If you read back over the past few months, you’ll see that Sheldon and I were a bit surprised that prices were holding as strong as they were, given the sheer number of homes for sale in Edmonton. Well, I think the average price has finally caught up with the market.
What’s interesting, is that this has occurred at a time when the numberof sales are improving, and inventory is dropping. So, we’ll have towait and see how the improved sales will affect the average in a month or two. As for November ’07, sales appear to be within the norm:
The sales to new listings ratio puts us back into a balanced market, which will have an impact going forward:
As we’ve mentioned in previous posts, good listings are selling quickly, and we’ve had more than one buyer miss out in the past week because someone else moved quicker on a good listing.
To keep things in perspective, here is the average price per year for Edmonton:
In summary, our thoughts are that the drop in average prices this month is more of a reflection of prices over the past 3-5 months than a one month slide. I think listings that were on the market in the summer, and have chased the market down for months in order to sell, have now sold below what they could have gotten if they’d priced correctly in the first place, and have brought down the average.
For months people have speculated about a great unwinding in the market, and that just hasn’t been the case. They’ve pointed at credit crisis, royalty reviews, fluctuations in the stock market and more as reasons that this market isn’t viable. Time and time again, they have been proven wrong. Even with CIBC announcing Edmonton is the best local economy in Canada, and with other strong fundamentals, it comes down to supply and demand and the affect that has on consumer confidence.
"Tis not good nor bad, but thinking that makes it so." Shakespeare.
We’ll have more analysis on absorption, time on market, types of listings and more throughout the week.
Great analysis Sara, thanks for the quick posting.
Something must be really sick about this city,I mean people coming here in flocks,there is no(or almost no) place to rent and yet,that(relatively) few property purchase,that taking place(could be 2-3 thousand a month)even that is at a highly discounted price.
Meaning 10,20 30 or more thousands
below the asking price.
If prices are not stabilize or going up now,than when will they be? I mean jobs are here NOW, newcomers are ARRIVING as we speak and not in the spring, but RIGHT NOW, to rent anything is hard to find NOW etc. so prices should go up NOW and not 8 month from now as some says.
Do you understand,what I’m saying?
The good time is here NOW and not on the way next year and the year after.It’s never going to be better,ever.We are really the number one NOW in the whole nation.It was in todays news.
And now, we take a $25.000 price reduction in real estate.
Can you believe this?
Sara,
Thank you for the stats. While I may not always agree with your posts, I always appreciate the effort you put into them.
“For months people have speculated about a great unwinding in the market, and that just hasn’t been the case. They’ve pointed at credit crisis, royalty reviews, fluctuations in the stock market and more as reasons that this market isn’t viable. Time and time again, they have been proven wrong”
I’m not sure what you mean here. We’ve just seen 5 months of steady decreases (7 months since peak), and now the biggest monthly drop yet. Inventory may be down from last month, but its still higher than it was in July (when prices started decreasing), and 2-3x what it was during most of the runup since the beginning of 2006. It looks pretty likely that we’ll see YoY nominal price drops by February. If this isn’t an “unwinding”, what is?
“For months people have speculated about a great unwinding in the market, and that just hasn’t been the case….Time and time again, they have been proven wrong. ”
The International Monetary Fund defines a housing bust as something that happens when housing prices contract by 14% or more.
Are we there yet? Nope, but me thinks we’re getting close.
BTW, for those who want some historical perspective on housing busts, refer to the IMF Report entitled “When Bubbles Burst”.
http://www.imf.org/external/pubs/ft/weo/2003/01/pdf/chapter2.pdf
Food for thought:
Single family price Nov 07 is $376
Single fam price Feb 07 was $375
Duplexes: Nov 07 $311
Feb 07 $319
Townhouses Nov 07 $252
Feb 07 $247
This is near close to the beginning of the year!
I am going back right on the fence for now. But man my bum is sore.
Karl,
There’s a lot of inventory on the rental market and the cost to own is almost 50% higher (not including maintenance/taxes) for condos/apartments.
My company imports a lot of workers from the rest of canada and overseas. It’s shocking how much more choice for renters in this city there is, compared to 6 months ago.
Economy, jobs.. it all factors into supply and demand. Right now, investors have mostly fallen out of the demand group. They were probably the majority during the runup. So expect supply and demand to drop market values until it’s a tempting investment once again.
Check out that graph of “Average Price Per Year”
Now if that doesn’t scare you off, I don’t know what would. Who wants to risk a half million dollars buying at the top of that chart, hoping it will keep going up. Not me!
That chart is a straight up vertical line at the end. That’s a fall waiting to happen if I ever saw one.
Seller’s are losing the battle of the minds. It just doesn’t make sense to buy. It’s a bubble. Just like the tech-bubble. A buying frenzy too good to be true. It’s time for speculators to ply their craft somewhere else (and get back to work).
I will likely buy a house when Alberta Advantage stops posting. It is totally obvious that he continually feels the need to pump the prices of houses. In a normal market, house prices should not require ‘pumping’ or additional marketing to sell.
Very hard to analyze the market right now… look at this:
From Oct/07 ==> “duplex/rowhouses were up 18.7% and sold for $367,964 on average (just 55 units sold)”
From Nov/07 ==> “duplex/rowhouse prices were down 15.4% and sold for $311,193 on average”
This type of property in my area that are listed (and sold) have not changed their prices at all.
Simple logic.
If the economy is number #1 in Canada and house prices are decreasing, how can Alberta ADvantage substantiate these numbers?
I’d like to hear what he has to say (aka spin) about the recent stats.
I think this graph is interesting in relation to the comments by the EREB today in response to the price decline.
http://tinyurl.com/2jebmh
It tracks housing prices in the UK along side comments from the UK Realtors Chief Economist. It is interesting to look his comments echo those of the Edmonton Real Estate Board in the face of falling prices.
To quote…”As we move into the spring with a more normal inventory, we expect that prices will again begin to rise slowly”
Almost identical to what was said by Lereah a couple of months from the peak of the “bubble” (ie. point two on graph). Quite scary. I won’t be fully convinced that we have seen the end of housing prices falling until the eternal bulls start to sound at least a little pessimistic.
Sara,
I will start this off by saying that i do enjoy this site and do enjoy Sheldon and your view on the market. But I need to take you to task on this posting. I almost feel like this blog entry has not been written by you or was heavily edited by EREB.
“For months people have speculated about a great unwinding in the market, and that just hasn’t been the case. They’ve pointed at credit crisis, royalty reviews, fluctuations in the stock market and more as reasons that this market isn’t viable. Time and time again, they have been proven wrong. Even with CIBC announcing Edmonton is the best local economy in Canada, and with other strong fundamentals, it comes down to supply and demand and the affect that has on consumer confidence.”
I am by no means an expert and will not pretend to be BUT I think the “great unwinding” is here.
May SFD average selling price was 426 028. Steady declines to November’s SFD average selling price of 376 267. That is a 49761 fall from the peek in 6 short months. According to MK the number is 14% house price contraction equals a bubble pop. The above numbers puts us at 11.7% decline in six months! I don’t think the great US house unwind is happening this fast.
The CIBC announcing Edmonton as hottest local economy is not a good thing. I read that as our inflation is running away on us. Inflation in Edmonton is damned near 6%…. not healthy. Wages for 99% of Edmontonian’s are not keeping up to this runaway freight train and we all know how safe the tracks are around Edmonton
As you say, it comes down to supply and demand, but i don’t think I took the same econ classes that REALTORS take. Supply sitting at 8600MLS, 3000 comfree, and approx 9900 housing units under construction, looks very ugly when compared to demand, the very meager sales of the past few months.
