Here is our weekly update on the Edmonton real estate market. (Lastweek’s numbers are in brackets, and the week before after that). Forthe past 7 days:
New listings: 669 (714,752, 648)
# Sales: 263 (259,275, 275)
Ratio: 39% (36%, 37%, 42%)
# Price changes: 465 (411, 270, 384)
# Expired Listings: 152 (137, 343, 201)
# Canceled, withdrawn and terminated listings: 66 (58, 45,51)
Net loss/gain in listings this week: 188 (260, 89, 121)
Active listings for single family homes: 3496 (3367, 3207, 3048)
Active listings for condos: 2608 (2541, 2446, 2351)
Inventory continues to creep up and sales continue to lag behind:
At some point we’ll run out of homes to list…won’t we? j/k… I do think we’re at that point in the year where we’ll see the largest gains in new listings, and shortly thereafter we should see the largest number of sales for the year. We’ll have to wait and see if the sales out pace the new listings, or if the current trend continues.
As for the average price per square foot, things seem to be flattening out:
Note: The data for the price per square foot chart is taken from Bob Trueman’s daily stats web site.
Just wondering, is the decline in the price per square foot related to more pre-owned homes selling rather than new homes since last summer?
Just a comment on the inventory. I’ve noticed a huge emphasis placed on the raw number of active listings, which is then always compared to prior years with the comment that our inventory is above average. The population of the city has grown significantly over the past few years as well as the total number of properties in the city. There must be a better way to measure inventory to compare it to past years than just posting the raw numbers. For example, it might be prudent to post a ratio of active listings/number of residential properties in the city. Also, the pool of buyers and sellers is much greater than it was 5 years ago meaning that inventory can quickly be absorbed or made available to the market depending on the mentality of the herd.
I also don’t think the seasons have much effect on prices any longer. Buyers and sellers are both sophisticated enough these days to negate that effect.
Personally, I can’t see our market staying stagnant for long. Saskatoon, Winnipeg, and Regina are no longer bargains and there really is no place to move in the country with jobs readilly available and cheap housing. Calgary and Fort Mac still have a much higher average price than Edmonton. One strong month of sales with a 2-5% price jump could swing the pendulum back again as investors and fence sitters pile back in at the same time.
I agree with you, Ken. I also think that buyers are going to start seeing that (-$50/sqft single family) and (-$30/sqft condo) drops. Next, active dropping from June 2007 to November 2007. November 2007 to present represents stability with slights increases in the curve as buyers see if it’s the best bang for their buck. That’s 5 months of active decreases and 5 months of stable movement/minor increases. With the warmer weather and potential further decreases in the key rate, it’s starting to look good in Edmonton again. People are starting to see that “the ground hasn’t fallen out” of the market and the waiting is going to turn into buying now that the weather is going to start getting nice. There’s built in value again.
There’s been a few articles saying that Canada’s narrowly missed a recession from the US fiasco. The exception may be Ontario which may slip into a light recession. Alberta is #3 in growth after Saskatchewan and BC this year. But the US is hindering our normal growth rate.
There’s also an article saying the gap between The Fed and The Bank of Canada will be good for future home buyers.
There’s also articles saying that the foreclosures in the US are also not as bad as everyone’s thinking. That for example a 273% increase represents a very small pool of subprime individuals and doesn’t represent 99% of the people with normal mortgages.
I know that those articles are on ctv.ca somewhere.
We’re 10 months of doom and gloom and we’re now down in the $130K’s again. Canadians are consumers and 10 months is a long time for a consumer culture to be kept down…soon the urge will come again, maybe not as before, but it will. Soon the good weather will errode away those who have “battoned down the hatches”. With the US doing so poorly right now and a marginal effect on Canada – that’s great news and shows that Canada is coming into it’s own and standing on it’s own two legs.
Thoughts?
oops “now down in the $130K’s again” = “NOT down in…”
As the sales-to-inventory ratio decreases, presumably the average “quality” of homes sold increases – last year, nearly everything was selling; this year, only the best third or so is.
