Holy crap it’s cold out there! As our friend from Yellowknife just said "it’s so cold I saw a lawyer walking down the street with his hands in his own pockets!" Lol…no offense to our lawyer friends 
Seriously though, weather does have an impact on the real estate market. I mean, who wants to go out and look at houses when it’s -40? Only the very, very serious buyer…. Sheldon was out showing houses all week (lucky guy!) and we tried to get photo evidence to prove it but the camera shutter froze shut!
So here is our update, hopefully I got it right on the first try last week. Thanks to Linnaeus for pointing out my error(s) last week. (Last week’s numbers are in brackets). For the past 7 days:
# New listings: 499 (570)
# Sales: 249 (250)
Ratio: 50% (44%)
# Price changes: 231 (285)
# Expired Listings: 414 (115)
# Canceled, withdrawn and terminated listings: 37 (36)
Net loss/gain in listings this week: -201 (169)
Active listings for single family homes: 2592 (2725)
Active listings for condos: 1961 (2010)
So, since the beginning of the month, inventory has only climbed about 300 listings in Edmonton, we’ll see what the stats say for the entire region next week.
There was some discussion last week about whether the average prices in Edmonton will rise or drop this month, Bob Trueman has already posted his analysis (we wait to get the official stats from the board). It shows the average price in Edmonton has dropped by .55% from December and the median by .8%. Last week many people wondered part of the reason the average is holding strong is that the crap properties aren’t selling, and neither are the over priced ones. Well, here is an analysis I did for a property we just listed, as you can see the overpriced properties are expiring, and the competitively priced properties are selling:
If I were one of those 2 blue dots way at the top…I’d be re-thinking my pricing strategy awfully quickly because I’m about to become one of those green dots!
Update: Some commenters wanted to know what the above "scattergram" would look like if I added Comfree sellers to it. Since I can’t post images to the comments I’m posting it here:
Many people have commented on the blog that the Comfree asking prices tend to be way higher than those on MLS, and in this case it appears to be true. Out of all the comparable homes I found on Comfree (comparable to the original home I created this chart for) there was only one sale, and the asking price was significantly less than the comparable MLS homes (I don’t know what it sold for). Interestingly there was also only one home that had snow in the pictures, so they’ve been for sale for a long time. Lastly, there was one home that was comparable that I didn’t even include in the scattergram since was WAY off the scale at $799900 and was throwing the whole chart out of whack.
What’s the x-axis? Size of the house in sq-meters?
Number of houses sold compared to the price point.
I guess my question then Sara is, are the only housing selling above $400,000? Or are these the only houses in the last week that sold.
Yes, the x-axis is the size of the home in square meters and the y-axis is price. Sorry…guess I figured everyone could read my mind!
The chart above just shows the homes that are comparable to the one we listed, in the same neighbourhood. It is just an example…
Ah ha! I stand corrected. Thanks for clearing that up Sara.
I see now what your saying about the overpriced vs quality priced homes in a certain area.
I find it interesting that there is a $180,000 price spread between houses in the same community with similar m2 sizes. No suprise that these expired when other more affordable homes are available. Do you find their are still alot of dreamers in those areas? Also, how do houses on comfree compare to the prices your offering your homes for in this area?
No offense at all Sara, especially because realtors would do the same.
Thanks for answering sabb’s question, I was wondering the same thing.
FYI… I don’t know what is going on this past week, but I’ve been trying like crazy to sell one of my properties. Tons of showings, really good price, but no action. Then this week, I got a reasonalbe offer, accepted it, it is pending, now I have 7, yes 7 backup offers. Seems like everybody just decided, yup time to buy… Anyone else finding this? Sign of things to start leveling off?, a fluke? Or maybe there are tons of listings, but few good quality reasonably priced ones??? and yet a good number of buyers?
My realtor gave me the following, Sara can you confirm this? What was the total active during these times?
2008 = 939 solds for January
2007 = 1180 solds for January
2006 = 859 solds for January
2005 = 654 solds for January
2004 = 618 solds for January
We did pretty good for sales this January? Without knowing the actives for these times, nor the population growth, but I am assuming we are not doing too bad?
