rule is that they have to spend it, they can not save it. Well that is how much spending that is happening in upgrader alley alone. Granted not all of this will be spent in Edmonton and area or for that matter Alberta or even Canada but some of that money will find its way into the housing market.
you need to be a little more accurate, scotford is 4 billion
northwest is 4 billion
syneco is a no go at this time,
so thats actually, 8 billion, but the massive upgrader expansion at petro can will be winding down as those projects ramp up, believe it or not, thats the way they plan them
i must correct my self, the heartland upgrader is basically at a holding stage as they look for a financial partner
tommy
look up Shell’s regualtory filing on their website. $27billion comes straight from their application. Regardless of the number, its a lot of spending. Also Petrocan’s Fort Hills project was also looking at upgrading in Upgrader Alley. Over all project spending was over $30B, not sure how much of this is for the upgrader.
Ian over how many years,is it not the next 20, maybe you could provide a link, they work better then opinions
how much did edm property increase when they built the massive exsisting upgrader in 2001-02, that project was 8 billion all at once, did your re prices explode
Hi all,
Analysis anyone? I guess we are “unusual” in that we are both buying and selling. What should we do?
We have a townhouse downtown which we’d like to upgrade to a small house. We found a nice little house. We looked into keeping both. The financing was too intense. So we’re making our offer to buy subject to sale of the townhouse. That is smart in the sense that with 8000+ units on the market, prices can only go down (according to supply-and-demand, right)?
I’m trying to interpret the first graph Sarah posted. In 2005 inventory was relatively constant (around 3800-4800 units for most of the year), and so were prices (in the $200s). Maybe this is kind of a “real” price (ie. balanced market where first-time buyers can get in). And maybe that’s approximately where the market has to go before it balances, to approximately those prices (adjusted for inflation). And then after there was massive immigration (thanks O for the link) into Alberta which fed the investment frenzy. Some people are leaving, there are some local megaprojects going, so let’s say those numbers “balance out” (meaning, supply and demand takes place in the labour market too, and there is no change in the number of potential house-buyers, big assumption – anyone have stats?). So you’re still left 4000 units as we go into the winter.
Who will buy these units? They’re just still too expensive for first-time buyers. So, they a) will get rented, or b) will be sold at reduced prices or c) will just sit empty. So regardless of boom/bust (assuming neither, if possible), it seems that two things are sure to happen, rents will go down (somewhat) , and house prices will go down (more). This will only not be true if there is an increase in demand, which could only come from increased immigration into Edmonton. So the question for us is, how long will these dynamics be in place?
It’s not just hypothetical for us, because we would like to upgrade to the house. But with little prospect of selling the townhouse, can we? We are already “priced to sell,” which I now understand means “lower than everyone comparable.” Still no interest. Do we keep dropping the price until there is interest, and hope other prices (of houses) have also dropped by that time (and go for a longish possession date to make that more likely)? If we keep dropping our price five thousand a week until it sells, it will surely sell. And then we would buy somewhere further down. But that would take some real spine, and a little good luck too. Hmmm….
Thanks in advance for your acts and arguments.
properties wont sell now no matter the price,there are nooo buyers
It’s the calm before the storm…
Hi MC,
I agree that prices are on their way down, perhaps significantly. So for those already in the market, “buying up” substantially is probably not a good idea. For example, if you’re looking at a place that is $200k more than your current one, waiting for prices to drop 20% (for example), could save you $40k. A return to 2005 levels could save you more.
I don’t know whether trying to get a price for your townhouse now and waiting a month or two to buy will work… in theory it sounds like a possiblility, but in practice, there may be too many timing issues. Perhaps someone on the blog with more experience can help here.
Finally, if you firmly believe that prices are headed downward, maybe you should “lock in” your gains and sell your townhouse (albeit at a lower price than you were hoping far), take advantage of one of the decent rental opportunities that are out there (ie rent a house for substantially less than the cost of owning), bank the extra cash that would otherwise go into ownership, and see where the market is at in six months or a year. Some nice benefits here: you get to live in a house now (admittedly not _your_ house), you can presumably bank a bit more for your downpayment, and when you re-enter the market you will be able to do so without conditions on selling your own place (and thus perhaps drive a bit better deal for yourselves).