Even though the mean, median, and SP/SF are holding, home values may actually be decreasing.
For every articles predicting good news, there is an article predicting bad news.
For every articles predicting good news, there is an article predicting bad news.
For every articles predicting good news, there is an article predicting bad news.
I see more sold signs than have seen in last 10 months, is it just spring or trend is changing, well one interesting thing, I was contacted by a realtor who I contacted 3 months ago for selling my brand new apartment which I bought for investment, she has 2 clients desperately wanting to own a apartment in the building I have my apartment in, but thinking market is slow I rented it for a year, now I have a potential buyer but cannot sell it as I have tenant in it for long time.
An over reaction in panic buying, then followed by the over reaction of over supplied market selling is finally coming back to stability. Ken, you have made some very good points especially with ratios of people to listings. I watched an program on CTV last night about how Quebec folks are finally starting to move west, especially Alberta. When unemployment benifits start to run out in Ontario they will be forced to consider Alberta as jobs are what they need and we have ‘em.
Car27 and Ken,
Your optimism is inspiring but don’t let it cloud reality. Sellers have been waiting for others to move to ALberta for how long now? Ontario and Quebec’s economy has been horrendous for more than a year now. Even when Alberta reported levels of negative net provincial migration, Alberta had jobs and Ontario and Quebec were in trouble. The issue boils down to common sense. Have you looked at the the house prices in Quebec etc? Why would someone move here to buy a house that would be almost twice what they paid for in Quebec? Furtheremore, what about the culture shock? Why would you move just to make 5 dollars more per hour but have quality of life go down because everything in Alberta is inflated price wise?
It doesn’t make sense.
Sellers or Bulls have been waiting for someone to rescue them. First it was the spring rush, but no one is buying anymore and prices are stagnant. Now the hope is with others who move to this province. But how many of those people truly want to buy??? They might come here for work until things get better in their home province then decide to move back after.
I think it will take time to get back to the $325+ sq. ft but it looks as though the average has levelled off around $275. A stagnant market has both ups and downs for buyers and sellers. What is wrong with that? If your house is in the top third, it will sell. If not, it SHOULD be hard to sell your house unless priced appropriately.
DOM is down 9 days from its high and avg. selling price is almost $8,100 higher than “the bottom” late last year/early this year.
If you do the math, we’re on pace for 748 sales in March, the highest since June 2007.
And why is today’s market so bad anyway? There have only been 8 months in Edmonton’s history that have higher sales than today. People have short memories…
Good days are ahead not just for homeowners but for those willing to jump in soon.
Car27,
You are expecting doom for all the Canada to have a boom for our crappy real estate. Months before some one else commneted that the Golbal warming is in near future and the only place livable will be Canadian North and so our prices will go up…hahaha
For those wondering about the price per square foot of new homes and resale homes… I’ve tried to run the numbers, but the sample size for new homes on the MLS is too small to get a reliable average.
I take it by the fact that there’s not 64 comments by now that people are starting to seriously calm down about the market and are searching MLS for deals instead of coming on here all the time haha!
So why is it that Edmonton has such a large number of homes on the market? I can’t help but notice that most of the homes for sale are new or no older than 0-1 years. In my opinion the large inventory is directly related to builders and investors trying to make a quick dollar in 2007. More builders than ever before would build a spec home without having a buyer and once the house was 90% complete they would sell. This worked well when prices were increasing 2-3%/month. When the market was showing signs of softening most builders/investors put their homes on the market. 4-6 months ago you saw homes for sale that weren’t even complete as builders/investors new they had hit the peak and were now facing a 1-2%/month decrease in prices. This created a spike in inventory. How long until these homes are sold? Personally I think we have hit bottom as most new homes are already on the market. Builders have stopped building unless they have a buyer, investors are no longer putting 5-10 thousand down on a new condos or homes and flipping once complete. In my opinion…. We will see inventory decrease soon. Prices will once again increase 5-10%/year. Population always grows faster where there are jobs. Edmonton has plenty!!
unfortunatly edm is still adding 14,000 homes this year
statscan.com/housing/starts
Still can’t see how prices are going to increase 5-10% annually. To see a house leap by $45000 in a year is far more than nearly everyone’s wages will increase in a year.