I always enjoy reading the blog regarding movement in the Edmonton area. I am wondering if you have any information as to what is happening in the surrounding areas, particularly Leduc. I don’t see nearly the activity there as Edmonton. Is this just because it is in an outlying area of the city?
No I can’t confirm those numbers. They are close to what I get but not the same… You can see the end of month inventory and number of new listings in our monthly stats update, the most recent is here:
http://edmontonrealestateblog.com/2008/01/edmonton-real-e.html
That being said, it seems sales for January for Edmonton by itself are quite good. When the board tabulates the results they include the entire area, and I think the outlying areas are not doing as well and that will drag down the numbers.
I expect we’ll have the January stats up by Tuesday or Wednesday.
cripes, what kind of property are you selling and which side of the city and what is your price, would like to know as your numbers look amazing.
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???
I was wondering if you have a stats breakdown on different areas in Edmonton.
Laura said:
>>Have to admit I roll my eyes at many, many post and yes most often , Bunny’s.<<
I have nothing against real estate flippers. I myself trade stocks and I suppose I am a flipper of stocks.
But there are fast flippers and dead flippers. The latter are just too slow to react, listed way too high to sell and got too anxious.
And yep, dead flippers tend to roll their eyes at the truth I spoke.
My posts certainly have their flaws and I welcome any logical debate.
But the dead flippers never came up with any factual or logical arguments against my points.
Typically, they resort to name calling such as “doom-and-gloom” or “roll my eyes”, that sort of thing.
Bunny,
I am not a flipper at all. I invest in real estate that has rental value in order to let someone else build equity for me. I personally think that rental rates need to catch up to the market so I haven’t bought in year. I do admit I am considering buying right now though.
As far as factual and logical arguments. There have been many on here. People have posted why they feel the real estate is sound. Apparently you have ignored those posts.
All that most people are trying to say is the problem with your posts is that you take a piece of information that may or may not be factual then you state as fact a result or outcome of said information. You need to start including in your posts words like “I think” or “This could lead to”.
I would like to ask you a question though. Please answer this one. If it now costs builders X to build a house right now. How are they going to build a house for X/2 in the future?
Bunny,
You miss the point. It’s not always about bears and bulls. This is a real estate blog. The real estate business includes all kinds of people for all different reasons. It would be nice to discuss all things real estate as it pertains to many situations.
This is not Bunny the renters blog. It is for all interested in real estate. The blog should be able to share and respect more than just your opinion.
When you grow up maybe you can own an investment property.
Jesse,
” I personally think that rental rates need to catch up to the market so I haven’t bought in year. I do admit I am considering buying right now though.”
Based on what assumptions? Every time I do a back of the envelope calculation on rental income with a decent (20-25%) downpayment, and reasonable cost of ownership estimates (mortgage interest, insurance, taxes, maintenance, capital costs, vacancy, etc), I always come up with a significantly cash flow negative result. This is a serious question – am I missing something?
rj
The only thing you are missing is that rents go up all my properties have been negative for the first year then the rent goes up. The properties that I bought 2+ years ago pay for the new properties so I can buy more. The only way to cash flow from the start is to have a rooming house. That is asking for trouble. The only time the rent has not gone up is in the last 4 months. The specuvestors all tried to rent when the could not sell but rents will be up 10% by next year
speculator,
Thanks for the response. I realize that rents increase over time (although so do taxes and maintenance) and eventually a place turns cash flow positive, but the opportunity cost on the negative cash flow incurred between now and then seems too high. Personally, I doubt that rent will increase by 10% over the next year; and I certainly wouldn’t depend on that into the future. Over the long run, its almost certainly pretty close to the rate of inflation.
Here’s the sort of calculation I use:
$365000 median home price
$95000 downpayment (~25%)
$270000 mortgage amount
$1800 monthly monthly payment (6.5%, 25 years)
$200 monthly taxes + insurance
$200 monthly maintenance + capital cost sinking fund (<1% annual, probably not enough)
So, in order to break even (and assuming no vacancies) I would need to rent the place for $2200/mo to be cash flow neutral. This doesn’t seem likely right now, next year, or even the year after that – even assuming (unlikely) 10% annual rent increases.