Of course the downside here is that if what we’re currently experiencing is just a blip, and the market does go up significantly, you could find yourself “priced out”. The current inventory levels make me think that this is unlikely, but you never know…
-rj
Gregg, I don’t agree with you. Of course properties will sell, at the right price. For the average SFH in Edmonton, you are not going to buy at $1 million. But are you going to buy at $1?
Thus, between $1 and $1 million, there is a market price.
“Gregg, I don’t agree with you. Of course properties will sell, at the right price. For the average SFH in Edmonton, you are not going to buy at $1 million. But are you going to buy at $1?
Thus, between $1 and $1 million, there is a market price.
Posted by: bunny ”
Really? Wow. No more comment reading for me.
Hi,
Thanks rj for your thoughts. I’m thinking there are no “experts” out there… The scenario you laid out is exactly pretty much the one we’re contemplating – although we wouldn’t be buying up that much, only about 10 or 20%. We kicked ourselves for not cashing in and renting in May, but maybe now it’s the same situation except there are more rental properties around.
Kendall, I think you’re being harsh with bunny. bunny point is extremely important – we *could* sell it tomorrow if the price were low enough. Then it’s a gamble that things go even lower….
How do you judge that?
I was really interested in the conversation (which I interrupted) about major projects going on…
Nabil,
The prices of Toronto area will certainly be higher than edmonton but what about greater Toronto area..you can still get very reasonable stuff in suburbs and here you cant get anything more than 1200 sft in the same price range.
TH:
I agree prices in the suburbs are ridiculous. Nobody will pay them especially with this huge inventory.
Going forward I see them taking a huge hit and more desirable areas going down but holding more of their value.
If inventory stays like this look for a big gap down in November through January (a reverse of what happened last year).
I will admit there are some signs that seem to point toward falling prices. However the lack of other signs confirming the story the statistics seem to be telling is odd. The talk of a market meltdown is almost funny? I have the feeling that this is one of those times when everything that should happen just doesn’t? You may be very surprised at how well this market hangs on to its recent gains? Flippers have done some damage and prices will fall some but not nearly as much as everyone thinks.
To all the people telling me people don’t rent for $2500. I just made that up! Yes I am sorry for that. I know you wanted to hear that but it is not true. $2500, $2400 and $1500 are 3 confirmed renters! Do you people actually think I have nothing better to do than make up this stuff? The $1500 house for your information is 50 years old and only a 2 bedroom up 1 down, it does have a large 2 car garage though which people seem to like. When the last renter was moving out people were actually stopping and asking the former tenant if it was for rent? Look I have never had that happen before in 10 years of renting it so I really don’t see the rental market being soft? What planet are some people here on?
There is no doubt there are many factors that could change what is happening in Edmonton. It is clearly speculation for anyone to claim we are going to crash and burn as well to claim it will go up. Some data may seem to be showing a decline in prices but there is other data supporting a continued rise in Edmonton real estate? The inventory and sales are interesting stats but these could be misleading and can change again just as fast as they have already done more than once in the last few years.
DEAL OF THE CENTURY !!!!!
Hey maybe prices are falling?
This house is a 2 bedroom new build for $4700?? You read that right 47 hundred dollars! I’m not making this up!! Maybe we should all buy one? Give it a minute to load it is a slow link?
http://www.tiny.cc/RVrmI
sorry Alberta Advantage, but the trend is down. Try listing your property right now in Edmonton at “market value”. It’s absolutely crazy out there right now. I just listed my condo only to be undercut 10G by your neighbor who decided to list his/her place a few days later. My advice for sellers right now is to pull your property off the market unless you absolutely have to sell!! I just pulled my listing and my upgrade plans are on hold. The market has done a complete 180 in 3 months! It’s absolutely amazing that in May 2007 an army of buyers would have been lined up to buy my place and now there are no offers. The herd mentality rules in this town. Either everyone is buying or everyone is unloading! Amazing! It is the herd mentality like nobody has ever seen before. We’re getting our butts kicked in Alberta right now, however the Vancouver market is still very steady and strong. 350K can’t even get you 500 square feet in Yaletown these days and the buyers are still lined up!
correction: my neighbor undercut my price by 10G