There has to be a limit. Mainly, lending will dictate what occurs to a point…the rest will simply be mathematical. When owning your own home means $2800/mo, that is a serious piece of the average families income. If they stretch to meet that limit, then they will be certainly cutting back on non-essentials.
At what point will these year/year appreciation levels stop then? Are you saying that in 5 years from now that the average home in edmonton is going to cost $600k + …do you even comprehend the carrying costs of a mortgage of that magnitude?
I have a hard time believe that the demographics in edmonton will support an average home requiring an after-tax $4000/mo to maintain in 4 years. Even for the people making $100k/year that is a huge portion of their take-home.
This type of blind conviction that prices will increase because there are jobs available is misguided. Prices are more a function of the lending environment that anything else.
I see far too many families struggling with $300,000 homes let alone any higher.
Housing (amongst other necessities) is consuming a disproportionate amount of the average familiy’s income and will result in future pain when savings are required.
Comments on the last 3 posts,
Allin,
Right on. I couldn’t agree with you more on the reasons for the glut in inventory. It’s also the reason that comparing sales numbers this year to the 06/07 sales numbers is misleading. Investor and spec sales really distorted the numbers, so when I’m looking at how strong/weak the re-sale market is, I’m looking at 03/04/05 numbers. I’m not sure on the 5-10% increase though. I certainly can’t see that for this year as I think inventory will remain high til the early part of next year. My opinion has been that prices will go nowhere for the next several months. If there is any hope for those who wish for markedly lower prices it will have to be this fall/winter during the slower sales period as long as we don’t put a big dent in the inventory.
Susan,
That may be so but the majority of those are condo’s. I think that segment has the largest downside risk, due to an expected glut by years end. The SFD market is going to be drawing on some pretty paltry starts, beginning this fall. If you look at the 1st 2 months this year, sales of SFD homes were around 1400 (Bob Truman) and starts were about 450. Even during the Oct/Nov/Dec07 period actual houses being built were lower than reported because the Spec builders started filling in a significant number of basements. These were reported as starts because it’s based on permits not actual houses built. The builders hung on to the permits (because it actually costs them money and red tape to get them), but didn’t build the houses. Since it takes 8-12 months to bring new homes onto the market, it makes for potentially interesting conditions for late this year, early next year in that market segment.
Michael,
I doubt if you meant it that way but your wages don’t have to increase 45,000 a year if house prices go up 45,000 a year. If you have a mortgage interest rate of 5.5% your wages have to go up 2,475.00.
On a wage of 50,000 a year you would have to get a wage increase of about 4.95%. I don’t think that’s outrageous. I’ve kind of lost track of the average wage increase in Alberta over the last year or two but I know it’s been higher than everywhere else in Canada.
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“Exporting raw resources means exporting jobs. In fact, according to a consultant’s report for a recent Energy Board hearing, even one 450,000 bpd pipeline can send 18,000 jobs south along with that bitumen.
Those well-paid jobs are critical to families, communities and the province. Without the job-creating, “value-added” processing, oil and gas extraction is one of the lowest jobs-per-output industries in Canada.
Many Albertans know this is a problem. And they’ve been speaking out about it for some time now. So much so that in 2006, one Tory party leadership candidate made a promise to address it, saying: “Shipping raw bitumen is like scraping off the topsoil, selling it, and thinking we have a rich farm because we have cash in the bank.”
He even pointed out the obvious, “Once it’s gone, it’s gone for good.”
(…)
Instead Stelmach claimed that 72 per cent of bitumen would be processed in Alberta by 2016 with upgrader plans already on the books. So obviously, there would be no need for government to act.
Wrong. Without government action, there is no guarantee that those upgraders will be built in Alberta. Quite the contrary. The lack of government regulation, in conjunction with runaway inflation — also caused by government-without-a-plan — has already resulted in some upgrader projects being shelved. More will likely follow.
