Here is our weekly update on the Edmonton real estate market. (Last week’s numbers are in brackets.)
For the past 7 days:
# New listings: 378 (342)
# Sales: 206 (215)
Ratio: 55 (63)
# Price changes: 325 (285)
# Expired Listings: 558 (132)
# Canceled, withdrawn and terminated listings: 117 (153)
Net loss/gain in listings this week: -503 (-158)
Active listings for single family homes: 3309 (3576)
Active listings for condos: 2252 (2368)
That’s a big increase in expired listings, this is likely due to the fact that when listing contracts are drafted people tend to use the end of the month as the expiry date.
A number of people have asked that we include the weekly average sale price. At this time I will not be posting the average price per week. I am by no means a statistics expert, but I do know that averages can be very misleading especially when you’re dealing with a small sample size. Plus, this blog is not all about stats, all the time. I realize this week was pretty heavy on stats but we are working on lots of new content for the coming weeks. Have a great weekend!
That being said I would like to make one last comment on prices for the week. The chart below shows the average prices broken down by type of property. As you can see, the row house/duplex category is very volatile (especially over the past few months), and that is due to the small sample size, it is not an actual reflection of values in that category. Personally I think they should get rid of that category altogether.
“A number of people have asked that we include the weekly average sale price. At this time I will not be posting the average price per week. I am by no means a statistics expert, but I do know that averages can be very misleading especially when you’re dealing with a small sample size”
Well said.
I gotta say that I am sure that most people want see the weekly average. I can honestly say that I don’t agree with your decision. It seems that realtor’s try to hide these stats when they are negative. It is difficult to find these stats, and every time a person such as yourself releases these stats, then all of a sudden there is some questionable reason as to why the information won’t be released. It is never done when things are going up. I am an investor and I think people are entitled to the information good or bad. You provided a service that many of us appreciated. I personally it is crock that realtor’s don’t want the stats released. Even if the averages in your opinion are misleading, they should be released. Why not just stop releasing monthly stats and yearly stats to, according to your argument. Keep people in the dark, along as it is convenient to hide the fact the market is dropping. I am not usually a conspiracy theorist, but to me it seems that realtor’s only want to release information when it serves their purpose. Maybe people are too focused on the stats, and I have been an advocate for talk on other real estate topics, but please continue releasing the stats. I don’t think it is fair that the general public is shielded from information. How is that fair? It isn’t!!!
I gotta say that I am sure that most people want see the weekly average. I can honestly say that I don’t agree with your decision. It seems that realtor’s try to hide these stats when they are negative. It is difficult to find these stats, and every time a person such as yourself releases these stats, then all of a sudden there is some questionable reason as to why the information won’t be released. It is never done when things are going up. I am an investor and I think people are entitled to the information good or bad. You provided a service that many of us appreciated. I personally it is crock that realtor’s don’t want the stats released. Even if the averages in your opinion are misleading, they should be released. Why not just stop releasing monthly stats and yearly stats to, according to your argument. Keep people in the dark, along as it is convenient to hide the fact the market is dropping. I am not usually a conspiracy theorist, but to me it seems that realtor’s only want to release information when it serves their purpose. Maybe people are too focused on the stats, and I have been an advocate for talk on other real estate topics, but please continue releasing the stats. I don’t think it is fair that the general public is shielded from information. How is that fair? It isn’t!!!
I gotta wonder Sheldon, are you taking flak from other realtor’s for posting the info? Obviously with the EREB collusion to not post information that should be available 24/7, even the newspapers have been forced to quote you as a source, as once again the EREB is attempting to hide what is going on. Keep doing what your doing, I respect your post and have been reading it for a long time. Don’t do the politically correct thing, keep posting the stats! Please!
solid understanding of how stats work. With such a small sample size, the stats would be scewed so much that it is impossible (and irresponsible) to draw any firm conclusions from them.
You would need at LEAST 1000 sales to get some type of average out of the stats. Even then, averages are dangerous. Medians are a little more informative in any kind of analysis.
All my opinion.
