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: 570 (562)
# Sales: 250 (170)
Ratio: 44% (30%)
# Price changes: 285 (235)
# Expired Listings: 115 (136)
# Canceled, withdrawn and terminated listings: 36 (82)
Net loss/gain in listings this week: 169 (174)
Active listings for single family homes: 2725 (2584)
Active listings for condos: 2010 (1817)
More of the same this week, lots of new listings, but the inventory hasn’t climbed like I thought it would this month. With the number of homes that came off the market at the end of ’07 (that didn’t sell) I thought the inventory might spike right back up again, but it seems more like a normal increase for this time of year. Is that because many of those sellers have found renters for their homes? Or is it because they are spending a little more time considering their options and researching when to list and who to list with? I’d have to say it’s a combination of a number of things, and I’m sure our readers will have opinions of their own. Happy Weekend everyone!
Thanks Sarah!
What are the two sets of numbers outside the brackets?
***WOOPS! Copy and paste mistake. I’ve fixed it, thanks for pointing that out fence
Sara.
I was just wondering the exact same thing.
probably there is an error in Ratio: 44%(30%) and in Sales 250(170).
Should be rather: 44%(38%) and 250(228) if the comparison have to be made to last week.
****Nope, no error. The comparison is made for each week. It’s just the number of sales divided by the number of listings. Thanks
Sara.
Hi Sarah,
I’m not sure if this is possible, or to much work to add, but it would be interesting to see price comparisons week to week with all the price adjustments taking place. Just the average of a SF vs Condo. I think this would be a key indicator in how sellers (on a whole) are reacting to the market, but I don’t know if this is even possible or suggested before
Since there isn’t a major influx of workers into Alberta in the past month, I don’t believe in the “renting” theory. Even if some of the houses found tenants, they are at the expense of other rental properties.
I believe the sellers are still holding on. I know of a family with a total of 4 houses. They have not even listed one of their properties, yet.
Also, the massive amount of apartments (>1000) in South Terwillegar will be available after Sept~Dec 2008. Similar projects can be found in other areas as well. That will have a major impact.
1) If the buyers move into the apartments or rent it out, their current rental/residence will be empty. The rent will have to go down, unless there are more than 30,000 people moving into Edmonton this year.
2) If the buyers just flip them, the inventory will be greatly increased.
Hi Sara,
I obviously must be missing something. I seem to have lost 28 houses. When I add the net new listings for the week to last weeks active listings I get 169 + 2584 which is 2753 not 2725. Can you explain what I am doing wrong?
Also, I think I know where all those new listings you were expecting may be showing up. They seem to be in the suburbs. At least both Bob Truman’s Edmonton stats and polarissells.com have seen new listings occurring in the Edmonton area at a far faster rate than your weekly stats for Edmonton only are registering. The only difference between their numbers are your is the catchment basin, is that right? They add the suburbs of Sherwood Park, Fort Saskatchewan, etc.
Bob is currently showing 3459 sfh in the Edmonton area and Polaris has 4758 sfh.
The problem with my theory is that Polaris, once I remove all sfh listings outside Edmonton I still get 3936 sfh not 2725. In Bob’s case once I remove suburbs I get 2610 in Edmonton. I end up confused.
You also say that things seem pretty normal to you vis a vis inventory for this time of year. Can you tell us what # of SFH were on the Edmonton market last year at this time?
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“Years of price gains in Canada’s booming housing market have made owning a home the least affordable it’s been in 17 years, according to a study released Thursday by RBC Economics.
(…)
For the Alberta market, “underlying fundamentals are signalling that housing markets are ripe for a significant slowdown this year,” it said.
(…)
Percentage of income required for ownership of a standard two-storey home:
- Edmonton 41.8%
- Calgary 46.9%
- Toronto 53.4%
- Montreal 47.2%
- Vancouver 75.2%
- Ottawa 37.4%”
http://www.canada.com/edmontonjournal/news/business/story.html?id=02861ce3-1881-412a-b7c4-7eee768e74f1&k=70397
Edmonton at 41.8% does not fare too bad compared to other Canadian cities; however one should consider the lowest affordability in 17 years and the reason for it. It could be low incomes, high interest rates or high housing prices. During the low affordability 17 years ago in 1990 the 5 year fixed mortgage rate was at 12.5%. Today the 5 year fixed mortgage rate is about 7.5%. The inflation adjusted incomes are also somewhat higher today than in 1990. This clearly indicates the different origins of the low affordability in 1990 (high interest rates) and today (high housing prices). This year may shape up to be a slow year in the Edmonton real estate market as RBC predicts.
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Hi Sara,
So I thought I’d figured it out ans was mucho stupido ie. that new listings included both condos and sfhs in your stats. So growth or loss in active listings of those should equal net new listings but that would be 334 net new listings. Now I have found houses. I guess that beats losing them.
In an attempt to figure out my problem I looked at last weeks stats which don’t actually match up properly. I think you may have re-entered some numbers.
Hi Sara,
Okay I am closer.
I am pretty sure your table should have read
570 (601)
250 (228)
44% (38%)
285 (242)
115 (151)
36 (53)
169 (169)
2725 (2625)
2010 (1928)
That doesn’t fix the problem totally now growth in active listings = 182 while net new listings equals 169. But at least now only 13 houses separate the two.
Hi Sara,
I went back and checked your 18th of January number and found 169 net new but only a growth of 152 in the two active listings. Not sure why these numbers wouldn’t add up. I can see net new exceeding actives but don’t get how new inventory can magically appear with out new listings.
Bunny
Dont’ forget about all the condo conversions, most of them were rentals, so that decreases the number of available rental properties. I would think that most people who bought those conversions with intention of flipping are not going to put them into the rental market. They will just put it on the re-sale market and hope for the best.
If you look a CMAC stats Edmonton, historical has had a higher number of rental properties than other city. Renters are just going to have to get used to higher rates, just like when gas a couple of years back when it went up to $1.00 a litre, now we think that’s normal. So I would think once house prices stabilize, probably by fall, rental prices will slowly have to rise to meet the owner/rental ratio.
I’m not saying all flippers/specs are not renting their properties, but most probably are not, that’s not what they bought them for. And even if they were all renting them, that would mean they must be doing ok, so they don’t really have to sell or discount their price at this time.
The numbers are correct. They don’t add up the way you want them to because I don’t count any listings with offers pending.