Instead of those upgraders being built in Alberta, U.S. based refineries are installing upgraders, which will create thousands of long-term, well-paying jobs — in the U.S.
And every time the capacity for upgrading and refining bitumen is stepped up in the U.S., the job loss in Alberta is permanent. When facilities are built elsewhere, companies have no incentive to build them here. And NAFTA makes it hard to bring those jobs home.”
http://www.canada.com/edmontonjournal/news/opinion/story.html?id=a40379ac-4f63-4d27-b191-105008a1de37
The high cost environment in Alberta is the cause behind those decisions.
http://www.financialpost.com/trading_desk/energy/story.html?id=382312
Unfortunately these are the good long term jobs that we need to keep the province’s economy healthy. It seems that the jobs are going out of province in search of the workers instead of the workers coming into the province in search of the jobs.
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I was leaving a restaurant on the weekend and saw one of those boxes that had the free comfree magizines etc. I picked up and browsed through the Comfree mag. and was surprised to see that they had approx. 4000 listings (in and around Edmonton plus a few in other locations).
I then remembered dealing with a realtor last year that had his own web site where he listed houses on his own, outside of his MLS clients (promised better prices because of less fees to the seller). He had approx. 20 properties listed. I then checked anouther realtor (Web site) that I had met (specialized in condoes), he had 91 “investment” exclusive properties that were not on MLS, but only available through him. How many realtors are listing and selling properties outside of MLS and the company they work for (sounds like a conflict of interest)?
On my way down town I drive by 3 huge condo developments that are being built (looks like they’ll finish this spring/summmer) in the RailTown area.
Sales to listing ratio at 39% (thats only the MLS story).
In the apartment/condo conversion complex in my neighbourhood the same 9 for sale signs are still standing (although bent over and raged looking) like they were last fall
Even with new starts way down, I think its apparent that we have more then enough properties available to last for a very long time.
The new homes were serving speculators as much or more so then people actually needing a place to buy/live.
I think as far as a get rich quick opportunity, Edmonton has run its course, if you haven’t already, its time to move on to the next big thing. Which is probably better for most of us who live and intend to continue living here. Happy Easter.
The overbuilding in Alberta is crazy. In my home town Stony Plain a town of 12,000 give or take, there are at least 7 four story condo projects just either finished, or being built. This does not include the flood of townhouses for sale. One townhouse complex had a sale on, and was giving away a car with the purchase. I always hear that 30/70 investor/owner split on such units, but I am sure that these stats are wrong. If prices are not dropped on the units to sell them the inventory is going to go higher. Sad that a province with so much extra housing can’t attract people because of the unfordable housing costs.
The overbuilding in Alberta is crazy. In my home town Stony Plain a town of 12,000 give or take, there are at least 7 four story condo projects just either finished, or being built. This does not include the flood of townhouses for sale. One townhouse complex had a sale on, and was giving away a car with the purchase. I always hear that 30/70 investor/owner split on such units, but I am sure that these stats are wrong. If prices are not dropped on the units to sell them the inventory is going to go higher. Sad that a province with so much extra housing can’t attract people because of the unfordable housing costs.
The overbuilding in Alberta is crazy. In my home town Stony Plain a town of 12,000 give or take, there are at least 7 four story condo projects just either finished, or being built. This does not include the flood of townhouses for sale. One townhouse complex had a sale on, and was giving away a car with the purchase. I always hear that 30/70 investor/owner split on such units, but I am sure that these stats are wrong. If prices are not dropped on the units to sell them the inventory is going to go higher. Sad that a province with so much extra housing can’t attract people because of the unfordable housing costs.
After moving here last year the first thing I noticed was how many of the people I was meeting held 2nd, 3rd and even 4th properties.
The speculation in this market (and others) is rampant. I wouldn’t be surprised to find out that Speculation accounts for 30% of the demand over 2006/07. Judging by the number of people who I have met who own multiple properties in hopes of making easy money.