Again no expert, but I have a strong feeling the inventory that has gone away in the past couple of months, due to de-lists, will be back with a vengeance come feb and mar. So this magically spring rebound that EREB says is coming…. I just don’t see it in the cards.
So 50k off peek prices so far and I still think there is 100k to 120k to shave off till we are back at what I would call the right price for Edmonton.
I am calling it as I see it. Again I am no expert in this field … just a computer nerd by day.
Cheers,
Sean
The Edmonton real estate market reminds me of a junior penny stock. Pump the living crap out of it and when the MM’s have sold all their stock, down she crashes as fast and hard as it climbed on the pump.
Nice post Sean.
I think the one thing people need to remember about supply and demand is that for any normal good, demand is always downward sloping…I’m sure anybody who has ever done any post secondary studies knows this. The housing market in Edmonton is a perfect example of this. There are lots of POTENTIAL buyers out there but not at 400k. With very, very few buyers having more that 10% down, qualifying for 400k at 25 years takes two solid and STABLE incomes. Most of the stable incomes in Edmonton are not directly linked to the energy or construction sectors given the cyclical nature of that type of work. Prices are just too high for the average buyer. If the 1800sqft homes that are listed fro 430+ were priced more towards the 350k range, the market would have no trouble returning to balanced conditions.
I live and work in Ottawa now but I’m from Edmonton and the two cities are very similar but in my view, the stability of the incomes in Ottawa has led to a very stable real estate market here. In Edmonton, where incomes can be very volatile in comparison, cyclical workers with very high incomes can drive prices beyond the grasp of normal buyers. The same happened here in Ottawa during the tech boom.
So it is my opnition that until prices in Edmonton return to levels where “normal” incomes can meet the debt obligations of home ownership, only the very best homes will sell quickly and for close to full asking price. I don’t see a bubble bursting but it should deflate slowly.
As for the newcomers still flocking to Alberta, you have to consider the cyclical nature of much of the work that these newcomers will be doing. Lending institutions are seeing the light that stable employment income not just high employment income is vital. Many of these newcomers may not be able to buy a home immediately and why would they if they are in Alberta to work for a year or two?
And one final note that I’d like some feedback on. I hear so many times on this blog about the cost of rent vs buy but I never really hear anyone mention the intangible benefits one receives from home ownership. If owning costs you an extra $500 a month even after you compare interest vs rent, for many, the sentimental benefit outweighs that cost.
The $1.10 loonie sure was short lived….
Loonie swoons below 98 cents
TAVIA GRANT
Wednesday, December 05, 2007
The Canadian dollar fell below 98 cents Wednesday, extending a month-long slide that has made the loonie the worst-performing currency against the U.S. dollar.
The dollar dropped as low as 97.91 cents (U.S.) from yesterday’s close of 98.78 cents. It’s weakened 8.4 per cent in the past month and now trades at an 11-week low.
The latest move came a day after the Bank of Canada cut its key lending rate for the first time in more than three years, citing weakness in the U.S. housing market, growing risks for exports and tightening credit conditions.
A slowdown in the U.S., which accounts for three quarters of Canada’s exports, “suggests growth prospects are worsening,” said Anna Piretti, senior economist at BNP Paribas in New York, in a note late yesterday.
“Against this background, and given further expected weakness in the U.S., we expect the Bank of Canada to maintain its dovish stance and ease the policy rate by an additional 25 basis points in the first quarter of next year.”
Wednesday’s move came as the U.S. dollar gained ground against other major currencies. It also occurred two days before Friday’s Canadian jobless figures, which will offer further clues on whether the economy is slowing. Economists expect just 8,000 new jobs were created last month, sending the jobless rate up a notch to 5.9 per cent.
In the meantime, scrutiny will fall on incoming Bank of Canada Governor Mark Carney, who appears before the House Finance Committee today. He is expected to field questions on Tuesday’s rate decision and any developments in the credit market.
“It will be our first real look at the incoming governor and accordingly will be key in forming BoC policy decision expectations going forward,” Scotia Capital said in a note.
Sean,
For months people have posted on here that this market is done blah, blah blah. And every thing they look at points to that. That’s fine that is their opinion. However that is not my experience or opinion.
We are not done with dealing with the inventory but the strength, confidence if you will seems to be ebbing back. Hence Octobers bounce in sales. Whats unusal is that Novembers sales did very well if I use September as a benchmark.
For months the average barely moved and everybody knew that was not an acccurate reflection of the market. Novemeber is different in the perceived confidence. The number (volume of buyer inquires) through our website has almost tripled since July.
Once again I come back to what I have been saying all along. This is a supply demand issue for our market. The market will find its balance.
and prices are probably balanced now as I can see lots of buyers pulling the trigger now.
I am fairly confident that what sold was TLC’s at discounts and owners that really had to sell fast to undercut the rest.
You read it here first: prices will be up by 3-5% by spring.
Quote me all you want. i stand by this.
I have a feeling that not all inventory will come in the market again, as from May to November when there where 9000 listings, there were sales too, so if maybe half the properties sold from May to November and hald did not, we won’t see 9000, maybe 4500 may come back again, what do other people think?
Sheldon Posted:
“Once again I come back to what I have been saying all along. This is a supply demand issue for our market. The market will find its balance.”
Did anyone, bear or bull, ever say it wasn’t about supply and demand?
When housing prices are on their way up, everyone is willing to take out 2 or 3 mortgages knowing that they can flip for profit, even with 0 down.
Slower immigration into the province, reduced drilling activity and the inflated home prices combine to lower demand.
I don’t see any 100k price corrections coming, but Alberta will balance itself out. Inflation and low quality of life will work to slow things down until the next runup.
abc, I think more listings will flood the market. One family that I know of has 4 properties at hand. None of them has ever been listed even once. And no, they will not hold on to those properties indefinitely. And no, they didn’t pay cash; it’s either a mortgage or a deposit.
Sheldon,
“For months people have posted on here that this market is done blah, blah blah. And every thing they look at points to that. That’s fine that is their opinion. However that is not my experience or opinion.”
All due respect, but I prefer broad-based statistics to anecdotal opinions based on small sample sizes and subject to any number of other external influences that the observer may not even be aware of. Not to say that EREB’s numbers don’t have their issues (focus on average over median, no benchmark home, etc),
“We are not done with dealing with the inventory but the strength, confidence if you will seems to be ebbing back. ”
While predicting buyer confidence is a bit of a fool’s game, its hard to see how a drop like we just saw is going to boost confidence. “On average”, someone who bought with 10% down on October 31st essentially had their equity wiped out in one month (once you consider cost of selling thru a realtor). Now, for a traditional “buy and hold” purchaser, this is not be a big deal, but for a highly-leveraged short-term speculator, that’s a killer. And based on cost of ownership vs cost of renting, it seems pretty likely that its the speculators that have been driving the market lately.
“For months the average barely moved and everybody knew that was not an acccurate reflection of the market. Novemeber is different in the perceived confidence. The number (volume of buyer inquires) through our website has almost tripled since July.”
That may simply be a reflection of increased popularity/visibility of your website, and not at all an indication of overall buyer confidence.
(As an aside, a nod to you and Sara for making such effective use of the Internet in your business – very nice job.)
“Once again I come back to what I have been saying all along. This is a supply demand issue for our market. The market will find its balance.”