Sheldon,
I don’t agree with your decision to not publish weekly prices but will respect it as it is your prerogative. There appears to be an old fashioned “keep them in the dark” aura with EREB. Whether or not average prices for a week mislead is besides the point. How anyone viewing the numbers interprets them is their own problem (if it is), but in a perfectly functioning market, more information will be better for efficiency. American systems disclose a lot of information (a property’s entire trading history along with prices, the number of times prices are changed and tracks the trajectory of each price change). I don’t think having that information would discourage buyers, more like it would encourage them if it demonstrates a seller is motivated enough. Anyway, like I said, it is your prerogative…given that you guys pay a fee to the EREB…it is your property to do as you wish with. But I must repeat again, if a trend is insignficant on a weekly basis from a price perspective, what makes quantities more relevant. If prices are only worth reporting on a monthly basis are we saying a month is enough to establish a trend? I am confused. I think Bob Truman’s site actually helped a lot of buyers in 2006 when people started to see that prices and days on markets were getting higher and shorter respectively. Some people used this information and acted accordingly. Fair enough, decreasing prices might be something for bears to gloat about but in the same vein if prices are going up then that would be something for bulls to gloat about too. we already know that whichever way it goes there will be a group of unhappy people. Whatever the price trend is, even if it is a decreasing one, surely there would not be a month with zero sales?
I could be labeled a bitter renter, or one of those that missed the boat and would like to see doom and gloom. I do not agree. Doom and gloom would be trouble for everyone….bulls and bears alike as it would most likely translate to other parts of the economy (bears be careful what you wish for!).
I see myself as a very motivated future buyer (easily mistaken to be bear, which I guess I am). I just cannot afford what I would like to buy, period. I would say as much as we might resent bearish folk they are there for good because they typically swoop in at the bottom and essentially stop the markets from completely going into the pits in my opinion.
best,
Fencesitter
p/s Sheldon, did you watch Shrek II. I have eyes like Puss in Boots lol, you would not be able to resist my plea for weekly prices or even bi-weekly prices if you gazed into those eyes!
Hi fence here again,
I know it is not anyone else’s responsibility to feel sorry for those who missed the boat at the beginning of the boom. Having as much info as possible may perhaps help us this time?
If you won’t post weekly stats on their own how about providing a 30 day average updated weekly?
I can’t help but feel that if prices were climbing 5-10k a week you would be more than happy to publish those numbers, however, as others have stated, its your blog, put whatever spin on it you want.
Sara, Sheldon;
If a house is listed, delisted/cancelled or expires, does it get a new MLS number if and when it comes back?
**Yes, it gets a new MLS #. Sara.**
I believe that the new listing will have a new number.
Add me to the list of potnetial buyers who feels that organizations such as EREB and CREB provide information to the highest degree of full disclosure to the public.
http://www.findcalgary.ca/
Mike Fotiou still maintains daily stats for Calgary.
Month to Date for December, the average prices and condo median prices are all down (only median for SFH is up a couple of thousand I beleive).
MTD sales for SFH is 175 units whereas condo sales are 75 for a total of 250 units.
Sara and Sheldon,
I was wondering what is on the x-axis of the graph?
Thanks for your work.
**Jason, the X axis got cut off somehow, I’ve replaced it. Thanks for pointing that out. Sara.**
Bob Truman gives Edmonton monthly stats and from the first of the current month ongoing. Both for SFH and condo’s. He’s not even a realtor from Edmonton.
SFH’s
http://tinyurl.com/2uxwcz
Condo’s
http://tinyurl.com/2wwzxa
He includes surrounding communities such as Sherwood Park, St. Albert, etc..
Which I like because those are not cheap bedroom communities.
I remember during the huge price run up you would look through the MLS and were lucky to see 15 homes for sale in a specific area. It was a small sample size but EREB and the media couldn’t get the stat’s on price increases out fast enough. Now when prices are dropping and sales have slowed it’s not an actual reflection of values?
Hmmm….
Yikes!
The Sun says it’s a balmy -29 in Edmonton this morning. Frig, it’s going to be climatic change for me coming home for Xmas.
I don’t even have a long sleeve shirt with me let alone a parka.
Brrrr..
Piccaso
Maybe high prices are just a reality in the artic. Look at Yellowknife, it’s even more expensive then Edmonton. The further north you go the more expensive it gets. It’s gotta be a direct spin off of paying high salaries. I mean, you got to pay high wages to attract the people cause there is no other incentive.