Jesse, that’s more like a logical debate.
Laura, I don’t see anything constructive from your latest post, so I will ignore your for now.
Back to Jesse’s question:
“I would like to ask you a question though. Please answer this one. If it now costs builders X to build a house right now. How are they going to build a house for X/2 in the future?”
The answer is simple: they won’t.
If the housing market recovers quickly, they can build and sell at more than X.
However, if the housing market continues to deteriorate due to over supply or cool down of economy, then the market price would drop below X. In that case, the builders cannot make a living anymore.
The builders are just general contractors, they don’t have to feed too many mouths. So the stronger ones will survive. But the sub-contractors and the contract workers will lose their jobs and move back to New Foundland.
Jesse, do you know why I don’t usually say “I think”? Because that’s wasted bandwidth.
Whether it’s you, or me, or Laura, or AA, none of us represents the truth from heaven. So, every single thing that we have said was what we thought and there is no need to state something that trivial again.
RJ,
I am basing it partially on speculation and partially on cash flow.
I am still sitting on fence as far as my speculation on the Edmonton RE market. However, if I feel the market is in an upswing I will go hunting and see if there are any rent neutral places, with all the inventory I would imagine there are some bargains. To answer your question I have already seen some that are getting close to cash flow neutral.
Here is an example.
http://www.mls.ca/PropertyDetails.aspx?vd=&SearchURL=%3fMode%3d0%26Page%3d1%26vs%3dResidential%26ret%3d300%26sts%3d0-0%26beds%3d0-0%26baths%3d0-0%26bt%3d2%26aid%3d6642%26MapURL%3d%253fAreaID%253d6397%26mp%3d0-0-0%26mrt%3d0-0-4%26trt%3d2%26of%3d1%26ps%3d10%26o%3dA&Mode=0&PropertyID=6527524
So, assume I put an offer of $640 and it is accepted(as I think they are too high and this is big assumption but if they didn’t accept I would move on). Now I have say $140k down payment giving me a $500k mortgage with a monthly payment of $3200ish.
I rent out the one side for $1500 (pretty easily) and the other side for $1000 + $600. Make them pay utilities and power and we are almost cash flow neutral. Now obviously repairs, maintenance, vacancy is going to cut more into your cash flow but if you can up rents in a year, it will become cash positive.
So essentially if you could sit in that basic cash neutral situation for a couple of years and realize an average 6% return over the 3 years you would take home a pretty healthy return when you sell in three years.
Once again, I still think this is risky but it is an example of how it is starting to get close.
Also RJ, even by your calculation you are basically at cash flow neutral. People are renting 2 bedroom condo’s for $1200 a month. The premium on a half decent 4 bedroom house could easily be $2000-$2200. In fact, find me a half decent, centrally located home that rents out for less than this.
So Bunny,
Essentially what you are predicting then is an unwinding and meltdown of entire Alberta economy? Am I correct in this assumption?
Jesse,
Thanks for the responses. Like speculator, it appears that you’re expecting some pretty steep (and historically rare) rent increases for the property to become cash flow neutral in the near future. Even assuming the $40k price cut, your scenario isn’t quite cash flow neutral. And I think you underestimate your expenses – taxes and insurance (nearly $400/mo?), maintenance and sinking fund (another $300-$400/mo?), and vacancy (even with 95% occupancy, another $150/mo) puts you at least $850/mo negative. It would take roughly 3 consecutive years of 10% increases to become neutral.
My estimate was based on the median – which a 4 bedroom, centrally located SFH is not. The only rental numbers I can find are anecdotal, but when I look on rentedmonton.com, I see plenty of homes that look “median or better”, with asking rents in the $1500-$2000 range.
rj
my numbers on my last house paid $360000 but we will use 365000 with the rents I am getting
$365000 purchase price
$95000 cash down
$270000 borrowed
$270000@5.25% on LOC $14175/12
$1181.25 per month
taxes $1850
or $155 month
insurance $33
$200 maintenance
Total $1569
Rent $1650
It was vacant for the first month
I invest in real estate as I can’t find anything else that makes a profit. I have dealt with so called investment advisors but there 10 year average before I invest is always 10% or better but as soon as I invest it goes down. As for the rent increase I had a house bought about march 06 $230000 rent $1050 first tennant move out march 07 rent for $1550 never vacant. If I was smart enough to figure out the stock market I would do that.