Take a look on kIjIjI dot com and the signs of desperation are becoming more evident. Ad titles like “I have bought another house, gotta sell!!!” are rediculous.
I like to keep an eye on the number of places offered for rent (climbing steadily) as an indication of Investors trying to slow-down the flow of Red Ink.
I don’t recall seeing so many “Reduced!!!” ads before on so many properties in Edmonton and abroad.
The ship is listing badly now and the Rats are abandoning…the smart ones are on the shore with their Cheddar in hand.
Wow!…
“The ship is listing badly now and the Rats are abandoning…the smart ones are on the shore with their Cheddar in hand.”
LOL.
Michael, are you sure that all these people purchased their 2nd, 3rd, and 4th property “in the hopes of making easy money”? Or could it be that they are in it for the long haul, as part of their overall investment strategy?
This is certainly the case for us. We purchased rental properties shortly before house prices started to climb steeply, but we don’t consider ourselves speculators, since we have no plans to sell in the near future (and neither did we try to sell when prices were at their highest).
We are planning to keep these properties in good shape, which will eat into our short-term returns. You could say that, having renters pay the mortgage, is relatively easy money….if all goes well
However, by buying several properties within a relatively short timeframe, I admit that we helped drive up sales volumes and subsequently prices, and probably contributed to the impression that there were more buyers out there than there really were.
Assuming that a number of other people did the same, we collectively created an environment in which it seemed appropriate to increase new housing starts and asking prices for resale homes.
How do we fix this now? Probably by letting the market balance itself, as it has been doing.
We may not purchase additional rental properties in the near future, since we probably would
have to charge rents that we believe are not justified for starter-type homes. We like to invest, not exploit….
On the other hand, we will probably buy a new primary residence within the next year, but we will be very realistic in terms of the resale value of our current home and the price difference we are willing to pay.
We have seen a lot of houses that seem a bit out of touch with reality, when it comes to asking price relative to location, finishings, and overall value.
mdm,
Of the people that I have met…the answer is Yes…None of these people have any interest whatsoever in being landlords; just easy money.
Beyond the people whom I have met, I can’t say what their situation is for certain with respect to those who have multiple properties – but the rising inventory may have something to say.
However, at the prices that RE was going for in 2006/07 and now, I can say that the rental yields would not have made many of those properties a sound investment. This you have already acknowledged.
You say that you wouldn’t purchase a rental property now because you would have to charge higher rents and you “like to invest, not exploit”…well that would be a decision that the rental market would make for you. There would be nothing wrong with asking $2500/mo to cover your mortgage however your property would be facing fierce competition from a growing supply of rental properties.
If your current Investment model works for you, terrific. If you have a long term plan, then good for you! I don’t suspect being a landlord is the easiest work, and if you are making money at it, then you deserve to. But your situation is not applicable to todays house prices and puts you out of context.
But…now that Investors like yourself are out of the market with regards to purchasing investment/rental properties due to P/E ratios then you will have undoubtedly left a vacuum in demand. This is evident with new housing starts.
I hear all about the 1000′s of people supposedly flocking to Alberta in search of work, but with the number of out-of-province plates I see zipping around, that doesn’t spell long-term to me. Add to the fact that getting into a property now is like having your first step on a flight of stairs start at 8 feet.
I guess my real beef is that I see so many people stretching their finances dangerously to own a property (many gambling) that I fear these idiots may be the majority…and in the event that poo hits the fan and home-owners get in serious debt problems I would be pissed to see a bailout of any form for these people.
The US is a good model of irresponsible people/banks being bailed out at the expense of others.
So for those of us who presently choose to live within our means, are we really doing ourselves any good? Or should we just go to the bank tomorrow and sign up for 40 years of artificially high payments? I will ponder that some more when I drive past the For Sale signs in the morning.
well, instead of bailing out banks US government should bail out common people to save their economy. You may not like it but if US goes in recession it is worst, besides does not government’s poor decisions effect common people then why not common people for once should run the show.