But isn’t this true of _every_ market? Of course prices will not continue to go down forever (just like they didn’t go up forever), but it looks like they’ve got a ways to drop before balance is achieved. The reduced inventory may or may not be “real” (seasonal slowdown, sellers waiting for the “spring bounce”, and many new homes in the pipeline are reasons to believe it might not be), but even if it is “real” it is still way higher than it was for the whole 2006-7 run-up. Short of massive immigration, its hard to see where all these properties are going to go.
I am not a wisher for either boom or crash, I like to see the balance in the market, where every one is happy with what they bought. I like prosperity and peace of mind that I can raise my children within my budget, so far I have been doing good, but I do not understand too much pessimism or optimism, and I do not see there will be a great crash coming or prices will go quite high again, but I see that things will be more balanced in future, and I wish for that, I don’t want Alberta to crash as I live here, I love my city and I think my city gives me comfortable living and opportunity, I wish well for everyone. I liked this article in the journal today, here is the link, hope people who love Edmonton, will be pround of our city.
http://www.canada.com/edmontonjournal/news/story.html?id=3a5768d2-58ba-47a2-8c26-bfa91d5345d2&k=62452&p=1
Why does the BoC fight inflation? Because inflation caused by expansionary monetary policies leads to incredible amounts of price volatility. It is VERY difficult to do any kind of business forecasting in Alberta these days.
You don’t know if you will be paying 20% more for your labour next year or if there will be large layoffs.
Conventional oil and gas reserves are declining. We may have 15 years left of conventional reserves left (much shorter than the 25 year amortization period). At which point, Grande Prairie will become a ghost town. (And from what I hear they are already struggling with massive amounts of foreclosures).
If the economy meltsdown in Alberta, I sure as heck want a way out of this province.
I wouldn’t count on oil and gas reserves dissapearing within our lifetime.
Jeff, a meltdown? 170 billion worth of new projects in the next few years. 7 upgraders, more oilsand development in Fort McMurray, and oilsand development in Peace River. Nuclear Power Plants to be developed in Whitecourt, pipelines to bring the bitumen from the north to Edmonton. There are too many other projects that I have forgotten. Tell me when the meltdown is going to happen, cause I want to get out too when this happens? I am not sure if your crystal ball is working too well, take it back to Walmart, I hear they have a great return policy.
In all seriousness, the economy is slowing. Prices were artificially high, and many of us were dooped into believing they will up indefinitely. But as for a meltdown, is this your honest belief? I challenge you too make me a believer?
I need to proofread obviously, I meant to say “In all seriousness, the economy is slowing. Prices were artificially high, and many of us were dooped into believing they will go up indefinitely. But as for a meltdown, is this your honest belief? I challenge you too make me a believer?”
How much is left (remaining of initial)?
Crude Bitumen (Bbbl)- 173 of 179
Crude Oil (Bbbl)- 1.6 of 17
Natural Gas (Tcf)- 40.5 of 171
Raw Coal (Btons)- 37 of 38
From the EUB ST98-2007 -
http://www.eub.ca/docs/products/STs/st98_current.pdf
So crude oil and natural gas will be likely depleted within the amortization period of the mortgage. It will take a sea change in our economy to gear up for coal and bitumen production. It’s extremely labour intensive and has a lower return on investment compared to other plays. In summary, we have to be prepared to buy a house knowing that conventional production is coming to an end. We are still trying to deal with so many technological and labour hurdles related to the oil sands development that I am personally short on the short term, and long on the long term.
People that are being laid off now due to a 30% reduction in drilling, should not expect drilling to pick up next year. They would be better off to move to Fort McMurray. We are now ‘over the hill’ so to speak in terms of conventional oil and gas exploration. We have to be flexible to deal with the economic changes that this embodies.
What’s so sick about this city, red???
Put it into perspective here…..these are very basic fundamental laws of economics. There is a huge supply of LISTINGS, but not HOUSING. What I have seen in the circles I hang with is many of my friends realizing over the last 2 years that they can now “afford” an investment property. I have one friend that owns 5 condos! Is this normal? You see, the banks will lend to anyone if market conditions are right and they have the personal equity, so aside from the local economy and how hot Alberta is, people have been trying to get rich quick by owning that second property. One of my friends recently bought a condo and the bank told him doing so was a “no brainer”. But, no brainer for who? The bank, maybe. Unfortunately, the ceiling has hit, and now reading the press releases from EREB reveals how out of touch they are. There are a ton of real estate investors out there, and they all will eventually need to sell. Basic laws of supply and demand dictate where prices stabilize, and not where the fortune teller Pratt thinks they will stabilize. It looks as if we’ve all ruined it for each other. Prices need to fall another 6-8% before we get to a market that pushes flakey investors out and life can go on. I can see average price by the end of Feb at $350K.
By the way, Nexen just cut back on 33% of their spending today.
http://www.financialpost.com/story.html?id=146343
You can add that to the growing list of companies that are trimming investment in Alberta.
Jeff another story from financial post
http://www.financialpost.com/Story.html?id=145239&p=1
every body can play with numbers and stories
Ahhh,
The royalty review…the perfect scape goat and place to lay blame for oil companies (like Encana, Nexen, etc.) that were already planning to make cutbacks in their natural gas drilling.
Take Encana for example, how convenient was it for them to announce a $2.4B investment in the US just days after the Alberta government released the new royalty structure back in October.
Let’s be realistic, how possible would it for EnCana (an extremely large organization) to string that deal together in two-three days? That deal was going on for months, and their announcement of it was planned perfectly so they could lay some blame on the government.
Brillant PR on their part really…
As for Nexen, I would venture to guess that their notion of cutting back didn’t stem after the Royalty Structure announcement in October, but far superceeded this.
rj,
You are free to determine what information makes your decision.
This blog isn’t about daily stats. Hasn’t been nor will it ever be. There are too many facets of real estate that I’m interested in.
Thanks for your compliment on the website by the way. That’s really Sara’s doing.
We have about 40,000 unique visitors a month to our website (Damm good for a small company). Buyer activity and searches are up 5x over September. This is not anecdotal. These are not all clients of ours. This is the way I see it.
Through 20 years, when the phones are quiet and noones calling or now emailing on listings then things are quiet. I would suggest this blog is about our opinion and that won’t change. I do respect your opinion and that’s why we let people post their opinions here as long as they are respectful.
What we are saying in the post is that certain people have pointed their fingers at this that and the other as to why the market should be this way or that way. What I’m saying is that some people have an agenda well beyond what will reasonably happen and that it is simply supply and demand.
Lack of supply and high demand the market went up. High supply low demand and we see the prices come down.
There will be ups and downs as we go forward.
I think we are in for some market turbulence. What we are seeing in my opinion is great for the market. It gives the buyers the opportunity to wait and if they don’t want to wait they can negotiate. These are good signs.
On a last note. I must commend everyone for some very thoughtful posts.
I wish I had time to comment on everything. There is some really good information being posted by people and there is some well really crappy stuff too. Thanks for the respectful posts.
We have $8 Billion of O+G cuts suggested to date….and $3 billion that have actually taken place so far not counting Nexen.
So let’s examine the ads placed by realtors in the Calgary Herald today….specifically….key words from those ads…..here they are….verbatim….
ALL HOMES MUST GO
NO QUALIFYING
ASSUMABLE $50K (4 of these)
ASSUMABLE $45K
ONLY $500 DOWN (8 of these)
FIXER UPPERS/FORECLOSURES
RENT TO OWN (3 of these)
$2000 DOWN (3 of these)
LOW ASSUMABLE
BLOW OUT PRICE
REDUCED !!!