Piccaso
Fort McMurray is another example. There ain’t nothing to attract anybody to that place, yet it’s stratosphere to buy ANYTHING.
Piccaso
Edmonton now has the highest crime rate in Canada?
http://tinyurl.com/2gz8lk
Check out a high end comparison just for an absolute jaw dropper.
For $1.25 million in Edmonton
http://tinyurl.com/2zz627
Now check out this home in Venice for half the price !!!!
http://tinyurl.com/27xvhs
You people are just off your rocker paying those prices in -30 Edmonville. It’s so absurd, words can’t begin to describe it!
It’s going to take a while for people to realize what is happening 1 inch from their noses. Edmonton has entered into a new economic era that will last forever. Investments were, are, and will be popping all over the place (http://www.canada.com/edmontonjournal/news/story.html?id=b94d080b-633a-4b65-9a19-126d9943289c&k=76799) and all of them are long term investments, not overnight like some comments here refer to real estate.
The economy (industry, services, retail, salary, housing, health, education, etc) will take some time to adjust to something “new”, but there is no way back now.
Some people here badmouth Edmonton because of its climate, trying to justify that prices in real estate are going down because no one wants to live here and so on. I totally agree the prices went up too fast, but the adjustment is happening as we speak, and prices will sustain the strength, maybe not next month or month after, but they will due to the economy.
Many different things attract people depending on their priorities in life. Some talk about beaches and sun, others about jobs and strong economy, so there are and there will be people willing to build their lives in Edmonton regardless they were born here or not.
Every single day I see new families arriving Edmonton (immigrants or Canadians), and maybe surprisingly to many people here both man and wife are very well educated and come to fill open positions (sometimes in the same company) to have a combined salary of 140+ K… as I said before, things are changing.
If you think of buying a property to sell next month, for sure you are doing the wrong thing, however if this investment is a long term, as it MUST be, then do it… in a few years you will see you did the right thing.
I don’t care if the streets endless amount of potholes were filled with gold. The real estate prices are not justified and time will show it.
Your not seeing people leaving $70,000 a year jobs or $140,000 combined income to come to Edmonton. The people you see coming to Edmonton are your unskilled, uneducated, transient labourer looking for work.
I agree with the above post. Same thing in places like Saskatoon and Regina. Many say there is still growth potential there, but I’m pretty sure things are slowing down along with Edmonton and Calgary, maybe just not at the same pace.
For those of you who are soooo down on Edmonton and the new economic reality I have to ask, why are you still here then?
If you think warm weather is what keeps values up, move to Costa Rica. They have lots of cheap homes and lots of warm sun shine. Good luck with your job search there, you may need it.
A job is a job but at the end of the day if there’s nothing left over from that pay cheque it’s irrelevant. I guess that’s the definition of house poor.
You can say safely, that much further price decrease would not be beneficial for many, who had bought their property in the last, say 2 years, because they have a high mortgage to carry, and much further price increase would not be too beneficial for those, who just want to purchase their property (first or second, doesnot matter, really)because it’s just too much money.
So, probable, we are just about to reach that balance in the near future.
For what it’s worth I think were in the first phase of a 2 stage correction. This downturn has been caused by a drying up of demand. Net inter-provincial migration softened; investors and speculators left the market; appreciation stopped and with it so did pyramiding.
But the people watching “Real Estate Wednesdays” and flipping houses or holding multiple houses haven’t clued in yet that the market will not reach it’s highs again. And that the reason for the downturn is that affordability and peoples willingess to pay for housing has up and left.
Once that realization set’s in and people are in the red (or tired and illiquid from carrying multiple mortgages) the second phase will start. Likely in the spring/summer. It’ll be marked by the realization that housing is not the new “get rich scheme” and that prices aren’t going to go up like people expected. Then distressed selling will likely begin and with it further price reductions.
Just my 2 cents for what it’s worth.
O
And I think this November is a good bell weather month for a number of reasons…
1) EREB indicated that prices “tumbled” and “declined suddenly” thus changing their tone to the public.