This is interesting… I’ve heard third hand that the EREB unofficial stats for January are showing that home prices in Edm are firming up again. The average price for SFD is supposedly up 1-1.5% over Dec 07. Sara and Sheldon, can you comment on this?
It’s been a while since I posted, but I thought I’de throw my 2 cents in. The stats continue to look interesting and in my post a few months ago I said, the only reason markets are soft is because of inventory. Not because of interest rates, not because of layoffs, but pure and simple supply and demand. The demand is still there….if you look at sales this month from Sheldon and Sarah’s stats we’re probably going to finish the month somewhere between 1000 and 1050. That is ahead of every year since 2003 except for the specuvestor frenzy of 06/07. On Bob trumans site which has different sales perameters again…poised for the best month of sales since June 07. Single family starts have fallen a huge amount. This is because all the builders that went from pre-sale building to spec building are going back to pre-sale (actually building houses for real customers, and not investors/customers that may show up). What a novel idea….homebuilders have stopped peeing in their own pool. I believe this is what is meant when RBC says housing market slowdown. Not price reductions, but less houses being built. Prices probably won’t be roaring up 30% any time soon but I don’t see them going down much either…not with the kind of sales we’re seeing. Hopefully this means some kind of balance in the market. The one thing I am a little concerned about is the amount of Condo units poised to enter the market late this year. I think the SFH market will be rid of a lot of the excess inventory by fall, but Condo’s still have some investor activity and they may be in the position that SFH’s are in now. It’s interesting how Condo prices lagged SFH prices and now the same lag with excess inventory. In summation, I believe we’ve probably seen the weakest part of the SFH market already (since July/07). Since lag time is about 10-12 months from start to finish for a new home, and speculators have been out since about Mar/Apr 07. We should stop seeing huge amounts of new homes coming on the market in a couple of months.
Let’s hope this get’s us a breather from discussing housing at the water cooler and we can start discussing how truly bad the Oilers are!
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Here is some RE number crunching for Edmonton based on the Bob Truman website.
———-SFH———-
Dec. 2006
Sales: 559
Listings: 487
Dec. 2007
Sales: 475
Listings: 681
Percent change
Sales: -15%
Listings: +40%
———————–
Jan. 2007
Sales: 835
Listings: 1088
Jan. 2008 (projected)
Sales: 686
Listings: 1829
Percent change
Sales: -18%
Listings: +68%
———Condo———
Dec. 2006
Sales: 376
Listings: 372
Dec. 2007
Sales: 272
Listings: 466
Percent change
Sales: -28%
Listings: +25%
———————–
Jan. 2007
Sales: 522
Listings: 674
Jan. 2008 (projected)
Sales: 333
Listings: 1129
Percent change
Sales: -36%
Listings: +68%
———————–
Bear in mind that the 2006 and first half of 2007 were quite a ride for RE in Edmonton. Nevertheless the relative YOY changes in listings and sales seem to be quite significant assuming that the numbers form the Bob Truman website are fairly correct.
http://www.bobtruman.com/Edmonton_SFH_stats/page_1918017.html
Thus in 2008 we have low affordability, some economic uncertainty (U.S. mess), possibly high inventory and low sales. This will put downward pressure on the RE prices.
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Bad,
I guess it’s all in how you look at SALES. Compare any year you want to 2006 and 1st half of 2007 and you’re going to come up with a number that looks pretty paultry. 06 and 1st half of 07 was an anomoly, grossly inflated by investors buying 40 year old 1100 sq ft bungalows 3 at a time …..slapping in a hardwood/laminate floor, granite counter tops, a coat of paint and flipping it 3 or 4 months later for 50,000.00 profit. You know what the 2002,03,04,05 sales are? They’re the 2006/07 numbers without the specuvestor frenzy. Compare this years sales with 2002-2005 for a more realistic idea on the strength of the market. After all 02-05 could hardly be considered weak market years….but houses had real buyers who planned on living in them then.
I do agree with you though on the point of outside economic forces bringing some uncertainty to our country as well, but any forecast I’ve seen says Canada is in good shape, and every economic forecast I’ve seen for Canada says Alberta will lead in growth again….something on the order of 4%. With falling Bank of Canada rates hopefully they’ll translate into lower mortgage rates, but there’s no guarantee there either.
I’m a long time reader, first time writer… It’s refreshing to see thoughful comments once in a while, it’s very rare here though
I must say I agree with itchy. We have simply fallen back to a normal 2002 to 2005 market. Yes we do have a high inventory, however the builders have smartened up, maybe too much? and have held back on new builds. Yes you see plenty of empty new houses, how many holes in the ground do you see? Not much right? All we need is for the inventory to be bought up. People are still coming here. Not near as many yes, but they are still coming. I now personally the uncertainty in the U.S. is causing some people I know to come up here for work. People here see Edmonton so negatively, yet outsiders hear it is the promised land. They seem confused as to why prices went down. The affordability is still very good. Especailly considering all that is going on. I’ve lived in a lot of different places. I’ve never seen people bitch and complain about their own city so much. Edmonton is not that bad. Tons of projects that any other city would be happy with 10% of. This city has a bright future. Investors saw this and invested heavily, however they misunderstood the Edmonton negative mentality, and got carried away at the same time. We are still affordable. We are not like Ottawa, how many billion dollar projects are going on in Ottawa, plus what would be your salary there. I make 30%+ more here than my company counterpart there. Plus my job is more secure. Edmonton is turning into a big city with big time investment, it is changing. Just look at the transportation changes.
Things are looking okay.
Can somebody please explain Ft.McMurray to me? $620k for a newish starter. $380k here? Ft.Mac does NOT pay 60% more. Maybe 20%. At least that is the concensus among my engineer, lawyer, and electrician friends, plus apegga stats. Inventory is good, maybe a bit high in Ft.Mac with plesnty of good homes to choose from. High turnover, but prices are still climbing? Up 30% dec 06 to dec 07???
People here are so obsessed with “averages”. Take a closer look. Take a home YOU would buy. Say a newish style starter. We are now not that much more than Saskatoon. However Saskatoon has a lot of crap shacks bringing the “average” down. Same thing out east. Alberta has a lot less crapy old homes. Alberta has newer cities. Compare apples to apples. Statistically the “average” human should have one testicle and one ovary… Do you? Take a closer look. The “average” is a fair way to see trends, that is all.