PRICE REDUCED
LAST YEARS PRICE !!!
OFFERS $1000 DOWN (2 of these)
$37K CTM
LOW DOWN (4 of these)
DISTRESS SALES (3 of these)
$25K CTM
NO QUAL NO DOWN
Hardly reeks of confidence in the market….doesn’t it ? Looks like a lot of people want out at any price…..and it is a shame realtors do not know how to sell value (a basic sales technique)….but just sell on the price.
Anyone want to post the key words from the Edmonton ads ?
Hello,
o.k. here is my question, why is that Edmonton, with all these nice numbers around (hot economy, good paying jobs, in-migration,good income, strong economic outlook etc.)the market can not support $400.000 real estate prices for longer than several month,-than take a huge hit- and Vancouver, on the other hand, essentially nothing is going on, with less household income, not much positive outlook, overtaxation etc., and they
still can support $500.000,600.000,700.000 properties on average, for a long period of time.Should not it be the other way around?
Why prices are not dropping?
Why do we get a correction and they do not?
How do they get the mortgage?
This stat looks little more improved from the few last. But still inventory are there. So may be it will take time to improve the market. not for the price but for supply and demand ratio balancing.
The thing is that edmonton prices were too low before it reached to peak. and now it is going to down for correction and balancing prices as supply and demand ratio does not match.
There are existing project in edmonton area. If we do not think a lot about the future forcasting, to me it looks like there won’t be a boom or brust after this boom only correction with the price.
Edmonton is really good place to live and people to migrate from other provinces they prefer Edmonton. So still we are in good shape and will be (Hopefully)
Edmonton has welcomed immigrants as well and it has benefit now, most people from different counties come where they see some of their friends or family ties. Edmonton has that advantage, and most people who come from different countries like to own a place, but they are first time buyers so price is a big factor, so once the prices are reachable for first time buyers then this city is not going to see the doom, as some people wish.
I still say that the reason that all of a sudden prices went down drastically was probably to do with either:
a) owners under the gun to sell, or;
b) Crappy quality, older homes or in need of TLC.
otherwise, as per karl’s post above:
why can’t Edmonton – with its economy, etc. not be able to support a market where SF homes are priced at $400K for an average mortgage payment which (according to a recent RBC affordability study)represents 40% of gross income of a bread winner while vancouver has sustained mortgages of way more at scary levels of 70%+ gross income just to make mortgage payments??? what’s wrong?
is it all the inventory?
Hello,
I was talking to a friend of mine from one of the major cities there in Canada. He was telling me about the ever increasing demand and home prices in their city. I couldn’t help but wonder what stage they were in the booming market. Because I remember we were in the same situation (20-30% home equity / year): http://renomarketblog.typepad.com//reno/2007/08/reno-sparks-m-2.html
I guess my take on it is just be more aware and careful of investing based on what your aunt is saying or what your friends are earning from real estate ‘flipping’.
These kinds of posts are good blueprints to keep up with the market is really doing, not what we think it is. Because ultimately the market does not care who we are it’ll do whatever it wants to do. It’s a harsh reality my business partner and I learned the hard way.
-Ian
http://renohomeblog.com
Karl and ray:
Your answer is simple!
We’ve had an unprecedented level of appreciation in a very short period of time. Vancouver real estate always rose, but not 90% in one year! I speak from my own surroundings when I say that many of my cohorts went out and bought property. When appreciation is occuring at the levels it did in 2004-2006, everyone could now “afford” to build a nicer home or buy a condo as an investment. Don’t you agree that it is very enticing to see your house value double and all of the sudden have $250K worth of (market) equity at your disposal? Hence, the surge in second properties. I talked with one of the execs at a local home building company and he said in 2006 they had a huge increase in people building – partly because developers had more lots available, combined with available equity in the buyers primary residence. Problem today is that the listing price of these investment/2nd properties pretty much excludes first-time home buyers because these people either committed to a builder and bank based on May/07 value of their home, or they are fearful with the recent plateau in prices and are listing high to get the most they can.
The result: Listings. Price has to fall.
I’m no expert, but I certainly wouldn’t vote for the person that claims prices will soon rise.
I tell ya….if I were buying today, I’d simply wait. Unless I HAD to move, I’d want to see how this unfolds. I think most people feel that way.
all the ingredients are there right now, still things are not selling, reason seems like investors are out now only real buyers are there. Another reason probably customer confiedence is missing.
Karl,
My take on your Vancouver-Edmonton comparison:
Vancouver is one of the most beautiful cities in the world and is internationally recognized as such. Edmonton is known as an industrial gateway city. For international investors, this is an easy choice for them to make. People don’t look to Edmonton as a place to own a second home or as a place to spend your summers. Vancouver is an international destination and real estate prices reflect this. Land is scarce which further increases property values. The comparison you are talking about is apples to oranges.
People are not drinking the Kool-Aid anymore…..simple as that.
Friday I am off to my condo in Rio de Janeiro for a month….my 700′ one bedroom unit that cost $60K USD…….and it is 4 blocks from the beach.
It is only still worth $60K USD even though we bought it 5 years ago. Why ? There are no mortgages in Brasil….therefore no property inflation as a result of greed.
Alberta is soooo far out of whack with reality due to greed, we are going to get what is coming to us. And I for one….hope we have a repeat of 1982 when I was a banker here in Calgary. People deserve it.
what a nice person your are Carioca canuck
My take on the Vancouver vs. Edmonton:
Vancouver is a top choice for a lot of Asian millionaires. They sold their Hongkong 700sf apartment for CND$2M and moved here. Technically, they have no or very low income in Canada. But that doesn’t matter. They have the cash.
Also note that Vancouver is ranked #1 cities in the world. Where is Edmonton? Oh sorry, they only studies 130ish major cities in the world and Edmonton is not significant enough to these bastards.
Sara and Sheldon:
Thanks a lot for your comments and analysis on the market, obviously, I’m a home owner, but not an expert
or insider on the real estate field
and reading your posts help a lot
in my future decisions and to get a picture what’s going on out there.
Thanks very much again!!
karl
Carioca Canuck may not be the most diplomatic in town, but greed is a huge factor. If you look at other factors in the economy where there ends up being a run on something in over-valuation, then greed hits those that entered the market last due to the soon to follow valuation decline. I agree — GREED is huge. And that is why this time this downturn will be so unpleasant – not because of the percentage in valuation decline, but simply due to the sheer number of people that tried to hose the marketplace.
When everyone is going left, perhaps looking right is not a bad idea. When my buddy (a car mechanic) qualifies for a second home, something’s amiss. These people were not sophisticated investors, just plain greedy.
Edmonton is a more industrial, blue collar Calgary. Without the mountains…
Vancouver appeals to people that would like to live in Canada, but not deal with Canadian winters.
Compare the market here to Calgary, Saskatoon or Winnipeg.
Reality and recession both start with “R”……
Ouch…stove hot…don’t touch stove….ouch stove hot….won’t touch stove anymore…..
That is how we learn. The majority of new buyers in Alberta are in the under 35 age group. They never heard of the NEP, 1982, dollar down, etc, and their salespeople never told them either. Oh come on, you can’t be serious CC….really ?? One word….GREED.
In order to come back to earth…..the balloon has to pop.
Check out this chart and tell us where you think Alberta is on the graph………..
http://tinyurl.com/2vkm9
Sorry….the tiny url was mislinked…here’s the actual.
http://www.irvinehousingblog.com/wp-content/uploads/2007/06/bubble-psychology.jpg
Yes, Carioca, right on. A lot of people never even heard of Bre-X. I am amazed.