2) The monthly decrease was enough to show the public that housing prices can go up by 5% a month and also down by 5%. Both in a “hot” economy with billions of investment projects I might add.
3) SFDs are now down a tangible $50,000 from their peak and this go good new’s coverage. (As opposed to the rosy and false “everything is going up picture painted before)
Think the following also be good indicators of when we’ve crossed into the second phase of this correction:
1) When SFDs prices fall to January 2007 levels making 2007 a 0% return on investment. Suspect this to happen in the next 2-3 months.
2) When the published year-over-year figures reported in the papers and media start showing a 0% increase. I Also suspect this will happen in the next couple months.
3) When the price appreciation is either not evident in the spring or lower than expected and people realize that this downturn is not a “seasonal” adjustment rather it’s a bubble that has burst.
That’s what I’ll be watching for. Also for when the front strips of our numerous new beautiful exectutive condo developments stop looking like pin cushions or “for sale sign” storage bins.
And for what it’s worth, I saw a house today which had both “For Sale” and “For Rent” signs on it’s front lawn. Really smelt like desperation.
O
I don’t why is it “negative” to predict a decline in housing price. I mean, right now, the job and salary growth is steady. A declining housing price is good for all first time buyer and those planning to move up. It’s also good for investors. With the upfront cost down, and rental income stable, the yield is higher.
The only group hurt is those who wish to move down. But I don’t think many are moving down, at least I personally don’t know any.
I concur with O’s sentiment. My thoughts to add regarding “Phase 2″ were that Calgary and Edmonton rental capitalization rates were extremely low (roughly 4%/year). This is less than some high yield savings accounts, or long term bonds that have no risk. Therefore the ‘smart money’ should have left the market as soon as the inventory started swelling. This is because even if they were to switch to bonds, it would be a no-risk investment with higher returns. In the event that stock market volatility decreases, they have the option to convert the bonds to stocks at a higher yielding investment.
I think this would have been the smartest exit strategy.
A comparison of the losses from the peak (>10%) against the capitalization rate (~4%/year) shows that it would take 2.5 years for a rental property to recover the losses from the price correction.
I believe that the market will continue to correct until capitalization rates are >= 5.75%/year.
Thought this may be of interest to some people regarding consumer confidence in Alberta real estate:
“In fact, Albertans have an extremely negative outlook on their housing market, which has skyrocketed in recent months. Nearly nine-in-ten from Alberta(88%) think homes in their neighbourhood are overpriced, and a similar number of Alberta homeowners (89%) say they could not afford a down payment on their home as presently valued. Four-in-five Albertans who rent their homes (83%) also say they will wait for a more favourable market before buying a home.”
http://www.angusreidstrategies.com/uploads/pages/pdfs/2007.07.09%20Housing%20Press%20Release.pdf
1) Psychology of speculators matter a lot. The Vancouver Sun front page yesterday was a series a red arrows down. Enough for unexperienced speculator to think it is the beginning of the end of easy money.
2) Edmonton: 378 new listings in December! That seem a lot to me. Why would somebody put a house on the market at that time of the year?
3) Stats: if you assume:
* a Gaussian distribution of prices (in first approximation, which should work for the bulk of the curve)
* a mean of $379,000
* a full width at half the maximum of $50,000 (this is my guess)
* 127 sales
then FWHM/sqrt(N)=$4440
so the average price is $379,000 plus or minus roughly $4,000
That range of values looks interesting enough for me to know. So I would be in favour of releasing the weekly stats.
4) As for who is moving to Edmonton, everybody can speculate, butonly the census can tell.
That is all I could find in the 2006 census so far:
http://tinyurl.com/2jm4t9
That Edmonton – Florida comparison is tainted because that 1.25 million dollar house for sale in Edmonton is a joke. He’s probably $650,000 over priced. There’s still seller’s living in the past here with their pie in the sky $$$ mentality. That 40 year old house on 1 acre will sit for eternity at that price.
Just another thought I had this morning. If realtors are correct and only the “choice” properties are selling. Than that would also indicate that there are allot of average and crap properties out there. So #1, prices are falling in a good economy with buyers choosing to close deals on only the best properties via natural selection. And #2, you’ve got allot above-average; average; and “handy-man specials” sitting in the pipe that will eventually NEED to be sold.