Thanks speculator. The big difference between my estimate and yours is the monthly mortgage payment…. looks like you’ve only included the interest portion on the mortgage? Also, I didn’t realize 5.5% was still available.
As for the rent increases… I don’t doubt that they’ve gone up significantly over the past couple years, but I’m sure you’ll agree that 10%/year is not the historical norm.
Hi, rj
ATB 5.24% interest only. As for rental rates alot of years they may not rise maybee wishfull thinking? It is a risk I realize that but the only thing that would make it a terrible investment would be high interest rates and falling property values that could lower rents as well. That is why I read other opinions to keep me from getting over my head and bankrupt. I wonder what is the historical norm for rental rates my guess 3%
RJ, I am not anticipating that as of yet. As I say I am still on the fence. I wasn’t underestimating those things, I was giving an example at how the market is approaching a point where it makes sense to buy again. “Approaching” isn’t there but it’s far better than even a year ago.
Jesse, where did I predict a meltdown of Alberta economy? You are making stuff up out of thin air.
Read my answer to your question again. My answer is in such a format:
if A, then B
if not A, then C
where
A = RE recovers soon
B = builders can sell for more than X
C = builders won’t see much activities
D = Alberta economy will melt down
Now you are accusing me of predicting D, which I never mentioned. Take a logic course (I believe it’s CS272 at the U of A), if you still have problem understanding that.
jesse, speculator,
Thanks for the responses. I appreciate your explanations, and am glad that the discussion did not devolve into an emotional (and pointless) bulls-vs-bears dispute (as is unfortunately too often the case on this blog and the albertabubble).
I’m all for open discussion.
Bunny,
I was making some logic leaps actually. Let me explain. Firstoff, I am going under the premise that you have essentially established that Edmonton is in a bubble and it will burst. So just for argument sakes lets say it bursts by 50%.
Well in order for that to happen it means prices have to come down by 50%. In order for that to happen basically all building has to cease because builders cannot build houses for 50%.
If all builders cease building, I would bet you anything that the economy will melt down.
Unless you are just predicting a pullback in prices? In which case builders can slow down without melt down. But I have been under the perception that you firmly believe housing is going to collapse.
Jesse, you assumed wrong.
1) I have never explicitly predicted a price collapse of 50%. Please quote my exact words, if you intend to prove that.
2) A meltdown in RE does not necessarily cause a meltdown of the general economy. The two things are related, but not the same.
3) I have stated that if the RE market does not recover soon, the weaker builders would go out of business and the stronger one would hang on.
I can’t quote you on a number of 50%. I do admit to somewhat putting words in your mouth. I suppose it’s hard to get anything else out of your posts other than the sky is falling and market is collapsing. I think I understand where you are coming from now.
Sorry, but you are wrong. A “Meltdown” in real estate will crash the economy. A decline will not but a meltdown will.
The thing is though. Economic meldowns aren’t generally a result of housing boom/bust cycles but in general are causes of them. Which is why we see ourselves in a housing boom cycles because we have a strong econmy. This economy isn’t changing anytime soon either by all indications.
scrolling and rolling
scrolling and rolling
Bunny needs to get a hobby. LOL
There are a lot of comments on here that are not overly informative or correct and there are some that are pretty good. I really don’t understand why Laura has singled out Bunny. Give it a rest already. Whether you like Bunny’s comments or not, she has a right to say them and you have a right to ignore them.
Justacomment, Laura will be selling her property very soon and she gets emotional every time when someone predicts a pull-back of RE price.
It seems that greed has significantly reduced the logical ability of Laura. All she can pull out is the “bunny is a bitter renter” or “bunny needs to get a hobby” type of crap.
She just cannot understand that her very action of selling puts downward pressure on the RE price. If she indeed believes in a RE recovery, she should be buying now.
Jesse, I believe that you are off-topic by now. You asked a question and I answered. Can I assume that you don’t object my answer? If that’s not true, please be specific.