Vancouver has:
the mountains, the sea, the Olympics.
The pride of owing a bit of the best city in the world.
It is a fad amongst rich Asians and Middle East people. They buy a condo to spend the summer, like Carioca Canuck in Brazil. Why is Monaco so expansive compare to nearby cities? Vancouver is turning into a resort city.
Add to this a lot of money laundring from the drug underground market.
Add also a lot of speculation, people unaware of the risks they are taking.
Not to forget the weather. Almost nobody living in Vancouver can think of enduring an Edmonton cold spell. Else, they have left Vancouver already. This is specially true for immigrants who never ever experienced -10C. They just picture it as pure hell.
And Vancouver can collapse too (the stats in the Fraser Valley are not very good this month).
Interesting graph, CC.
I’d say it sure looks alot like the Edm. real estate market. Most of my buddies invested after they heard someone investing during the “smart money” phase (and those SM investors had no clue valuations were about to sky rocket). They invested after the media craze and probably during the “greed” phase in the graph. Now, they’re stuck. Facing the truth over the next few months will really hurt.
I like it.
I’d even agree that we’re now in the denial phase, as the graph shows. Should email it to Ms. Pratt. She’d prbably say we’re in the “return to mean”.
Carioca Canuck,
There is no comparison between Brazil and Edmonton or Canada. Regarding your comments for repeat of 1982 I dont believe it will gonna happen becuase fundamentals are very different thses days. I dont see any reason for Oil to go down $ 8 per that was happened in 1982 and other factors like NEP.
If you didnt make dollars at the boom time so now you wish everybody should get hit. it is not greed but something else.
Please visit this website
http://www.sterlinghomes.com
They have sold all the immediate available houses recently I have been visiting their site for long time. I think they sold all houses within 3 months. Who is butying if not the investors.
I think EREB should not only mention the Average price for Single family house but avearge Sq.ft avrage selling price too then we will have better idea what is going on.
These are my thoughts.
sorry link is
http://www.sterlingedmonton.com
If Sterling Homes is selling new houses like crazy, that doesn’t bode well for inventory reductions. These are obviously local people buying — I can’t imagine the average Phillipino immigrant buying a $400K home from Sterling.
The trickle down effect is that for the person that just bought from Sterling homes, their old house has to be sold at an affordable price, or it will sit.
Carioca Canuck,
Interesting graph. I think the graph is a little bit skewed to the low end at the tail end of the graph in context to Edmonton real estate. What is more likely is this:
http://finance.yahoo.com/q/ta?s=SPY&t=my&l=on&z=m&q=l&p=&a=&c=
We may see another run-up during the spring and then average prices will drop to what a conservative estimate of a $75K annual family income can afford. However, in the long run, prices will come back to where they are in May 07.
So if buyers need a home NOW and will be living in that home for the next 5-10 years then it’s not a bad idea to buy. However, I suspect that the prospect of buying and flipping are long gone.
Keep in mind though that home builders will decrease their inventory if it is no longer profitable to build and sell a house. Eventually the prices will reach a point where builders are barely able to reach a profit margin high enough to sustain operations. I think that’s where prices will stabilize.
100% agree Edmontonian. The market will rebound nicely in the spring, guranteed. Now is the time to buy.
-> Nabil
Sterling has 27 Homes listed as “Immediate Possession”? Is the website out of date?
-> Carioca Canuck
I’ve been selling new homes and condos for 20+ years and those terms/keywords have always been around. ReidBuilt gave cars away in the eighties…Sterling gave away cruises etc. This is nothing new. We had a short timeframe where everything sold…we’re just getting back to normal.
-> Sara & Sheldon
Thank you for the blog.
-> Readers
Please take everthing posted here with a grain of salt. Stats can be skewed and EVERYBODY has an agenda…so read the stats, consider your finances, needs and wants and decide for yourself.
Merry Christmas
I’ve been reading this blog for awhile and I appreciate the intelligent comments (however, not all the comments are intelligent). I wish people would see the big picture here. Prices are up 15% this year which is still a big increase. Prices are definitely correcting now, but we are just in a small snapshot of a bigger picture. Edmonton has a strong economy and that is not going to change any time soon. The truth is no one knows exactly what will happen with the real estate market. The best we can do is make predictions. It is obvious that prices will continue to drop until supply decreases and demand increases. When this happens prices will start to rise again. How long this will take is anyone’s guess. I think the problem with people here is that they got attached to the higher prices and can’t deal with reality. The people complaining about the prices dropping still likely have made a hefty profit, but just not as much as they would have made six months ago. If you bought your property for 200 000.00 and now have to sell it for 320, 000.00 instead of 360 000.00, consider yourself lucky, don’t whine and complain. Have some perspective people!
I agree with you Lucky. The trouble is Lucky, its the people who bought in at 360000 and the people who make a living out of real estate who are trying to pump the market. Most people on the street knew this was over back in May. The smart money isnt complaining. The smart money moved on to Saskatchewan and then somewhere else. Wish I knew where!
Everyone talks about a rebound in the spring. I haven’t seen anyone provide facts to support their claims (ereb included). Inventories are at (or near) all time highs. I see the following happening over the next few months leading to further declines similar to November:
1. The plunge in November will not go unnoticed by current sellers. (can we say wake up call?) All the overpriced listings will eventually adjust to the market price. This will bring average price down even further, as further prices reductions will be necessary to move inventory in this market.
2. When new homes and condos that are currently being built are complete this will only add to inventory levels. I have a sneaking suspicious that a good majority of the condos being built were bought by investors (people with no intention of living in them). What happens when delivery date comes and the price they agreed to pay is more than market? I see a large number walking away from their deposits and leaving the builders to hold the bag. The excess inventory will help lower rental rates too.
Nabil…….
You can’t compare Rio de Janeiro and Canada/Alberta ??? Are you sure ???
Find me a condo 4 blocks from the beach in Canada/Alberta for $60K USD……..I guess you are right……because you cannot. Canada/Alberta is soooo far out of line with reality is is hilarious……and it is no comparison.
I am not a bitter renter Nabil, that is a bad argument BTW…and one usually posed by realtors……wifey and I have $221K in the bank (the difference saved between mortgage payments and rent plus spare cash) saved up from the last 4 years. I am laughing all the way to the bank as I get $750 a month interest from PC Financial and my rent is only $1100……
The others here who parrot the line “things will be back to normal in the spring” had better look at their position on that graph I posted. You do not need the NEP to do you in this time……royalty cuts, the potential of a liberal governemnt, and good old affordability will do just fine thank you very much.
“Denial of reality” is a serious issue….and some here have to deal with it.
PLEASE PROVIDE THE HUDDLED MASSES HERE WITH FACTS, LOGIC, AND REASON WHY PRICES WILL REBOUND IN THE SPRING.
There are still a lot of buyers in the market waiting to see when will price fall more and when will the bank cut another rate.
The average home buyer in Edmonton can likely service a 200K mtg at the most before they start to sink. Prices will come down another 50K over the next year now that the investors have bailed on us here in Eddy and are now snapping up pre-sales and assignments in Vancouver before the 2010 Olympics.
Husky tanks $2.3B upgrader
Makes deal with BP to ship bitumen to Ohio refinery
Gordon Jaremko, The Edmonton Journal
Published: 1:38 am
EDMONTON – Husky Energy Inc. shelved a $2.3-billion upgrader project Wednesday and committed its chief oilsands asset to supplying a rebuilt BP refinery in Ohio with Fort McMurray bitumen.