O
greedy sellers want last years prices, smart buyers will pay next years price.
Right now smart buyer is winning. Greedy sellers are all chasing the market down. Most are now asking 50K below what they listed for. And still they can find no buyers. you weren’t happy making 300K profit on the junky house? well, that’s too bad. Because now you’ll have to settle for 50K profit next year.
Anybody have comment’s on this?
http://www.glennsimoninc.com/
http://www.glennsimoninc.com/PDF/Investorupdate2007.pdf
O,
I’m not sure what type of response or reaction you’re expecting by posting those two links.
The company profile you posted is similar to the hundreds of other real estate companies that spawned during the boom to captilise on the “lazy man’s way to make money.”
But the pdf file that you have posted seems to be outdated. I believe the document was prepared in late 2006 or early 2007. Because obivously, prices have plummeted since July. And in the pdf document there is no mention about the new Alberta Royalties framework that will affect the Oil/Gas industry.
Furthermore, does anyone else notice how funny it is to have an office in Japan as well. Alberta and Japan, not sure how those two cities mix with respect to Alberta R/E. Maybe it’s because in Japan, they had 0% interest on most of its loans for the last 7 yrs?
Set up a business in Japan and borrow alot of Yen at low interest and then take it to Alberta to invest in the Alberta R/E driving up the prices so that your average Joe can only afford a 1 bed 1 bathroom condo making 60k a yr.
It’s all pretty much propaganda.
I wonder what company officials say now about the market.
4 Trillion $ being wiped off….
Miami condo auction
http://tinyurl.com/394xc2
California
http://tinyurl.com/2squ9e
Central California
http://tinyurl.com/3bvdro
more….
http://tinyurl.com/3b8s3o
the speculators have left an imploding real estate market. Kinda similar to the spec frenzy of Alberta.
Ray, the blog posts are quite objective in my opinion. No one forces you to read the comments.
There are dozens of real estate FORUMS you can go visit and discuss investing and renovation.
If you’re only looking for a place where posters will all agree that price will continue to rise 5-10% per year into oblivion, perhaps you should just sit in a corner and ignore the rest of the world around you.
Back on topic. I agree that prices haven’t “crashed” but I believe that the 10% decline from peak prices this summer in both Calgary in Edmonton markets can be, in my opinion, labeled as a correction, which is an obvious step in the “crash” direction. This excess inventory has to get chewed up before we start seeing any consistent upwards swings. And by chewed up, I don’t mean expired listings.
Back on topic. I agree that prices haven’t “crashed” but I believe that the 10% decline from peak prices this summer in both Calgary in Edmonton markets can be, in my opinion, labeled as a correction, which is an obvious step in the “crash” direction. This excess inventory has to get chewed up before we start seeing any consistent upwards swings. And by chewed up, I don’t mean expired listings.
Ray,
Have you noticed that most of your posts along with other bullish posters are full of insults to bearish posters but notice how all bearish posts always have hard numbers, logic and facts? It is just that they are things you would rather not hear! It is not doom and gloom….just things you do not want to hear.
Prices will go up this spring. This will prove vindicating for me and prove that 90% of posters here are wrong.
And probably renters.
Profiling of blog posters have shown in the past that the typical poster has a bias against the blog subject…
In the wake of layoffs of 25-50% in the petroleum service sector we will see potential buyer’s exhibit a retrenchment of in new home purchases. You can watch the 2008 Canadian Drilling Activity Forecast from PSAC here:
http://remotecontrol.jetstreammedia.com/14369
If purchasing a house at the ‘best of times’ was difficult due to low affordability (second lowest affordability in Canada), then how will this be even better when the Alberta economy is not doing as great?
http://www.edmonton.com/eedc/ede_news.asp?page=111&toolid=1085
Edmonton rank very promising by independent firm.
I am sure the fDi does quite rigorous analysis.
I mean look at what it had to say about the “endless opportunities” of Arizona in Febraury 2007:
http://www.fdimagazine.com/news/fullstory.php/aid/1933/Arizona_endless_opportunities.html
Compared to this Reuters story printed in December 2007 wherein “Arizona may be in recession due to housing woes”:
http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-12-07T202211Z_01_N07327382_RTRIDST_0_ARIZONA-ECONOMY-OUTLOOK.XML
And why does Tijuana rank above Calgary????!