Of course what the hell do I know, I’ve only been investing in Real Estate for 10+ years, making much more than my RSP’s, at least until I moved here
Neil said:
>>Dont’ forget about all the condo conversions, most of them were rentals, so that decreases the number of available rental properties.<<
The condo conversions may reduce the number of rental properties, but they increase the residential properties at the same time. The number of families that can live in these properties is not changed.
However, the same does not hold for the new apartment to be released into the market in 9 months. These are new apartment, and they increase the total number of families that can dwell by a huge amount.
Joe,
I agree with you on most points, but not everyone is a lawyer, engineer, or journeyman, the people your referring to make up about 30%-40% of the working population of Edmonton. I know many people in these areas of work myself, and many of these same people can’t afford a home as shown in recent stats, 41% of their total household income is dedicated to just the mortgage, add in a car, kids, and your literally flat broke.
Now lets look at the large number of other potential buyers in Edmonton, many are not working in the field, most work in IT, call centers, retail, laborer, or other unskilled working areas. For most of these folks, 41% is just their rent at the moment.
Now for myself, being in IT, I can tell you for sure that wages are very slowly starting to pick up, but its going to be another couple of years before you start seeing people making money enough to be able to afford the 300K price tag, with bills, and kids, thats unfortunately the reality of it.
Other areas of course are oilfield workers that commute. Knowing a few field supervisors, sales people, and laborers who work in these areas, many have been laid off, not because of seasonal shifts, but because the businesses are shutting down wells. A few friends that abandoned their careers to work in these fields have went back to their old jobs after the uncertainty of work.
I think your right about people in Edmonton being negative. There are some great things going on within Edmonton, but is alot more that has gone wrong (infastructure, crime, homelessness, etc) that hasn’t even been addressed, and then add on people not being able to purchase a home, you end up with some pretty angry people.
As far as new construction, theres still a large number of active sites around the city. Drive to the NE far reaches of Edmonton, or down 17 st, push past twillegar and go to 220 st, all of these areas have alot of holes in the ground, and nearly all of them are being filled with something. They may not be redeveloping new land, but be sure there are still a large number of projects still on the books that are going to be completed this year. Hate to say it but 2009 is probably going to be when all this none sense finally starts tapering off, but 2008 is no doubt going to be an interesting year.
Hi Sara,
I am neither trying to pick a fight or be difficult but am I not right that in this week’s post the numbers in the brackets aren’t from last week but from two weeks ago?
Second, I was trying to say that sometimes in your posts new inventory exceeds new net listings and some times it is less than new net listing. A unidirectional decision like not counting pending listings (which by the way I think is the correct thing to do) would only create discrepancies in one direction.
Third, don’t you eliminate pending sales from your sales figures as well as your listings?
In any case, I want to thank you for the stats you do provide and the analysis. I am honestly not trying to be critical. I am just curious. I get that this site requires effort, originality, and time far beyond its value as a marketing tool and I do appreciate it.
One final thing. In case anybody misunderstood in my short hand when I said mucho stupido, I was referring to myself and not Sara.
Regarding the affordability stats that just can out…when you look at Vancouvers 75.2% it shows just how much people are willing to spend to own a home. (I know Edmonton and Vancouver are much different cities but a 34% gap is a lot).
People need to change their housing expetations. The days of the first time buyer with a 45k annual salary buying a small SFH are long gone.
First time buyers need to either buy a one bedroom condo or buddy up and get a two bedroom condo and start to build some equity.
Here is a ROUGH example (condo fees and taxes are guesses):
A $175,000 condo conversion with condo fees of $200 and taxes of $100.
Annual income required (assuming 5% down) is ROUGHLY $46,500.
This is the type of housing first time buyers can expect. If you make more or combine incomes then there are more options available.
So talk to your friends and help them get into a home of their own.
btw…mls.ca is very slow today…reminds me of March ’07
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The royalty review does have a negative effect on the oil industry in Alberta after all.
http://www.canada.com/calgaryherald/news/calgarybusiness/story.html?id=c9fb3625-55d0-4066-9a58-8778a8059a20&k=61769
PSAC is predicting a significant slowdown.
“On a provincial basis for 2008, PSAC estimates 9,575 wells drilled in Alberta which is a 31 per cent decrease over 2007 drilling levels. British Columbia will see a four per cent increase to 900 wells, and, due to increased oil activity, both Saskatchewan and Manitoba will see a slight increase in activity over 2007 levels, Saskatchewan up by six per cent to 3,600 wells and Manitoba up by five per cent to 350 wells.
Soucy also indicated that, “many do not understand why the industry is experiencing a downturn in the face of soaring oil prices. The fact is, the WTI price of oil simply isn’t reflective of the price of oil in Alberta. For the most part, Alberta oil is heavy and just doesn’t fetch the same price at market.” PSAC is basing its 2008 Forecast on crude oil prices of US$78.00 barrel (WTI) and natural gas prices of Cdn$6.50/mcf (AECO).”
http://www.psac.ca/media_centre/pdf/20080123.pdf
As quoted the prediction is made based on $78 average oil price for 2008 which seems a bit low unless a possibility of a U.S. recession is considered. According to the previous article even if the oil price stays high some decisions to shelve exploration have been made already in the view of the new royalty regime.
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Maybe we need to consider why sales are still happening. Is it consumer confidence in the market? Or is it more likely just the average joe wanting to buy a house calling up his friendly neighborhood realtor and taking a ‘professional’ opinion. For example, I have 2 acquaintances that have just purchased their first homes this winter. One family in the north end and one family a brand new house in the south. Both had total confidence in who they were buying from; took the sales pitch hook, line and sinker from the realtor and in the other case, the builder sales center. Both families believed with absolute certanty that the market is going up, up, up and “everyone knows real estate goes up forever” (real quotes by both of them) they had scrimped and saved and bought the best they would afford as they both “didnt want to be priced out forever.” The average joe does NOT know whats going in the market. They do NOT know whats going on in the US. They do NOT know about failing stock markets or global wide economic recession. http://tinyurl.com/2emmov And if they did, whats it to them anyways? Their realtor/builder ensured them it was a good investment and thats all the confidence they need.