Husky deferred plans to triple output at its Lloydminster plant, 230 kilometres east of Edmonton, and instead agreed to pay half a $2.5-billion bill for adding bitumen upgrading to a BP operation in Toledo.
http://tinyurl.com/2zy63n
I’ve edited this post. I don’t think its your intention to suggest harm to anyone but regardless of differing opinions I’m going to err on the side of caution and say its not appropriate.
Sheldon
Piccaso it sounds like Husky wasnt influanced by the slowdown in economic growth but by simple economics….why build in Canada when you can plug it into a pipeline – transport it to Ohio, and do it at a half price. Fallout of NAFTA
….take our resources, but build the manufacturing and refinery power near a main URBAN Hub…Ohio is alot closer to the bituman market then Loydminster – and they probably gave them alot more incentive than we did….
As for everyone else who is screaming bloody murder at the royalty issue – guys 10 years down the road this issue will be a footnote – since the oil is at 92$ and nearing a 100$ ….personaly I dont care if ESSO or Shell makes 1.2Billion in profit rathern thatn 1.1Billion in profit and trust me on this neiter does ESSO or Shell.
If they really cared they would have build in Russia and Siberia….or wait a second Shell did do it – what do you mean their new refinery got repossesed and confiscated by corrupt burocratic govrenment in Russia..
???? Did anyone tell that to Shell???? 
))
(Sarcasm boys)
Around the country house prices are high…not only here…but also in Ottawa, even in Sask the prices are going up….
AS FOR CARIOCA – What in your opinion should be a price of a SFH???? come on let me hear your suggestions???
Piccasso
– here is one for you 
) – ITS THE WHOLE STORY YOU FORGOT TO PRINT IN YOUR BLOG!!!
Husky Energy Inc. and BP Plc are teaming up to put their oilsands and refining businesses together, the two firms said Wednesday.
The companies will form two 50/50 joint ventures, one an oilsands business operated by Husky and the other a U.S. refining company operated by BP.
Husky Energy 3-month TSX chart
Each company will put assets of equal value into the business, with Husky putting in its Sunrise oilsands project near Fort McMurray, and BP putting in its Toledo refinery in Ohio.
The deal is expected to be wrapped up in the first quarter of 2008.
“BP’s move into oil sands with Husky is an opportunity to build a strategic, material position and the huge potential of Sunrise is the ideal entry point for BP into Canadian oil sands,” said Tony Hayward, BP’s group chief executive, in a release.
The firms plan to invest $3 billion US in Sunrise through 2012 in a three-phase development. Another $2.5 billion US will go into the Toledo refinery through 2015 to boost its refining capacity and its ability to handle bitumen.
Investors sent shares of Husky up more than five per cent on the TSX. The stock finished up $2.14 at $41.29.
I didn’t leave anything out. The url’s there for you to read.
Wooow….DUDE!! …you made it seem like the earth is falling from under us…and I quote -
“Husky tanks $2.3B upgrader
Makes deal with BP to ship bitumen to Ohio refinery”
Here is my side of the story without link
) -
“BP Moves to invest $3.0 Billion in the oilsands.”
Its spin control baby, you say global warming I say front Ocean properties in Edmonton
))) ….
Which way do you swing
))
I cut and paste the title, the first paragraph and the url.
Give it a rest.
If you really want to get to the heart of the article.
!!!!!!!!!!!!!JOBS LOST!!!!!!!!!!!!
Nursing shortage shuts OR’s
Royal Alexandra Hospital forced to close two to three operating rooms; crisis over lack of staff called worst ever by doctor
Jodie Sinnema, The Edmonton Journal
Published: 1:38 am
EDMONTON – Capital Health closes two to three operating rooms at the Royal Alexandra Hospital each day, marking an “unprecedented” and “dramatic” crisis that will only get worse, a physician at the hospital says.
The situation is so bad that Bert Gibson, pastor at Crestwood Presbyterian Church, is considering heading south of the border to have prostate surgery because his operation here has been cancelled four times due to nursing shortages.
http://tinyurl.com/38hlnd
So why the shortage of nurses and other shortage of qualified people in other industries. It seems that’s all you hear about in Alberta.
Is it because they can’t make enough to live in Alberta or they don’t want to live there or a combination of both?
No piccaso, nurses make good money it is expnenetial growth they cannot handle, alberta health and wellness recorded 36000 new people from march 06 to march 07, don’t blame every thing on Edmonton, you seem like you do not like it here, find a place you like rather than criticizing this province and city.
I think your wrong. A lot of nurses went to the U.S. because they can make more money and it’s cheaper to live. It’s the truth.
Carioca, I totally agree with you, there is no way we compare Alberta and Rio. Here we DO NOT have to wear a bullet-proof vest to walk on the streets. “Maybe” this explains why your condo had no appreciation since you bought it 5 years ago… BTW it will never have.
Edmontonian
Ya, but you have to wear so many layers of clothes up there in Edmonton you are already bullet-proof. lol
Couldn’t resist, just kidding.
Regarding the nurses, remember not to long ago the U.S. was in dire need of nurses and went on a big campaign blitz recruiting nurses from Canada. They paid more money, automatic green card, cheaper to live and a more desirable climate. It was pretty hard to pass up for a lot of nurses.
Oh, that explains piccasso, if people find US so attractive they move there and still there houses are not selling.
So it was asked earlier by Carioca Canuck, and I’d like to ask again:
Can anyone provide hard facts why price will rise in the spring?
These are the facts as I understand them.
1) Current inventory levels on the MLS are the highest in the HISTORY of our city (which excludes Comfree)
2) Average price for Nov 07 took largest one month drop since 1994.
3) Current condo conversion inventory under construction is expected to increase available condo units by 60% over the next 3 years.
I’m not a pessimist, I’m an investor. I look at the trend — to me it’s headed downward.
Are any of you who think prices are rising willing to put your money where your mouth is? How about contacting Sheldon and buying an investment property?
There definitely are agendas on this blog. When supply outstrips demand, you can say what you want, price corrections are in order.
Her are more facts…..
Husky tanks $2.3B upgrader
Makes deal with BP to ship bitumen to Ohio refinery
Gordon Jaremko, The Edmonton Journal
Published: 1:38 am
EDMONTON – Husky Energy Inc. shelved a $2.3-billion upgrader project Wednesday and committed its chief oilsands asset to supplying a rebuilt BP refinery in Ohio with Fort McMurray bitumen.
Husky deferred plans to triple output at its Lloydminster plant, 230 kilometres east of Edmonton, and instead agreed to pay half a $2.5-billion bill for adding bitumen upgrading to a BP operation in Toledo.
http://tinyurl.com/2zy63n
Mark my word, prices will go up sharply in Edmonton next year, all
we need is to shred another thousand off the current inventory,
or even five hundred and people (investors or not)will buy up properties like crazy again.
And prices will go up fast, like $30-$40.000 from one month to another not $2.000 or $3.000 as some predicts.
Why?
Because the mood is there to this kind of crazy things to happen.
Edmontonian….
Been there 21 times now…..walked home drunk at 3am in teh streets….never been robbed or ever felt threatened.
Have you ever been there ? Or do you just read the MSM ?
Here is Calgary people get shot and knifed a block from my west end DT high rise…..crack dealers do their business 2 blocks away at the 8th Street KRT station…..
I am safer in Rio….thank you very much.
I was back in Edmonton this spring and was having a beer at the local watering hole. The bartender, just a kid… sold his row house townhouse. He said he couldn’t pass up the opportunity. The kid and doubled his money in the year and a half he lived there. So he sold, smart kid… unless he upgraded.
