There is a lot of debate in Edmonton right now, about whether it is the right time to buy or not. The timing of a home purchase depends on many factors including your personal finances, goals and desires, as well as external factors such as affordability, the economy, financing availability and more.
I can’t answer when the best time to buy for every individual is, but I’d like to put something in perspective.
The above image is something I quickly put together to represent a snapshot of the housing market. The red line represents average prices over a short period of time – real estate prices tend to rise and fall on the short term, while rising overall on the long term.
The green arrow represents where everyone wants to buy: when prices are as low as they can get in the current economic climate. The problem is, you never know when the market is at the green arrow until a few months afterwards. What ends up happening is that most of the people who were waiting for the green arrow realize prices are on the rise somewhere around the blue arrow, and come into the market together creating competition and causing prices to rise further. All the while the selection of homes for sale shrinks.
Now, I don’t know exactly where we are on that red line right now, (I’ll probably be able to tell you in a couple of months…lol). Anyway, for argument’s sake, lets say we’re about where the red arrow is; there is a huge selection of properties available on the market, and relatively little competition. Prices have dropped and may drop a little further, but there is potential for an increase in the short term as well.
For as rocky as things have been in the stock markets the and media lately, it looks like prices may have come down only .9% for January. Not exactly cause for panic. However, there are good and bad stats out there, and as I said earlier, you have to make your own decisions based on your personal circumstances.
So in the end what I’m trying to get at, is that you can aim for the green arrow, but don’t get stuck with everyone else at the blue arrow. If you shop at the red arrow (when most people are reluctant to enter the market) you’ll have more to choose from, more negotiating power, and less competition…. as long as you can swallow prices dropping a little further before they start to pick up again.
***Foot note***
- If you are one of the many people who are currently looking at buying be aware that different areas, different price ranges, and different types of products are performing differently. You should be working with someone who knows what’s going on and what represents good value in this market.
- There is clearly a divergence occurring in the market between well priced or competitively priced properties and over-priced properties.
- Buyer activity is reminiscent of late late 2006 and early 2007, although sales will probably not reflect that as buyers are taking longer to make decisions. Things are moving, some are moving quickly, but there is also a lot a crap on the market at outrageous prices.
Sara, that’s called “technical analysis” in stock market—trying to predict future price using historic data. There are MANY data models available. What usually happens is that by following technical analysis, you win a small bet 90% of the time and loss big during the other 10%. As Peter Lynch (or some other guru, I don’t recall perfectly) puts it, “the only people that can consistently profit from technical analysis are those who sell their analysis (not those who follow and actually trade).”
Just for the sake of discussion here, and assuming your model does apply here, we are currently right on the first peak on your chart, a little bit to the right. That’s where there is a lot of “sell” orders, low trading volume, and the “stock” price barely dropped from the peak.
Add to above, trading volume is very important for technical analysis. Since the sales rate is still low, we are either close to the peak or the bottom (by looking at the price, we are still close to the peak). We just cannot be close to the red arrow. There should be lots of sales at the red arrow area, say, 1500/month.
But mostly likely, the current market won’t be like that. The curve that you have drawn is for long term (10+ years from peak to peak), with inflation adjusted. What we will experience in the next while will likely be unpredictable—sheer signal noise on that curve.
If/when prices start to increase again it will most likely be quite different than what happened 2006 and early 2007. This being the case personal factors are probably more important than timing. If buyers are still looking to appreciation as a rationalization to buy then there may be some downside left.
Also is there really a large number of buyers on the sidelines waiting for prices to decrease? Note the definition of buyers on sideline has changed. I’m guessing before the “boom” people that saved up for awhile and bought in their late 20s were not considered holdouts. Now everyone with reasonable credit and job can “qualify” for something even with no down payment. So basically anyone renting and earning an income is considered to be “timimg the market” without consideration of their finances or plans.
Well based on these two key points you made:
“There is clearly a divergence occurring in the market between well priced or competitively priced properties and over-priced properties.”
and
“… but there is also a lot a crap on the market at outrageous prices.”
These are the two key things. Individuals still trying to sell their 700 sq ft with dugout basement bungalow, that should have been knocked down years ago for $300K+, or the 1 bdrm/studio apartment condo conversion for $220K+. These two key misalignments are just killing quality market homes and condo’s.
Now really who’s to blame for these overly inflated prices? Was it circumstance and the individual bought at the peek, or is it they’re hoping for another fiesta of buyer wars, its hard to say.
The other flip side of this is that there are properties like these on MLS. Why are the RE agents promoting these houses when they themselves know the price is inflated, hard to say, but being a commisioned based business might be part of it. (Although looking at comfree you’d swear it was 2005-2006) As any salesman/woman will point out, some people will go max on price hoping someone will be stupid enough to actually pay it on fears of market instability.