Honestly. My dad, a well educated man who has run his own successful company has no clue whats going on behind the pages. He is of the same opinion. “real estate going up, up, up. Get in now. My house is worth so much more now and the value only ever goes up up up.
My uncle a very, very successful mortgage broker who is well known in this city, tells everyone the SAME THING.
Whats really going on here? Is the inevitable crash (which has happened in every other single bubble market in the world thus far in the past few years and is only not going to happen here eventually in the minds of those that believe in tooth fairies and easter bunnies) delayed by Albertas invisible force field that makes us a self-sustaining economic powerhouse thats invincible to world wide market trends?
Or does the average joe still have his head stuck in the sand while those who stand to still make a profit do everything they can to keep it that way and cover the truth for as long as possible?
Andrea,
What are trying to persuade here ? I still believe that there are lot of buyers in the market the only thing that they are waiting for right time. and I believe that this is the best time to purchase, as prices went down already, interest rates are going down too.
Andrea,
Well said! I couldn’t agree with you more.
Not only does the average person not pay attention/understand macroeconomics, but they have such strong faith in the yammering that comes from the the local papers, news channels and the real-estate industry professionals that they are easily corralled into over-priced purchases.
The fact that people think prices will go up forever is insane. This is just something that “Joe” has been convinced of in the last decade ever since the Credit Bubble shifted into overdrive allowing people to borrow more for homes, vehicles, and discretionary goods.
Now we are seeing events that haven’t been witnessed in a generation. This credit bubble implosion is causing serious worldwide problems. Governments are wetting themselves and throwing huge amounts of liquidity at the problem which is like trying to put out a camp-fire by throwing sheets of newspaper onto it.
We may not plunge into another Great Depression, but the breakneck pace of credit expansion that brought asset prices to where we sit Today is slowing and will slow further as things continue to unwind. This will have an effect on consumer borrowing and ultimately on the price of those assets.
People should not be surprised or angry when Realtors (and others who earn a living from real estate) use fear and poor advice to convince someone to buy. When people hear radio ads urging us to hurry up so we don’t miss a great sale on a Vehicle or Furniture, do we rush out and do it without thinking??
It doesn’t matter. People have to think for themselves and if they buy something that is overpriced, then they have to deal with it.
Problem is that the majority rules, even in stupidity. Mix that with a bit of Speculation and you can see it all in current house prices
Ultimately like in the US when things finally collapse…we have Governments meddling by trying to bail out the Stupids and the Greedys at the expense of everyone.
Keep in mind…these big economic problems will take some time to trickle down to where “Joe” will feel it, but eventually he will.
andrea,
In effect the realtors and your uncle are wrong and right. Real estate does go up, just like cars, the food on your table and the price of going to a movie. You can find plenty of instances where there has been corrections or crashes and over a 3-5 year period and probably find instances where average prices were lower in year 4 or 5 than year 1. However I believe you would find it impossible to find me an example of prices being lower in year 10 or 12 than in year1.
Considering your friends are buying their 1st house…they are probably relatively young. So they will probably have it for a long time. I think they are buying at a fantastic time after a 13 or 14 percent drop in 8 months or so. The drop is because of inventory. The reason for the increase in inventory I think you’ll find in my previous post.
Every bust or crash as you put it, in Alberta has been caused by ECONOMIC UPHEAVAL! Whether it be 17% mortgage rates or 7 dollar oil, not temporary overbuiding because of investors and spec builders. Will these conditions occur in the next few years? Who knows but with interest rates heading down, not up, I wouldn’t bet on it.
As far as the U.S. goes, I’m not sure people really do understand it, that somehow it’s only a matter of months until the same thing happens here. Poppycock. The housing mess in the U.S. was started by a mortgage vehicle (subprime mortgages). That vehicle is not available in Canada. A subprime loan is when you pay below the published prime rate for a few years at the start. It was financial institutions big scheme to be able to qualify people for mortgages that otherwise wouldn’t qualify. When I was in Phoenix last year I played golf with a guy and his wife whose son and his wife were on one of these subprime deals and his rate for the 1st 3 years was 2.9%. Year 4 his rate went to 7 point something (I don’t remember exactly). I didn’t ask but if he had a 300,000 mtg…that would be about 14 or 15 thousand a year increase in interest alone. A lot of people new this but they didn’t care because their house would be worth 100,000 more in the 1st 3 years, they would sell it, pocket the equity and go qualify for a more traditional mtg which voila they now qualify for. Now they’re stuck with negative mtgs because the amount they owe is more than they can sell their property for because millions are in the same position. As far as I’m concerned these geniuses at the big financial institutions should have the cell that belonged to Mr. junk bond man Michael Milken….the last great ponzi scheme maker. Not only have sub-prime ruined a lot of peoples lives, but they’ve sank an economy as well. As for the effect on the Cdn economy, Certainly lower exports to the U.S., and lower growth for Canada. Possibly big consequences for the manufacturing sector. But we’ll also see lower interest rates…hardly a death knell for the housing industry.
NR,
I think Andrea is trying to share her observation of the sheep-like
mentality of many buyers the real estate market. Is she really any more guilty of “What are trying to persuade here?” than yourself?
I agree with you on your opinion that “there are lot of buyers in the market the only thing that they are waiting for right time.”
Many of these people may have made the same observation as Andrea has. This will result in those people waiting patiently for a good/realistic price which is one that is lower than today’s prices.
As far as interest rates, if you are looking at fixed mortgages, they have barely budged in the last 2 rate drops by out gov’t.
Just because our Federal government is trying to stimulate our weakening economy doesn’t mean that the banks are going to give away money. Quite the opposite if they see increasing risk in lending and if they are trying to shore-up their balance sheets due to their bad bets on sub-prime.
Given the current situation in credit markets and bank losses, I don’t think the easy, low-interest loans are going to flow as freely as we have seen.
Itchy,
Your comment above of “The housing mess in the U.S. was started by a mortgage vehicle (subprime mortgages). That vehicle is not available in Canada.”
Well IPSOS-Reid did a study a while back that was to be ready for May 2007 called “Sub-Prime Market in Canada:
Usage & Attitudes Study”
Some text from their article -
“What prompted us to do
this study?
The sub-prime market in Canada
has been growing exponentially
over the last few years.”
No Subprime in Canada Itchy? Come on…
Well, both families bought with the intention of selling in a few years to make some cash. One of the families is now trying to rent out their condo that they moved out of.