Karl talks about “mood”. And he’s right, except the investment mood is now skiddish with respect to property.
I’d say about 85% of all movement in the stock market is due to social and emotional factors. Same with real estate. It’s all over the news now that we’re in a downward trend. So what will change that MOOD?
Gretzky coming back?
Carioca Canuck, just curious are you in Rio right now?
You always read how if the U.S. sneezes, Canada catches a cold. With 85% of everything we export going to the U.S. you can see why. We are not immune to what’s happening down there, just delayed. It’s unfolding like clock work too.
Karl,
Who in Edmonton can afford a home at prices that are 30k-40k above todays prices? Housing affordability in Alberta has eroded significantly over the past two years and it now takes over 40% of average pre-tax income to meet the debt requirements of an average two-storey home in Edmonton. This situation in Calgary is the same. If you are counting on in-migration to provided new buyers, you should consider the lack of affordability in your analysis. The last several waves of migrants were able to come to Alberta because it was affordable but that is no longer the case. If you live outside of Alberta, which I do, the lure of the province is much less now that it once was. High salary or not, other Canadians are not excited about paying 400k+ for a mediocre home in a second tier Canadian city with a poor national and international reputation. I still consider Edmonton home so this is not a biased opinion, this is really how people see Edmonton. They see it as ugly and cold. There had better be some extremely good incentives for people from other provinces to call this city home. And with house prices having risen much, much faster than incomes over the past few years, those incentives are gone for now.
This may change if prices do correct downwards, but for your 30k-40k scenario to play out, you will first have to see a very pronounced drop in prices to get the ball rolling.
Now you were so enthusiastic criticizing this province and what not, now why is US which in your mind is all good, is facing that crisis. Is there anything wrong there? Tell us about it.
sorry qustion wa for Picasso
Jim_s,
Good post.
Almost every economic and financial model that I’ve ever worked with makes a common assumption, that market participants act in a rational way. In real estate, more than any other market, this is not the case. The emotion involved in the purchase of a home is very high (except for those sales going to pure investors). There is a herd mentality in situations like this and the herd is heading downward right now and it will take a mighty brave (or uninformed) group of buyers to turn the market around. It could happen, but I wouldn’t want to be among that group taking this risk.
had to happen
anon,
I’m not the one that said it was cold and ugly up there but I wouldn’t disagree either.
Housing is in a mess south of the border. Twice the homes are going for half the price in twice the location compared to Alberta. Make that 5 times the location.
It’s in bad shape down here, real bad. Alberta isn’t an island and is not immune to what’s happening around it. Alberta also has a history of a boom – bust economy. What’s different this time?
I cannot say that Calgary is that safe really. I’ve had a jeep stolen in the past year and a $1000 bike. Last year, I saw a dead body lying in the streets from a gang fight. Walking over pools of blood on the sidewalk in the morning does give me a queasy stomach. Or having dealers approach me by the Bow River trying to sell drugs. Is crime in Calgary and Edmonton epidemic, probably not. Perhaps the suburbs are safe… if you can handle some of the highest rates of domestic abuse in the country.
Thanks, cb.
I don’t think the market will turn around for some time. At current absorption rates, we have enough inventory for something like 6 months, IF NO NEW LISTINGS COME ON THE MARKET.
Stu put it best, “had to happen”.
Carioca, I will pray for you… hopefully you will make it back here. Wish you good luck on your trip… YOU ARE GONNA NEED IT.
I have purchased my first two storey house in Feb. 2007 this year. House is under construction, the possesion is at the end of January 2008 (Takes around year to complete- surprising). After I purchased prices went up like crazy till May 2007. I was feeling proud I made right decision.
Now prices are back to Feb. 2007 level or may be less, now I am feeling uneasy and calculating how much hit I can absorb.
Since I have seen so many diversed comments from different people I dont knwo what should i do, i have following options:
1- I should try to sell my house as soon as I get possession to mimimize my loss further down the year ?
2- Should I move to my house as this my first house not investment property because I bought it after calculating my affordibility and hope prices will not go down further ?
3- Should I calculate how much hit I can bear, because selling of house would cost at least 4 to 5% (through realtor in this market) and stick with the house ?
4- Should I sell as soon as possible and see where the market is going and should purchase again when i feel market has been stabilized.
5- Also how much risk is associated , I have agreed to pay 410K for 1635 sq.ft house, not easy for firt time home buyer. Is it going to be 300K end of 2008 or not.
I will appreciate the comments.
It is all about feeling how can I feel comfortable ?
The 400K homes are supported by the started home prices. If a condo sells for 200K+ then those who have owned a condo before can afford to move up and buy a 400K home. It’s all relative. It just so happens that young people are getting jobs nowadays and can afford a 200K+ condo and prices get pushed up the ladder. A few years ago, there was a lack of starter homes and thus there was a price run-up.
There may be a small price increase in the spring relative to November prices as the people who were left out of summer 07 may be coming back since prices are now lower. It just depends on how many people are looking for a home during that time.
I think 400K house prices are maintainable if starting salaries/wages support a 200K+ condo.
Anon……
No I am in Calgary right now….leaving tomorrow at 1050 AM on UAL.
First time buyer….
I would walk from the deal.
firstime,
You paid 410K for a 1,635 q ft house in Feb. That wasn’t a bad deal in Feb. It has to be a single story too as it’s just to small of sq ft to be a 2 story. You get a garage?
Wait a minute, actually it probably is a 2 story with no garage. Hec, there slapping up 1,200 sq ft 2 stories like no tomorrow.
First Time Homebuyer:
If I were you, I’d consider the following:
1) Do you plan on staying in the home?
2) Can you afford the mortgage?
If you plan on staying and can afford the mortgage, you’re ok. Valuations will rise over the long haul. If, however, you built to do a flip, you’re in the same boat as probably 6,000 other sellers right now, with more coming this spring (condo completions).
If you stay where you’re at for 5 years or so, you’ll do fine. But if you want the quick buck, you’ll get a quick kick.
First time, if I were you, I would stick to my purchase and enjoy homeownership and ignore all the market fluctuation.
And I consider myself bearish.
Carioca, there is a fine line between being bearish and being irresponsibly pessimistic. And we are on different sides of that line.
“Irresponsibly pessmistic”….LOL…that is a good one.
Define irresponsible.
You make money in RE on the buy….and that house is not as good buy in this market….if he can wait 12-24 months he will do much better…..especially after we see what happens with the now inevitable spring federal election.
If his deposit is $30K +/- he should walk. Let the builder cry…..the builder won’t sue him…it’s bad PR…..$30K is roughly what he will lose at a minimum if he takes possession and sells it…..if he sells it…if he sells it…if he sell sit…..get my drift ? Him and 6,000 others in the same boat…..and builders are still throwing places up like crazy.
It is not irresponsible to walk from a deal…..if the circumstances of the deal do not fit you due to other changes. It is done all the time in business under these circumstances.
So I guess it’s settled, then.
Nobody can provide proof why prices will rise this spring.
Does it take this blog to figure that one out?
No, do not sell anything right now, unless you absolutely have to.
Wait until the inventory dries up,
prices will skyrocket again and than sell.
And do NOT go down in prices.
Let that buyer know that you either pay this price
or you won’t be a homeowner in this city.
Carioca, it’s not irresponsible to walk away from a deal, since you will lose the deposit. But it’s indeed irresponsible to pretend that you know the future.