I feel its going to be an interesting 6 months just to see if the market will readjust (like it slowly has been), but unfortunately I think there are far to many investors/buyers who purchased during the peak, and ended up burning themselves with the cooling Edmonton market. Kind of reminds me of the early 80′s(not price, but percentage increases, economy, buyer highprice purchases, quick pickup and quick cooldown, etc)
**Foot note**
I love the diagram btw, and had to laugh when I saw it as it reminded me of a bladder commercial I saw this morning. lol
Looks like we just got almost a thousand new potential oil and gas workers to buy up some inventory in this market.
http://www.reportonbusiness.com/servlet/story/RTGAM.20080131.wdellcanada0131/BNStory/Business/home
Unfortunately I doubt it. You’ll find a number of these people working at your local computer store, best buy, futureshop, until they find a higher paying job in the IT or Call Center fields.
No matter what kind of jobs these people will get, that’s 1000 fewer workers from the outside and thus 400 fewer houses needed.
That’s a thousand workers that were already here. Owning and renting real estate.
There is no question that these people will easily find new jobs in Edmonton. But I think that it’s a big blow to the IT industry in Edmonton. This city needs more diversification.
Nate said..
“But I think that it’s a big blow to the IT industry in Edmonton.”
Working in the IT field in Edmonton I can tell you that this has little to no effect. We have many (I think last number I heard was 40) unfilled positions that pay 42k+ a year to start. These positions have had many ads placed for them and go unfilled. These jobs have been here way before Dell dropped the axe and will be here for a while more. The problem is finding appropriately skilled people to fill the roles.
I can only see the Dell announcement as a boon for any call centre here in Edmonton as they are about to get flooded with qualified / trained staff.
Now don’t read this as a slight on the call centre personal. I am just saying if they were qualified and motivated enough to apply, there is plenty of IT jobs available here in Edmonton before and after Dell’s news.
Cheers!
Sean, the problem is that the salary is just too low as compared to the cost of living. While a petroleum worker will have to work in Alberta, a skilled IT worker can easily find a $42k+ job anywhere in North America.
BTW, call center workers are not in the IT field. It’s like, you cannot say that a cashier is in the financial field.
Read this week on the msn home page that workers in Alberta make between 50% and 125% more pay that the same job in other Provinces. I also read that Vancouver living requires on average 70% of your income to go towards your mortgage payment. Sales are still very hot in B.C. including Kelowna where it is now ranked the 13th most expensive place in the world to live. Those Dell folks probably have homes already and new jobs are EASY to find in whatever field you are in. If you can’t find a good job in Edmonton then the problem is you. The severance packages will just dump more disposable income into our city. We have the jobs, we have reasonably priced housing and the lowest tax base. What is the problem. The big question should be do I buy or rent. If I want to buy, should I buy new or used?
Looks like some people do smoke too much and see axed jobs as a rosy opportunity. Sure. Just tell yourself how you would love to change your nice job environment and start working in a shack on outskirts where it’s too cold even with a heater.
For those who didn’t get it – Dell showed that lots of jobs that came to Edmonton in early 2000s on the assumption that the town has plenty of cheap skilled workers (thanks to UoA) will be axed. There is no reasaon in competing with oil companies for skilled workers if the jobs can be moved to India or to MB or NS at least.
Enjoy the show.
Yeah, I gotta say car27. There is no good spin that can come from losing all those jobs in the city. Stop trying to spin bad things into something good. Leave that to the doomsayers to spin good things into bad. It discredits them more. Suncor approved a $20billion project. I think it might make up for a little of the fact that we lost a bunch of $12/hr jobs.
I like the statement:
“Now, I don’t know exactly where we are on that red line right now, (I’ll probably be able to tell you in a couple of months…lol).”
Honesty is refreshing.
Bob has his stats updated:
http://www.bobtruman.com/Edmonton_SFH_stats/page_1918017.html
Car27, I am not sure in what field does the “50% and 125% more pay” apply. Cashiers? Please give more specific information to make you sound credible.
But in the IT field (which I am currently in), the pay is slightly higher (20%?) than the poor provinces (NF), on par with the rich provinces (ON) and substantially less than some states south of the border (CA, TX).
Bunny, as I wrote, I read this in the msn home page. It was not job specific but if you want credibility then read it for yourself. I am in no way spinning good from job losses to those who can’t read, I mearly am stating that this is mearly another example of the labour shortage in Alberta which makes business like Dell uncompetitive. If we had the bodies to fill the jobs we already have, balance will return. You smartie pants’ just have to figure out where they will come from. Oh, and Bunny, you had best just worry about your own credibility as I don’t even want to read your posts as I am tired of having to roll my eyes into the back of my head evey time I do.