And do we really know whether the very small decrease in the intrest rate is really a reflection of a strong canadian econony, or a last resort shot at slowing the ‘gently plumeting’ real estate market?
And while Im not arguing that real estate prices go up along with the price of everything related to inflation (the mean value), I can NOT stand behind the falsehood that real estate in Edmonton will continue to climb at the very insane and very unstable rate that it has the past 2 years.
Here is a very simple, yet visually effective graph illustrating a housing bubble. http://tinyurl.com/2vkm9m
Compare that to Edmontons real estate graphs and I dont see how anyone can deny the obvious here.
I was going to add a disclaimer:
I am NOT a bitter renter. We were all set to buy our first home in May, when I couldn’t shake a nagging feeling that something was ‘off’. I did a bit of market research and BOY and I HAPPY I listened to my gut. Buying at the peak of this madness would have been a terrible mistake. So for now, we will stay happily in our $800/mo with util included 2bd townhouse and wait and see how things play out.
A crash does not happen overnight.
It took 2 years for it to peak, expect 2 years to see the after effects. I personally predict late 2008/2009 to be very interesting.
Canadians are always late to the party– Lets not expect our real estate trends to be any different.
Real estate is long term. Sorry if the average andrea or their friends got burned trying to make a quick easy buck. I never said prices were going to go up forever, simply that things were going to be okay, that the inventory is slowly starting to be chewed up and things are looking more like a 2002 to 2005 market. What is on the horizon, who knows for sure, but Canada is positioned fairly well to null the impact.
I do believe that now is a good time to get a good property at a very good price. Sure it may dip a little more, but a few thousand bucks to get the right property is nothing in the long run. Two or more years from now you’ll be glad you did. What are you waiting for? Are you waiting for everybody to start buying then the best properties get multiple offers or get snagged out beneath you? Then you are stuck with something you don’t really want? Right now there are deals out there. A crash has already happened. My area fell 20%+. I’ve seen “corrections” before, granted I saw a dip coming but not like this… I’m not a rookie basing all my knowledge off of the last two years. Infact my prediction is that the lower end housing will pick up moderaltely later this year, however just like Victoria a few years ago, the middle class will see some more reduction. Buyers will downsize and buy on the low end to be conservative. 3
Can somebody explain Ft.Mac?
andrea,
There is a rather wide gulf between “crash” in your first post and real estate going up 30 or 40 percent a year. I don’t think either one will be the case. I also find it hard to believe that anyone has been advertising that kind of increase let alone buying on that assumption. I’ve seen many forecasts ranging in a price increase from 1-8 percent. I’ve seen no forecast of doom (except on this blog of course). If you’re buying to flip, that’s a different kettle of fish. Then you bring short term volatility and larger risk into the equation.
For Michael….subprime in Canada is not the same as the subprime that is causing the mess in the U.S. Technically subprime loans do exist in Canada about 3-5% of outstanding mortgages according to RBC, (Compare to the U.S. at 22%) but there are many differences in the U.S. version. First of all no teaser rates in Canada,(find me someone here who is paying 2.9% for 3 years and then 7 or 8% after). Secondly if you’re putting less than 20% down in Canada you have to purchase Mtg insurance from CMHC/ not so in the U.S. Thirdly in Canada the bank will not lend you more than 100 percent of the current independently appraised value of the property you’re going to buy/ in the U.S. they would lend you way over the current value of the house based on recent market performance. Fourthly, the mtg market in the U.S. is like the wild west….highly unregulated. Canada’s mtg rules are very regulated as is the documentation required for proving income and mtg suitability. That is why the U.S. congress is going to hold hearings on the entire U.S. mortgage system later this year, and you can bet there will be more regulation…..can you say Savings and Loans fiasco of the 80′s in the U.S. So I suppose I stand corrected about “subprime” loans. But I was referring to the type of subprime loans that is causing havoc in the U.S.
Explain to me why I should buy this townhouse for $1700/mo over 25 years when I can rent it for $800/mo utilities included for as short term as I like?
Good deals on good properties really is subjective isnt it? Compared to what? Sure, compared to last spring, but if you compare where the prices SHOULD be following mean real estate values, you are still getting ripped big time.
We are not in a balanced market by far.
Wheres the risk in waiting, watching and saving several grand a month in the mean time? nada!
Although the fear based sales pitches from certain commissioned sales persons has convinced you, it has not phased me. And I am not so attached to this ugly city that I would be opposed to moving elsewhere with my fat bank account if I prove to be wrong in a few years.
Alternatively, Id like some sound proof of this economic force field that apparently exists on the borders of our dear province.
“Can somebody explain Ft.Mac?”
The series “Toxic Alberta” is a good start. Watch here:
http://www.vbs.tv/toxic/alberta.php
itchy,
I strongly agree with your comments.
And one other thing that so many peope overlook on this blog in their comments is that the Banks still are 100% confident to lend you money ( many times, considerable amount in the several hundred thousand range ) even in the wake of US subprime problems, to buy a RE property in Edmonton and any place in Alberta.
Do you, seriously think, that they don’t do their homework?
If they believed in a huge price drop in the near future, they would not lend you just any size of mortgage you are asking for.
To me, it is an excelent indicator of the health of the economy and the state of the RE market.
Andrea,
So bitter…so very, very bitter.
I suggest you take your ‘fat’ bank account and move somewhere else, since you obviously have no business being here.
I hear eastern canada has lots of good housing deals, and you can use your ‘fat’ bank account to live off while you collect unemployment….enjoy!
Well said nooneinparticular
Andrea,
You can’t compare renting for 800 to buying for 1700 a month in the long run. After about 5 years you would break even on the purchase and begin to build equity. Your monthly payment will also be protected from inflation while your rent will be going up every year.
If you’re here short term, rent away. I’m not sure if I will be here for more than 4 years, so my girlfriend and I are renting a nice 1 bedroom apartment that is a 5 minute walk from where I work. I’m one of the guys with my deposit for a home sitting in a few index funds and some GIC’s right now. If prices drop to the point that I don’t feel like I’m rewarding a speculator’s lucky draw, I’ll be snapping up a single family home in the south side.
Inventory looks like it will bloat this spring and half of those homes are empty. I’m spending less than 10% of my income on rent/utilities, so I can hold out until I like the economics of what I see.