I’m in Jacksonville, FL this week before coming home for Xmas. It’s just as warm as it was 350 miles south, still 80 degrees.
Downtown Jacksonville has cranes on top of skyscrapers too. Albeit no where near the amount Miami has. I’ll have to see how cheap real estate is here compared to other areas of Florida. Guaranteed they will be cheaper then Edmonton probably by about 50%
lol
Piccaso
Piccaso
Hey Ray,
You keep saying prices will rise in the Spring. Care to explain “HOW” RE prices will go up in the spring?
And don’t say net migration from other provinces because net migration is already down this year. Alberta is becoming too expensive for most to live here. In addition we lead the nation in inflation rate at around ~6%.
I’m sure everyone here would like to hear how you came up with your claim. And while you’re at it, can you also divulge how they get the caramel in the Caramilk bar?
Thanks,
JB
http://www.edmonton.com/eedc/ede_news.asp?page=111&toolid=1085
Edmonton rank very promising by independent firm.
Posted by: Anon | December 10, 2007 at 10:25 AM
Anon, are you living in the glory days of the past? That article was posted in April 2007 – a couple of months before the peak. Remember Alberta now has the new Royalites Framework and alot of Oil and Gas companies (as sourced before by others) have shifted their investments outside of Alberta.
Good economy or not, prices overshot their equilibrium level due to the herd mentality surrounding the housing market.
I don’t think anybody is saying that the Edmonton or Alberta economies are not doing well. But for housing prices to be sustainable in a city like Edmonton, incomes must keep pace and that has not happened. In other markets (like Vancouver or Toronto) local incomes and RE prices are not as closely linked due to international buyers. To my knowledge, there aren’t many rick business men from Hong Kong or wealthy Americans buying second homes in Edmonton.
So for the 400k average price to be sustainable in Edmonton, incomes need to move higher which may happen with time but most wages adjust slowly due to union agreements and simple budget constraints. Over the longer term, prices will likely climb back to where they are today (or even six months ago) but the downward correction should continue until prices reflect local incomes.
I always like to compare Edmonton and Ottawa due to the similarities the two cities have…a large government influence and somewhat concentrated economies (IT in Ottawa, Oil/Gas Services & Manufacturing in Edmonton). Average incomes are almost identical in the two cities yet for 400k in Ottawa, you can but a 2700sqft home with four bedroooms. The RE prices are slowly converging and my opnion is that prices should be only slightly higher in Edmonton (property taxes in Ottawa are very high).
Just my opinion but I have experience living and buying in both markets.
Royalty concerns seem to have quieted down alot lately from the big companies that measure profits by the billions. Maybe all thier sreaming is biting themselves in the a**. Besides, when you look at the reduction of income tax federally, it more than off sets the royalty issues. This is more about labour shortage than higher fees from the province. I wouldn’t try to start a bunch of new projects with the over priced unskilled workers that we have all seen driving thier Escalades and Hummers either. This actually makes sense to slow down especially to regain some control. I was just in phoenix for the last NASCAR race in November and I can assure you, the economy is flying there except RE. Real estate sucks there from two things, bad sub prime mortgages and over building. You have to remember that Phoenix alone as just one city builds more homes than all of Alberta combined. They have different problems than us. We need people to fill the jobs we have already. This will dry up inventory and some kind of normality will return to the real estae market.
An old Chinese saying is that the best time to buy property is 5 years ago and right now. This means buy to keep for the long term and weather these storms that come along. It may take 3 to 6 months but I am sure things will continue at a realistic pace in 08. Good luck to all of us, and God bless the renters, Land lords need them!!!
By Lauren Krugel, The Canadian Press
ADVERTISEMENT
CALGARY – Petro-Canada (TSX:PCA), a former state-owned corporation, has signed a US$7-billion long-term deal with the Libyan National Oil Corp. on energy production sharing in the North African country.