Car27, let’s stop the name calling and use facts instead, OK?
I questioned your credibility because:
1) You quoted “50% and 125% more pay.” I know that’s false for my field and you failed to say what fields does it apply to.
2) You failed to include a specific link to the article. When you quote an article, just give the link as a reference. Don’t expect the reader to spend 30 minutes to Google it.
When you question my credibility, please give specific examples where my claim is not true.
Bunny here is a link and paragraph from that story.
http://www.reportonbusiness.com/servlet/story/RTGAM.20080128.wjobquality0128/BNStory/robNews/home
Not surprisingly, Alberta and Saskatchewan led the labour quality parade last year, fuelled by strong job gains in energy extraction and mining exploration and development, where paycheques run between 50 per cent and 125 per cent above the industrial average. Ontario, meanwhile, continued to feel the pain of losing manufacturing employment levels.
It was a study done by CIBC World Markets
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car27, Neil and bunny,
The quoted article talks about job creation or in other words a gain in number of paycheques. The 50% and 125% does not refer to the average pay but to the gain in number of paycheques compared to industry average indicating relatively strong job growth in Saskatchewan and Alberta.
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Honestly, when it comes to call centers such as Dell or even Convergys or the other dozen or so call centers in Edmonton, it’s more of an operating cost question then anything else. As many have read in the articles about Dell, since they employ such large numbers, they recieve huge concessions on taxes, leasing, etc.
For the longest time, Canada was viewed as an English speaking mexico (no offence to anyone intended). What I mean by this is you could get quality trained, fluent in english, motivated employees for a fraction of what you could get out of the States or Europe.
Problem is, with the American economy going to hell, and our strong Canadian dollar, it doesn’t make sense for American companies to get support out of Canada, and especially the western provinces. Most companies now would rather see a hit to their customer surveys then pay more then is required to fill the position of supporting a product. Sad, but true. There are companies that take pride in high customer satisfaction, but with profit margins shrinking faster then a guy jumping into a cold lake, you can be sure they’re looking for alternatives to much of what they can get elsewhere in Canada, and the world.
Eastern Canada is a place that many call centers, support firms, and other support type businesses are moving their operations to as people in these areas will typically work for less as their standard of living isn’t as high. They can still purchase homes for a fraction of what we pay here, and rent is also at a fraction. In essence, coupled with our strong dollar, the Alberta “Advantage” has become a Disadvantage for many industries/companies that have no direct relation to, or very little, to the oil and gas sectors. Hence the rediculous “Albertan’s for Change” commercials. Our advantage is at times our own worst enemy.
As seen on this wikipedia article: http://en.wikipedia.org/wiki/Canadian_dollar, the Canadian dollar from 1994 until even as close as 2004 was a great time to build and invest in Canada with it being very affordable to be able to pay what a Canadian would view as a good wage, but still at nearly 40% less then their counterpart in the US (not all industries, but a large number of them). Recently however with our dollar matching and no downward spiral in site, businesses are going to start re-evaluating their need to keep large Canadian work forces present when they can move to an emerging market and make out better with their operating costs and general overhead.
Hate to say it, but we will start seeing more and more of the “US business lay’s off hundreds” headlines over the next couple of years if our dollar doesn’t cool down. For myself, working for one of the largest US based companies in the world, its a concern we have, but our saving grace is the small workforce, with high return, compared to some of the other businesses in and around Alberta.
I hope to god I’m wrong, but unfortuantely I think this is going to be reality, especially taking all I’ve said in account with our workforce shortages.
And before anyone asks, no I don’t have websites to point referencing to at this time, this is strictly industry experience and conjecture.
Nice post Sabb.
Bunny, I do have to agree with Car at the Eye rolling to your posts. It gives me headaches sometimes.
However car, your statement “The severance packages will just dump more disposable income into our city.” is a definate positive spin to a clearly negative occurance. This is why I called you on it.
I just read that article. This is a quote:
>>>Not surprisingly, Alberta and Saskatchewan led the labour quality parade last year, fuelled by strong job gains in energy extraction and mining exploration and development, where paycheques run between 50 per cent and 125 per cent above the industrial average.<<<
It’s very clear that the pay advantage statement is describing the “energy extraction and mining exploration and development” sector.
Car27′s statement “workers in Alberta make between 50% and 125% more pay that the same job in other Provinces” is false, because that statement implied all the workers in Alberta.
I mean, either he was intentionally trying to mislead, or he lack the basic language ability to properly define a context.
Jesse, as I said before, please give me a specific example to make your criticism constructive and credible.
Good post Sabb.
But did you mean to say that Ontario’s standard of living isn’t as high as Alberta’s? Or that their Cost of living isn’t as high?