>>”Andrea,
So bitter…so very, very bitter.
I suggest you take your ‘fat’ bank account and move somewhere else, since you obviously have no business being here.
I hear eastern canada has lots of good housing deals, and you can use your ‘fat’ bank account to live off while you collect unemployment….enjoy!”<<
Unfortunately this is actually what is happening in Alberta with interprovincial migration going into a negative for Alberta.
Further to this, although Andrea’s comments are definately aggressive for her point, “nooneinparticular”, your not driving any points for investing in Alberta. I guess your suggestion is anyone who is renting, and feel that it is affordable compared to the housing market at the moment, even though wanting to buy, to just pack up and move since they can’t afford a house?
I think some of the points Andrea is making are valid. “Value” is definitely in the eye of the beholder.
I think a point to Andrea is, your never ever going to see the prices you saw back in 1999/2000. Sorry, those days are gone, and as much as I personally wish prices went back their, it would take a massive set of events to make that happen, and even if we had a crash similar to the states, its still only going to go down slightly as it has in the states.
Karl, saying banks will lend money as a sign of confidence is really not a great argument at the moment. Meryll Linch thought the housing market was good in the states too until they lost 10 billion dollars, CIBC loosing 2.8 billion, so I don’t think lending practices indicate anything other then banks doing what they do, which is making money, or at least trying to. There might be an increased confidence based on foreclorsure rates in Edmonton, but with the credit crunch, and all the screw ups shown in the past I think the only people who will have an easy time getting further loans are the ones with enough equity to cover most of the loans. Who knows though, still have to wait and see how financial institutions will react to losses in the US RE market. Too soon to tell.
Somehow I agree with Andrea
Yes, If I’m proven wrong and in 3-5 years the RE market in Edmonton don’t crash I’ll just take my fat bank account and move to a warmer place. Come on! There are places on Earth that have reasonable employment opportunities and reasonable RE prices. For me the risk of having a -$100k in lost RE value far outweighs the risk of not making $25k on real estate if the gold deposits are found near Edmonville 
sabb,
Canadian Banks so far lost money because of the US subprime and not because the canadian RE markets performing poorly.
So , I can say this again:
The reason, they will give you $3-400.000 mortgage is, because they have confidence in our economy and not just that, but everything else, that can influence the RE market. ( interest rates, in-migration, job security, level of indebtedness of the individual, etc. )
Toronto Dominion has not lost a penny as a result of US subprime.
Andrea,
Please, please ignore the rudeness of some of these ignorant bullish posters. There are many people that refuse to look at the RE market in a objective manner, they get emotional and lash out at anybody that is sharing a point of view that is not optimistic.
I am selling my primary residence to live on rent and have already sold off my 2 rental homes. I have analyzed the number and definately think living on rent is more lucrative than owning in this market. The opportunity costs of your down payment are too high to waste when you can free up your money and your credit on investments with nicer returns.
I say follow your gut, yes inventory is still high despite any positive economic fundamentals people may cite. As long as you keep an eye on inventory levels and are ready to jump in as soon as you think there will be a turnaround, you’ll be fine.
Calgary’s detached house prices dropped nearly 4% M/M (chart) and in five months have dropped 12% (a 29% annual rate of decline). That average house you bought in Calgary 5 months ago for $505,920 has dropped in value to $444,769, a capital loss of $61,151. Your mortgage did not drop 12%. If you had a mortgage of 75% ($379,440) of the purchase price ($505,920) then your mortgage is now 85% of the present value of your house. Your equity is now 15% instead of 25% when you bought it. If you live in that house you cannot write that loss off. If you rent the house out you may want to figure out what it is worth as an investment asset with this simple calculator. Like Vancouver, sales in Calgary dropped double digit by 23% M/M (scorecard). Let’s see if the bulls come back in January.
Edmonton’s detached house prices put on the brakes in December after a six month freefall and finished up 1.5% higher M/M (chart). Average SFD Prices are down 10% since May 2007 (a 17.6% annualized decline) and sales are down 30% M/M and 20% Y/Y (scorecard).
The above is a quote from http://www.canadian-housing-price-charts.235.ca/
Karl,
“The reason, they will give you $3-400.000 mortgage is, because they have confidence in our economy and not just that, but everything else, that can influence the RE market.”
With the huge growth in Mortgage Securitization over the last few years, banks don’t care about Confidence Karl.
Many Banks give mortgages out and then the loan gets securitized and sold on the bond market – moved off of their balance sheets.
This mechanism allows the banks to create more loans with minimal risk because they sold the mortgages when they originated them. This is effectively like creating money out of thin-air when you dive deeper and see how leveraged these pools of mortgages are. Another story.
So as long as there are Investors to buy the Mortgages that Banks originate, the process keeps going … the banks don’t give a rats bottom because they make their $$ on selling the mortgages; not by holding them.
“Explain to me why I should buy this townhouse for $1700/mo over 25 years when I can rent it for $800/mo utilities included for as short term as I like?”
If you’re renting a place that would cost you $1,700/mo to buy for $800/mo including utilities…never buy, never move! With that kind of differential, prices are never going to drop enough to make buying attractive . You’ve found the “promised land” and it is apparently right here in Edmonton.
Sam,
I’m not sure what your point is. Yes if you bought at the very peak of the market and are forced to sell today you’re down money. But if you bought 6 months prior to that….you’re up money. You have to look at it like the stock market, in fact it’s very much like the stock market. There are ups and downs, but over the long term you are going to make money. I have all of my RRSP’s in Equities in the stock market. Do you think I’m looking for the tallest bridge in Edmonton to jump off today because the stock market tanked 10% in 1 week, or do you think I’m saying here’s a great buying opportunity because I know they’ll be worth more in 10 or 12 years when I retire?There’s a very famous quote I believe attributed to Warren Buffet…..I’ve never made or lost a nickel buying stocks…only when I sell them.
If you are buying to flip in 6 months, you really take your chances. If you buy to have a home of your own, to raise your family, to have the satisfaction of knowing the landlord isn’t going to sell it out from under you, then buy the house. Keep it for 10 or 15 years and it will be worth more than it is now. History tells us this very clearly.
Sam has a very good point though. Buying for flipping to make 120,000.00, like 05/06 is not very bright now. That ship has sailed.