The fact is: no one knows. We can only guess based on existing evidence. Both of us can go one way or another, since we are currently sitting on the fence. But given the situation of “first time”, it’s best for him to stay put at this turbulent time.
As a stock investor, I know the pain of buying at a high price. However, that pain is nothing compared to when you cut loss and the stock rebounded the very next day. I believe that “first time” can handle another drop in price (if there is one), but he cannot handle another spike up after he sells at a loss.
Inventory dries up?
Hmmm……
Uhaul company down the street from me can’t keep trucks in Alberta due to the rise in Saskatchewan bound workers.
Tons of RE investors who are currently building and haven’t even entered the selling phase yet.
When is this “dry up” coming? I foresee a spring with 10K + listings.
First time buyer,
If I were you I wouldn’t ask the question you asked on a web blog. Simply because it is a big decision, and people post here with different agenda. They only present numbers and stories that fit their agenda and ignore those that doesn’t. Even worse, some posters compare apples to oranges on purpose, just to give you a picture that fits their agenda. Why are they doing that? Because for whatever reasons they made a wrong decision and missed the boom, and they are jealous, and they are now trying hard attempting to convince themselves and others that they made a right decision. For example, they even put false advertisements on local newspapers at their own cost, just to present a picture that supports their agenda.
karl, in that case, the inventory will just build up.
Why not just let free market economy play its role? If you don’t want to sell, don’t list. If you want to sell, price it right so that someone buys.
Don’t be a stubborn bull or bear. Be a participant of the market economy and the current mess will be gone.
If I was an investor, I’d cut and run, how is that different than what a firsttime homeowner should do? Should homebuyer’s take a loss and ‘investor’s shouldn’t? That doesn’t make sense.
That’s exactly my point, Mark.
If FTHB does cut and run, he does take a loss. If he stays for the long haul, he’s ok. It’s all paper valuations anyway, at the point in time that the transaction takes place.
For example, if he cuts and runs and loses $30K now, that’s one option. If prices drop 25% in 2 years and he would have needed to sell in 2 years, then he made the right choice.
If he stays, though, and sells in 10 years and his $410K house is worth $500K, the intermediate market fluctuations didn’t hurt him.
Investors don’t have the time that tenants do due to rate of return they need to produce.
An investor would have a residence already and don’t need to rent.
The rent and lifestyle costs are different for a homeowner and an investor.
Good Lord, for many people buying a house that is unaffordable has nothing to do with making a bad decision, but being a part of the wrong demographic. If you are in your early-mid twenties, and can’t afford to buy a house now or believe it’s a bad economic decision. Then don’t buy. Save your money, and invest it in places that have a higher yield, or save and move to a place where you can buy an affordable house. Unfortunately if you are in you are a teenager or in your twenties living in this province it’s screw you, and if they are over that demographic age, then everything is wonderful. This province is going down the tubes due to excessive amounts of greed. It is no secret that the average household income has not grown at the rate of house prices.
Which is further proof that prices have to adjust.
Don’t want to get right into the debate but I want to raise one point. If you’ve entered into a purchase contract, and decide to walk away from that contract after all conditions are removed, there is more to loose than your deposit. You agreed to purchase the home, and the seller has the right to seek compensation if you don’t hold up your side of the bargain. In some cases you may be forced to go ahead with the purchase, or, the seller may sue you. So please don’t go thinking if you walk away from a purchase the only thing you’ll loose is your deposit. FTHB, you should discuss what you are thinking with your lawyer before you make what could be a very costly decision.
Good post….seek a lawyer who understands your situation.
Or, live in the friggin’ thing for a while, as it’s intended for.
first time buyer,
I largely agree with what Jim_s says.
Something to keep in mind is that you presumably agreed to a “below market” price in Feb 2007 (as the home was not completed). Once completed early next year, you may still be paying market or below market for it.
ray,
I grew up there, my boy still lives there.
I never used the words stupid or loser or crazy.
I called Edmonton cold and ugly either, I just agreed.
You are the one that sounds a tad bitter.
Cheers,
Piccaso
I “never” called Edmonton cold and ugly either, I just agreed.
I “never” called Edmonton cold and ugly either, I just agreed.
o.k, back in the spring you put up
your house for sale, say, for $420.000 and somoone, the same day wanted to give you more for it,like say $423.000 to make sure the house is his/hers, noone else can buy it.
Now, you make the same listing and somoone wants to give you $365.000
for that same property,saying, that $420.000 is too much.
In the meantime, nothing really changed (in terms of economy, job availability, bank rates etc.) in that time period.
So, what happened to those, who had fought over a house back in March or April?
Why is, all of a sudden, a property for $400.000 considered overpriced and a few month ago buyers overbid the asking price?
I think it’s more of a mind game, than it has anything to do with the real economical conditions or value.
Nate……
Sit on it and rotate.
First time home buyer,
If you have a contract that is on a draw mortgage then there is nothing that you can do to walk away since most of the funds have been transferred anyway at this stage.
It sounds like you’re in the home for the long run so it may be best to stay put provided that you can make the mortgage payments. The home you bought may decrease in value in the short term but in the long run it will appreciate in value above and beyond what you paid for it. You also have to consider the return that you get from enjoying your new home and not worry about rent increases/landlords/other tenants.
Karl said “Why is, all of a sudden, a property for $400.000 considered overpriced and a few month ago buyers overbid the asking price?”
That’s because most purchases in the past year has been driven by speculators. The property listed at $400k was not considered expensive at the time, because people believed that they can unload it at $500k within a year.
Remember, buyers = sellers. First time buyers account for a small percentage only. Most transactions are move-ups.
If the low end price(say the $300k level) is way out of reach of first time buyers, those possessing these $300k properties cannot sell them easily. If these homeowners cannot sell, they cannot move up and buy more expensive (say $500k) properties.
The lesson is: don’t expect a rise in price, if you are selling! I mean, why don’t you just hold it, if the price is going to rise? If you got to sell it, others may as well do the same, then what makes you think that the price will go up?
Karl, can you please tell us what expertise you have in either real estate or economics and finance?
Your arguments make no sense. You seem to be in the “house prices can never fall” trap. When plasma televisions first came to market, they were $5k+. Now they sell for $1,500. Why? More supply.
The activity this past summer that pushed home prices to Toronto levels were speculative by some measures, and outright rediculous by others. House prices can fall and they will fall just like they have in the past.
Some owners don’t have the luxury of pricing at $430k and waiting it out. Some people that put their homes on the market actually need to sell that shome within a few months. Evey month they sit idle and turn down low offers, they pay out $3k in expenses that perhaps they can’t afford to pay.
What makes you believe prices will skyrocket again? A market’s wourst enemy is volatility and these types of up and down price swings always lead to fear and anxiety which in turn push buyers away.
To me, you sound like somebody that has a home on the market right now and does not want to compete with the folks down the street who have just undercut your list price by $25k.
And for the record, I never said Edmonton was cold and ugly in my previous post. I said people in other parts of Canada think of Edmonton as cold and ugly. And you have to admit, it is cold and it certainly has its fair share of ugly spots. But anyone who has ever spent a winter in Ottawa or the likes can attest that the Alberta winter is not all that bad.
Bunny makes a great point.
Bubbles in any market have a few common characteristics. The first, is obvisouly sharp price increases. But a very important factor is whether or not the prospect of turning over the purchased asset in the short-term for a quick profit is sustaining the price level.
In my mind, this is what has happened in the Edmonton market. Is it a bubble, I don’t know. But prices over-shot their equilibrium level and they seem to be coming back down to earth. The big question is where will they stop.