In an investor day session last month, Brenneman said his company was interested in pursuing exploration opportunities outside Alberta, which is set to introduce a $1.4-billion royalty hike beginning in January 2009.
He cited Libya as a possible location, along with the Eastern Arctic, the U.S. Rockies and the Baltic Sea.
“The exploration investments that we might have otherwise made (in Alberta) are no longer economic,” he told investors during the Nov. 28 event.
I have 3 friends that have been supervising drilling and pumping stations in Libya for almost 10 years now. Several Canadian energy firms have long lasting relationships there. Continued investment isn’t really headline news.
Ray – Bless your enthusiastic optimism. I’d be very happy if in the spring prices started to ratchet at a normal pace and inventory dried up. Luckily, I can hold property indefinately, so I don’t need to hold my breath. I think it will take 1-3 years for the market to start growing again, hopefully this correction is slow and controlled.
To those that bring up the recent royalty changes: Keep in mind that what the media portrayed as a 20% increase, was a 20% increase on the 1% that the industry pays. This is not 20% off the bottom line, but rather a drop in the bucket. Of course with all the sabre rattling, threatening investment and jobs, it is easy to oversee the math.
Merry Xmas all.
-b
Just a note for some overly optimistic sellers. I was not born in Edmonton and don’t have any patriotic sentiments for buying a home here.
Yes, I can afford it even at the present prices with $70k/$140 income but I would rather move to a place like Southern Europe or Florida where my income would shrink to $50k and in return I’ll have a nice home and climate. Guys, be reasonable. Edmonton or Calgary are not attractive to those like me who will always earn enough in any economy and any country. And the desperate people from other provinces will not make any difference either with their earning potential depending heavily on the economic situation.
Don’t forget that we are entering the era of oversupply of oil and with the high cost that oil sands have it will be more attractive to the oil companies to move to other places like Brasil or Libya.
Come on guys, if life is not for you in Alberta then off you go I guess. You may find as you move around the world that no place is perfect. If R has the luxury of moving where he wants and make the money he wants then great for him but for the rest of us, lower taxes than other Provinces, unlimited employment and I am PROUD to be a Canadian living in Canada, I think I will stay here. Alberta may be cold in the winter but with the disposable income from a great job, I can at least travel and enjoy the rest of the world too. Oil may be in abundance but so are diamonds, are they getting cheaper these days???
R..
Not only are homes a lot cheaper but your total cost of living is cheaper in every sense of the word. Everything from a pack of smokes to a gallon of gas to a car to a house. People just don’t realize that up there and if they do they there’s not much they can do about it.
R & piccaso,
I’m sure you both make valid points but moving to another country is not an option for most of the Canadian population. For the rest of us, we have roots here with friends and family and these ties are much stronger than the drunken days at the beach you rave about. For most of us, that would get old rather quickly. Most of us are Canadian and would prefer living in Canada, shitty weather or not. Some of us actually enjoy the snow…not me, but some of us.
car27,
I like your post about long-term buying. This is the reality for most buyers and not that the get-rich-quick investors have moved on, I think people that want to buy for the long term can do so even in this type of market although I would try to wait it out a few more months…5% monthly drops are not a good sign.
There are a lot of negative people.
Not sure why. If Real Estate crashes a lot of people are going to be hurt. Be careful what you wish for people. Someone you know could be part of the doomed crowd.
Someone posted.
Don’t forget that we are entering the era of oversupply of oil and with the high cost that oil sands have it will be more attractive to the oil companies to move to other places like Brasil or Libya.
There is no oversupply of oil and none projected anytime soon. Alberta is a safe place for oil companies and BP also just announced they are taking steps to enter the oil sands. BP has long been the biggest hold-outs on the oil sands. So why after so long of staying away are they now coming around? Oil supply will remain tight for a long time. Almost no big oil company has been able to increase production in the last five years. Almost all of them are in decline. Alberta is looking better to them all the time. It is a solid safe long term supply of oil. Royalty Rates are not really an issue. It has been blown way out of reality.