By the way…very interesting article in the Calgary Herald yesterday, and on the Bob Truman site…since 1990, so the last 17 years prices have been down in
the last half of the year 12 times. Increases are mostly in the 1st half of the year. Looking at Bob Trumans stats, This month the avg price of SFH’s in Calgary is up 2.2%…same with condo’s, while median price for SFH’s is down .25% and condo’s up .25%. Edmonton is down about .9% for SFH’s but condo’s are up 2%. I think the headline at the end of January for both cities is going to be OVERALL PRICES UP however modestly.
Itchy, can you explain why in a market where there is a huge oversupply the prices are up, lets say, 2%? I can. And would really love to hear from Sara or Sheldon if I’m correct. Affordability (money that can be taken from bank), and buyers who now buy bigger and better homes than 2-3 months ago. It’s reasonable, if one can afford paying 10-20k more in a market where they have that choice, why not go for the best of the best? In fact sp/sf is on its way down anyway, which suggests that buyers get more bang for the buck than a month ago.
Condo Salesperson said:
>>Regarding the affordability stats that just can out…when you look at Vancouvers 75.2% it shows just how much people are willing to spend to own a home. (I know Edmonton and Vancouver are much different cities but a 34% gap is a lot).<<
Are you so desperate that you have to use such crap as proof?
No, people in Vancouver didn’t use 75.2% of their income to buy houses.
Many million dollar homes in Vancouver are bought by foreign millionaires who have ZERO Canadian income. It’s sheer idiocy to simply divide average house price by average Canadian income. The right way to calculate is to investigate every single family and their total global income and then use a weighted average. For now, let’s leave this crap alone, OK?
Continue from above:
I think a better way to measure affordability is to use:
Total home equity / Total home value
By using this way, we can eliminate the “foreign millionaire” effect in Vancouver.
R,
You could be right, personally I don’t think it’s a single reason issue. Could be a combination of lower inventory (3450 now vs 5030 in Sept), seasonal reasons (more sales, busier time in the 1st 6 months of the year). Confidence returning after a couple of months of steady prices. Or maybe just a little bounce off of several months of decreases.
I still say any kind of a prolonged or serious downturn has to be brought on by Economic Upheaval or else it just won’t have any legs. Over supply because of Specing and Investor activity always sorts itself out in the end….it just takes a while. I think prices aren’t going one way or the other much until inventory straightens itself out.
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itchy wrote:
“I still say any kind of a prolonged or serious downturn has to be brought on by Economic Upheaval or else it just won’t have any legs.”
There’s no need for an “Upheaval” but a slowdown or stagnation in economic growth will affect the RE market especially while there’s an oversupply already. Any economic slowdown will impair the absorption rate of the excess inventory. Also notice that the more consumers are spending on their housing the less they have to spend elsewhere therefore reducing the demand and economic growth. In addition the credit crunch seems to be getting worse.
http://www.ft.com/cms/s/0/ea8221ee-cd40-11dc-9b2b-000077b07658.html
Therefore one should not count much on credit expansion to support spending habits of the consumer.
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-46 outside with the windchill.
Doom and gloom today….
Some better news for you Nate.
http://www.reportonbusiness.com/servlet/story/LAC.20080126.MKECOLAB26/TPStory/robNews
“The downgrades to our forecasts for the U.S. and other advanced economies are expected to leave a larger imprint on growth rates in the emerging complex,” UBS said.
However, thanks to efforts to clean up potentially dangerous fiscal, monetary and currency policies, the developing world is much less susceptible to violent economic crises than it was even a decade ago. As a result, they are in much better shape to withstand a U.S.-led economic shock without the nasty repercussions that we might have expected in the past – meaning an economic slowdown is less likely to devolve into an economic crisis, TD’s Mr. Kelly said.
UBS GLOBAL GDP FORECASTS
2008 2008
%y/y 2007 (revised) (previous)
U.S. 2.2 0.8 2.1
Canada 2.6 1.2 2.0
Japan 1.9 1.2 1.6
Eurozone 2.7 1.3 1.6
Britian 3.1 1.5 1.8
Switzerland 2.7 1.5 1.6
Asia 8.8 7.8 8.5
China 10.9 9.9 10.4
India 8.6 8.2 8.8
Latin America 5.3 4.2 4.4
Eastern Europe 6.3 5.7 6.1
World 4.9 3.6 4.3
SOURCES: TD ECONOMICS, INTERNATIONAL MONETARY FUND, UBS
More good news.
http://www.reportonbusiness.com/servlet/story/RTGAM.20080123.wibasia23/BNStory/robNews
In the last U.S. recession in the early part of this decade, China’s economic growth fell by a mere one-tenth of one percentage point. Whether China will get off so easily this time is impossible to say, but there are at least reasons to hope that the locomotive of Asian growth will stay on the tracks.
I sold all my asian and emerging index funds in November. So I’m hoping it drops some more before I think about buying back in.
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Let’s define some terms as there seems to be some confusion.
Slowdown – lower growth than previous growth
Stagnation – no growth
Recession – negative growth (economy shrinks)
Formal definition of recession is two quarters of negative growth, hence it cannot be declared until after the fact.
Lower growth is not an “upheaval” or doom and gloom as some would like to see it. Nevertheless it may spell a downturn in the RE market since it is already oversupplied. The RBC predicts a slowdown in the Alberta economy as follows:
Nominal GDP growth
2007: 12.4%
2008: 7.4%
2009: 5.0%
Real GDP growth
2007: 4.3%
2008: 3.9%
2009: 3.2%
http://www.rbc.com/economics/market/pdf/provfcst.pdf
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Only 4 more days till the end of January.
Calgary sales are down almost 30% as compared to Jan 2007 and Jan 2006.
If this is the perfect time to buy, then why is no one buying?
And if no one is buying right now (when prices have retreated since last summer), then what reason would they have to buy in the spring/summer when prices are supposed to go up during the great spring market uptake?
In layman’s terms. If an iPod is on sale at Future Shop today and a consumer doesn’t buy it and wants to wait 2 months down the road and buy it at regular price or higher price – that doesn’t make sense at all.
So why would someone who’s making the largest purchase of their lives wait until spring to buy when prices will be “much higher?”
The only buyer psychology I can think of is that sales for the whole year of 2008 will be down as compared to the last two years. Consumers now are more cognizant about buying at the peak and are holding off for further price reductions. I guess reality has set back in.