Michael, thanks for your reply to my post. You are right, as investors we are out of the context of “buying high and selling low”.
I mentioned earlier that we will be looking to purchase a primary residence within the near future. This will be Step 2 in our two-phase plan to “sell high and buy low”.
After carefully watching statistics from all available sources, we felt in late 2006 that our home was appreciating at a staggering pace that we felt would not be sustainable in Edmonton.
We decided to sell as soon as we would have three data points to indicate that things were going to change. The third data point came last March, when the CMHC announced February as the third consecutive month of declining housing starts in Edmonton.
Within 4 weeks, we had our house on the market, and it sold within 10 days. We settled for about 10% below our (very optimistic) asking price, and our neighbours felt we were “giving our nice ravine property away”.
They based their opinion on the fact that average and median prices continued to rise. So did the people who bought our house, trading up from a very similar house in the same neighborhood, but not right on the ravine.
Although they bought our house in April, they held on to theirs until late August, hoping to let rising prices close the price gap. At April prices, they would not have been irresponsible. Their own home was probably totally paid off, and the price gap between the properties was reasonable for their income
Unfortunately, they still have not sold, and the gap is now widening, since they have reduced their price by 100K. Several houses similar to ours that were on the market in March 2007 have also reduced their prices by 100K or more, and are still sitting on the market – some under the 4th MLS number and different agents…..
I don’t think that our buyers were influenced by greed. They were buying a family home for the long haul, but may not have paid enough attention to the impact of the rising inventory.
They may also have overestimated the number of Edmontonians who are able – and more importantly willing – to spend a small fortune on a house.
While entry-level and mid-level homes continued to appreciate, my research indicated that the gravy train for more expensive homes had started slowing quite some time earlier.
I am sure many other people got inadvertently caught the same way. It takes quite some effort to analyze various parameters on a regular basis, over a long period of time, to put together a somewhat realistic “bigger picture”; and even then, it’s easy to misinterpret what’s happening. Most people looking to buy a family home probably don’t go to that length.
I agree with you and don’t feel bad about the fate of speculators or gamblers, but I do feel for people who thought they were acting within their means.
mdm,
Nice work on your analysis and planning of your moves within this crazy market. Well thought out and nicely executed.
As for the people who thought they were acting within their means…I guess I feel slightly sorry for them too….
Many of these suckers were pressured and convinced that they had to move hastily into the market or “be priced out forever”…common rhetoric by those who make a living on Appraising, Selling, and Brokering Mortgages.
The most unfortunate part of that situation is that while those involved in the RE business were extremely successful in their campaign, it was really the Securitization of Mortgages that allowed these suckers into the market in the first place. Take away traditional/responsible lending practices and here we are.
I had to talk a family member out of purchasing a home last fall.
Besides the fact that they were entering the market in a turbulent time…I simply sat them down, did their Budget and exposed the fact that their current income would not support the current costs for them to own a home.
YET their Mortgage rep at a large Canadian bank had them nearly-convinced, approved and ready to sign papers.
Complete Stupidity on both parties.
So while I do feel slightly for those suckers who fell for the banter and hastily rushed in…the part of me that can do a Budget using Grade 2 math does not.
mdm, why don’t you just go into real estate and speculating. You seem to be able to flawlessly predict peaks and valleys like god himself. I mean you single handedly and effortlessly predicted the peak in Edmonton real estate and cashed in on it further more. In one foul swoop you have done what real estate agents and experts have been trying for years, what’s next? Curing cancer or aids perhaps?
Jesse, call it beginner’s luck.
It was certainly not effortless, by a long shot, given the painstaking daily analysis of inventory and price trends in a very narrow range.
And don’t get me wrong: We were pretty scared that we were maybe selling too soon, or for too little.
It was a bit like watching the TV Show “Deal or No Deal” and assessing for ourselves how much risk we were willing to take that a higher selling price was “in our case”….
If cancer and aids could be cured with a few spreadsheets and a database, I would give up my day job and give it a try!