As for Real Estate prices in Edmonton they are now in good shape. There could be a little more price weakness but not much. Prices will probably flatten out until April of 2008 and then start climbing a bit after that. The fact that prices have dropped is no surprise but to think this is a trend that will continue much longer is wrong. In January of 2007 there were many reports on how affordable Edmonton still was despite the increases in 2006. It was not until after the run up in 2007 that warning flags appeared. Since much of the gains for this year have been erased why are price now considered too high? The analysts didn’t think so in January 2007. With huge inventory and the current season we are in you would think if prices were going to crash they would have dropped far far more than they have by now. This is a bullish sign if you ask me. This was a correction and the signs say it is almost over.
I know some smaller investors who own between 10-20 properties around Alberta. This week they are coming to Edmonton with the intent to buy more properties. They are not flippers they are investors. They are not looking anywhere else in Alberta right now. Edmonton is their target and maybe even Grande Prairie. Yes they could be wrong too but they are putting their money on the line right now in Edmonton. After the New Year we could see a big jump in activity but prices will probably still remain flat for a little while before rising at normal rates again. No one knows where prices are going to go but to predict large price swings either way from this point on is doubtful. We can’t tell too much from the MLS numbers about what is selling but I think decent homes priced at the market are still selling well.
Anon,
“I know some smaller investors who own between 10-20 properties around Alberta. This week they are coming to Edmonton with the intent to buy more properties. They are not flippers they are investors.”
Are they expecting to find cash flow positive rental properties in Edmonton?
“We can’t tell too much from the MLS numbers about what is selling but I think decent homes priced at the market are still selling well.”
By definition, “homes priced at the market” will sell well.
rj, why can’t investors find positive cash flow properties in Edmonton? Should they invest thier money in the shrinking stock market or a term deposit at 3.5%? Diversification is king! Why does it bug so many people that investors are making money in Edmonton? Whould the “nay sayers” be happy if everyone left leaving a ghost town? I don’t get it. I have only lived in Edmonton for 8 years and I think this place is moving at a tremedous growth over all. This is a great place to do business and work. I love it here and will stay indefinately ( as long as we have reagular flights to Mexico!!!). Anyways, that is just my opinion so doomers, start slamming me for all the reasons you can think of.
To car27:
Point 1: Capitalization rates/rental yields (~4%) are less than financial instruments like long term bonds (~5-5.75%) that have no risk. ICICI bank offers a savings acoount with 4.5%.
Point 2: When market conditions improve, there is always the option to switch back to equities. A house is a highly illiquid investment and is much more costly to buy and sell.
Point 3: The Edmonton & Calgary real estate market have shed 10ish% from the peak prices. As real estate is typically a leveraged investment, this greatly amplifies your losses or gains. In Calgary, you are looking at losses of about $70G from peaks hit this summer. And the forecast at this point is not looking that great either.
Point 4: Diversification is great, but when 40% of your pretax household income goes to paying for your house, 32% is tax, you are only left with 28% to pay groceries, heating, utilities and transportation. It would be extremely hard to fit in the ‘Wealthy Barber’s’ 10% rule for investing. Therefore, buying a house may mean an inability to save for the average household, if house prices do not appreciate for an extended period of time, the average household will be stripped of it’s only means of ‘savings.’
Car27,
“why can’t investors find positive cash flow properties in Edmonton?”
I asked anon the question because I was curious to know if his investor friends thought they could find some. I think they are very rare, if they can be found at all. As far as I can tell, prices are not justified by rents.
Asking prices in Edmonton have dropped a little but selling prices have dropped as much as 25% in the last few months. What they are asking and what they are taking is quite a spread right now.
If you want to take the time and research it a bit you have to go to the alberta lands and titles office and see the real price it was sold for.
The goofy speculators who are holding out to the bitter end are the ones propping up the prices right now. Go and talk to a home builder right now, if you are serious about buying, and offer 25 to 30% less his asking price and see what happens. Ask how many homes he is really going to build in 08. They will try to bluff at first then ask him why building permits, the first thing you do before developing, are down. Look at the wholesale price of lumber, its the cheapest its been in years!
If you live in Fort Saskatchewan or Redwater ask them about the Syenco upgrader….its cancelled, or the BA upgrader they ran out of money. Look at Stats Canada data for unemployment, both BC and Saskatchewan are doing better than Alberta right now. Before you buy REALLY take the time to research what is REALLY going on.