The decrease in sales will not sit well with the absorption rate as inventory increases everyday.
Edmonton prices are in good shape right now and the market seems to balancing out. 2008 is probably going to be a good time to buy if you have been thinking about it. Many factors have aligned to make this market more affordable but I would not bet on this lasting much past this year. Going forward is going to be very strong for Alberta on many fronts. I would like to make a point about the Royaly Rates which everyone keeps knocking. The rates have little to do with the Natural Gas drilling right now. Price, supply and CAN$ do. However prices will not be low forever and supply is going to be a serious problem within 5 years from now. Did you know the USA drilled over 32,000 natural gas wells in 2007? WOW! That must mean they have piles of production now! Nope. They do have high inventory but that will continue to shrink over the years. In fact even with 32,000 new wells production shrank last year. It is only a matter of time (soon) before Price and Supply make Alberta viable for gas again. It is also interesting to note that Oil consumption in the USA is higher than the same time as last year. So much for slowing demand due to a slowing economy. Their oil inventory is near the bottom of the five year average and consumption is still increasing and production is still falling. The oilsands is like the Internet 12 years ago. It’s just getting started now. You are going to look back at the numbers in 15 years and be blown away. It’s tiny tiny right now. 5 years from now those that could have bought a piece of Alberta may be ticked off that they didn’t. I suspect average prices will be around $100,000 higher in Edmonton 5 years from now. Don’t even ask for facts backing this up because I would need to write a book about why Alberta’s future is so bright. On a final note if you do what the herd is doing (waiting to buy) then you will be buying with everyone else and demand will have increased which will push prices higher again. So make up your own mind. No one here can tell you. From where I’m sitting Alberta is still the best bet in North America. What do I know? I’m an idiot! I’d forget my name if it wasn’t on this handy plastic thing in my wallet that has my picture as well.
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“”The only function of economic forecasting is to make astrology look respectable.” — John Kenneth Galbraith”
http://www.canada.com/edmontonjournal/news/business/story.html?id=26c53dcf-5be9-4e25-bd94-8d50adba6a30&k=47749
Anon, I am really impressed by your ability to predict economic conditions 5 and 15 years from now. Clearly it looks more respectable than economic forecasting.
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And yet… more good news…
http://www.reportonbusiness.com/servlet/story/RTGAM.20080128.wjobquality0128/BNStory/robNews/home
According to a CIBC World Markets Inc. report released Monday, manufacturing jobs are still vanishing across the country — and particularly in Ontario. Work in low-paying sectors such as general merchandise stores, textile, and furniture manufacturing, slumped by 1.2 per cent in 2007.
However, the number of full-time paid employees in well-compensated areas such as public administration, computer services and oil and gas extraction rose by a strong 3.6 per cent in 2007.
Alberta and Saskatchewan lead the labour quality parade last year, fuelled by strong job gains in energy extraction and mining exploration and developments, where paycheques run between 50 per cent and 125 per cent above the industrial average.
Yep… Here’s more
http://www.nickles.com/brn.asp
Alberta’s roaring oilsands boom is gaining even greater momentum, core-hole drilling plans indicate.
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Neil, from the same article you posted:
“Meanwhile, the oilsands coring boom doesn’t even come close to compensating for the year-long slump in natural gas drilling, said Roger Soucy, president of the Petroleum Services Association of Canada.
There’s work for catering firms that run the camps and construction firms that build winter roads and drilling pads. But most of the oilsands winter drilling boom involves core holes, so there’s no cementing, acidizing and fracturing work for the conventional oilfield service companies.
“So the economic spin-off of core holes is nowhere near what it is when you’re drilling a full-fledged well,” said Soucy.”
http://www.nickles.com/brn.asp
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Reality check.
Not everyone in Alberta works in oil and gas.
Neil,
http://www.reportonbusiness.com/servlet/story/RTGAM.20080128.wjobquality0128/BNStory/robNews/home
“The expected U.S. slowdown will slow the momentum in Canada’s labour market in 2008, Mr. Tal said.”
I hate to say it, but that article from Report on business is flip flopping back and forth all the way through that article. It is mostly positive, with some hits of “US instability affecting Canada” and the quote I put up.
BAD
You see the BAD, I see the GOOD.
To me the article states the the future oilsands development will only get bigger, which is better for Alberta and Alberta RE.
Plus, if you actually beleive what you read in the media I can tell you that if you think there is such a slowdown in NG industry, take a look in your paper (Edmonton Sun, Calgary Sun/Herald) and count how many ad’s there are for drilling/service personnel. Or better yet, look at the nickles home page.
http://www.nickles.com/ for rig counts.
or
http://www.smith.com/stats/new/index.asp
I would use Smith Bits its closer to actual counts than nickles, which by the way CAODC uses.
Just so you know I’m in the industry and have been for 32 years. Right now there is a big time shortage of workers, so when natural gas drilling comes back next fall, I don’t know where there going to find enough people.
And another thing, I could troll the internet looking for good news story all day, but what does it accomplish, nothing. It’s not going to change the outcome, what ever that may be.
You posted one great quote though
“”The only function of economic forecasting is to make astrology look respectable.” — John Kenneth Galbraith”
Recessions come and recessions go, but the last time I check world growth doesn’t stop over the long term.
One last question? Are you a day trader by chance, just wondering because you have such a short term outlook.
That’s it for me. no more posting as Neil (GOOD). Have a nice day Mr. BAD.
dj
You don’t have to work in it to share in the benefits. I would say it’s the biggest economic driver in Alberta, wouldn’t you. So it kinda relates to what you do for a living.
Sabb….. look at the good… look at the good. Looking at the BAD makes your heart rate climb and builds anxiety, so unless you need to lose weight or you want to shorten your life, just look at the good, be calm, be happy. Things will always work out for the best if you have a positive attitude. Has worked great for me….:-)
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Neil, you seem to read too much into my initials. Unfortunately they do make a valid word. BTW, I do agree with you. Be calm, be happy, but also be alert and see the bad things so you can avoid or exploit them.
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The viewpoints are often so polarized. The truth is probably somewhere in-between, which I believe will suit most people’s purposes just fine.
Here is a link to an interesting article. Worth a read although I think it might be fairly biased. Take it with a grain of salt.
http://www.angelnexus.com/getreport/daef18ae9dfa0940d182c96eda6bd210.pdf