I wouldn’t argue about the latter, but their standard of living is probably quite a bit higher due to climate, culture, recreational options etc… The boom and labor shortage haven’t been kind to restaurants and entertainment venues. Medical care and contractor services are also a joke because of how busy everyone is.
You’re absolutely correct Nate on the Cost of living. As far as the standard, I completely agree, it is quite a bit higher in some cases for sure within ON, specifically the GTA.
To take that a bit further, if you head to NS, NB, PE, NF, cost and standard are both lower compared to here (exceptions are there, but on a whole). These are going to be the provinces of choice for remote support centers in the future (if Canada is still chosen for these sites). These provinces offer massive venture funds for anything related to employment, and I know NF has a massive fund for support centers and anything IT that comes to NF.
Unfortunately though, even with many of the consessions and funds available for businesses on the east cost of Canada, emerging markets like China, India, Pakistan, Africa, and in South America will be even more attractive to businesses just due to the overall operating costs.
Just depends on how hard things will get down south over the next year or two. I’m hoping they pull themselves out of the hole they’ve dug, but with so much of the financial/RE/industry taking such a hit, its hard to imagine them pulling themselves out.
Right now Jim Rogers, famous investor, stated the following in this interview yesterday http://money.cnn.com/2008/01/30/news/international/okeefe_rogers.fortune/index.htm?postversion=2008013109
“We are probably going to have one of the worst recessions we’ve had since the Second World War. It’s not a good scene.”
Jim Rogers (more on Jim Rogers if your interested http://en.wikipedia.org/wiki/Jim_Rogers)
Not a good sign, he’s been wrong before, but not in a very long time.
Sorry about this part
“Right now Jim Rogers…”
was supposed to be another post but I got carried away with cutting and pasting, sorry for the confusion.
Bunny, not all of your posts but some of them. In particular, this statement struck me as particularily egocentric, short sighted and altogether incorrect.
“The curve that you have drawn is for long term (10+ years from peak to peak), with inflation adjusted.”
You just pull something completely out of your a$$ and then spout it as fact. There is no “I think” or “It seems to me based upon(link) that”. It is just plain out statement. Makes me really roll my eyes. I’m sorry, I’m not going to dig through the rest of your posts for the last few months and pick out every line or sentence that makes me roll my eyes, but suffice it to say that you make allot of claims that are speculation at best and incorrect at worst and spin them as fact.
Jessie – I will concur with your assessment on Bunny. She seems to think she is an expert on every topic. Whether its real estate, economics, or property taxes, she thinks she knows it all. It gets to be a little much.
Great post Sara — echoes some of what I alluded to in my post “Three Things – Now or Later?” http://cominghomerealestate.wordpress.com/2008/01/18/three-things-now-or-later
I however, lack the ability to come up with original graphics as you do.
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Posted by: sabb | January 31, 2008 at 09:08 AM
Looks like we just got almost a thousand new potential oil and gas workers to buy up some inventory in this market.
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Aren’t you the same fellow who stated how the “royalty” program was going to “kill” the oil business.
Yet, Exxon and Syncrude and the rest of the oil companies are announcing record profits ever. Some of these corporations make more money than the smaller oil producing nation.
My point is, people need to read independent media outlets because the mainstream sources have an agenda. To keep the public always scared and to reward their largest advertisers.
@brad and Jesse
I actually find Bunny’s posts quite informative.
unlike most posters who seem to comment based on emotion and whim based on the latest front page headlines, she Actually seems to know what she posts.
I trade for a living, and her succinct analysis of accumulation and distribution pattern is quite accurate. ( and I also agree at the current time, the housing market is more nearer to the highs of the trend than at the bottom )
However, I have to disagree on the comment that T/A doesn’t work. But that’s like discussing politics or religion. Everyone thinks they are correct and arguing otherwise is a moot effort.
Well, whether or not you agree with bunny’s analysis will be opinion based allot of the time.
However, there can be no argument that she/he often states opinions as facts. That is my only real beef. The fact that the majority of the time I don’t agree with her factually spun opinion is beside the point.
Also, if by give it thought you mean that she believes the market is inflated and going to go down and reads all sources that support that then yes. She does give it thought.
any one who does not know bunny is he or she, once he clarified he is he.
I just scroll and scroll looking for something informative or interesting as it relates to the real estate market. Have to admit I roll my eyes at many, many post and yes most often , Bunny’s.
Let’s hope they all learn some manners and restraint while posting, I did.
Sheldon,
I came across your youtube video. Nice to put a voice and face to you. Have to give you credit for being “hip” in the business. Extra mile for sure.
Please consider some posts on staging, flipping, investing. I think its safe to say half of your readers are investors/flippers and would be refreshed if they could hear something other than stats and “roll your eyes” comments.
I would be interested to hear some tips and advice from you as well as the investor bloggers.
Where did AA go???