There have been a whole bunch of articles about Alberta and Edmonton and the economy in the past few days. So I thougt I’d just put some of the quotes from these articles here…enjoy:
- Alberta remains an island of prosperity in a roiling sea of economic uncertainty. Geoffrey Scotton, Calgary Herald
- There almost seems to be distinct economies between Alberta and the rest of North America, really. It’s a rather interesting situation — we’re pretty well insulated from the stuff happening in the U.S. Calgary Economic Development chief economist Adam Legge.
- Our proprietary housing valuation models, driven by both affordability considerations and individual market conditions, suggest that Victoria is currently the most overvalued city in Canada, with average house prices at 23% above “fair value.” Edmonton is next, at 21%. By contrast, Miami and Los Angeles both got to more than 60% overvalued at the U.S. peak. David Wolf, Canadan Business Magazine.
- Alberta is doing even better than most people thought . . . and we expect Alberta to remain quite strong." CIBC World Markets chief economist Jeff Rubin.
- Alberta is slowly losing its advantage in terms of having the lowest business taxes, having the lowest personal taxes, having the best set of regulations and being the most attractive province to invest. Niels Veldhuis, director of fiscal studies at the Fraser Institute.
- Albertans are optimistic — and that optimism is rising. Job creation in Alberta is running at 3.4 per cent annually compared with 1.9 per cent nationally according to a new consumer and business confidence survey from PricewaterhouseCoopers LLP.
- Statistics Canada projects a stunning $20 billion will be spent in the oilsands this year, more than in all of Canada’s manufacturing sector. Wages in Alberta are surging, climbing nearly seven per cent in March from a year earlier, to the highest level of any Canadian province and 11.2 per cent above the Canadian average.
- Multi-unit housing market that started heating up in 2006 has turned into a buyer’s market, multi-family homes under construction have continued to rise — unlike single-detached homes — and are just starting to slow down in the last two months. Canada Mortgage and Housing Corporation analyst Richard Goatcher.
- Sales in Alberta of new vehicles — clearly, a big-ticket item — are on track to set a record for the fourth consecutive year.
- If I were trying to capture the market today, I would say it’s uncertain and confusing and we’re hoping that the market starts to find some footing as the year goes on. Raymond Townsend, a senior vice-president at CB Richard Ellis.
- Alberta exports were running at a record pace in February, up a stunning 32 per cent — or $2 billion — from February 2007, up nearly 10 per cent from January and for the first two months of the year ahead more than 20 per cent. That follows a fifth straight annual record in 2007.
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[I predict] a short-term housing glut as projects under construction are finished, adding to an inventory of empty single-family houses that aren’t moving. I think you’ll see some prices drop. You’re going to see some rentals take place, corporate company rentals, all sorts of things. Definitely, in the short run, there’s going to be a problem. Investors who bought spec homes "are going to get their clocks cleaned. Greg Christenson, president of Christenson Developments.
Seems like the experts are all over the map!
This many good news mean…. last year’s prices will be back this year!!
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The message seems to be quite clear.
We have overpriced and overbuilt housing market in a strong but slowing economy.
The exceptionally high economic growth in the past triggered the in-migration and housing boom drawing many speculators into the market. Now due to the slower economic growth, low affordability and less in-migration it may be difficult to clear the swelling RE inventory glut.
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Sarah thank you for all the articles/summaries.
Karl thank you for your quote made me smile, I assume your were being funny.
Take care.
No no no…
Based on the news, the ave price of a single house will be $100,000,000,000.
Please come to buy my house now. It is only $390,000.
IT is a best investment in your life.
Thank you!
Thanks Sara. BTW, The group that was infusing pessimism and rumours are now exposed. They created a bubble blog to spread the untrue negative sentiment. The surprise is that they are neither Albertans nor even Canadians. They live few thousand miles to the south of our borders.
The experts didn’t predict the 50% price increase of 06 – 07 and they sure can’t predict what’s in store for the remainder 0f 2008.
The fact is that real estate is now a traded commodity and most people buy it with the intention of making money. If it’s not going up, nobody will buy. If it starts going up in value again, there are plenty of qualified buyers willing to snap up this inventory for future profit.
Almost Mike, but not quite the entire truth… It is the illuminati behind the bubble blog…. they’re spreading doom in gloom in order to keep us from the truth!
It’s sad but it’s not only the spec vestors taking it on the chin right now but also joe ordinary who fell for the “better get in now or forever be priced out” speel in the last year and a half.
Quick everyone, hurry up and buy a house before you are priced out of the market…….
Does anyone has the time to compare this post of “snapshot” media glance at Alberta’s economy and housing to a similar sampling of Ontario and the U.S.?
Could be quite revealing…It’s all over the spectrum.
KARL: are you kidding or overly optimistic? Prices will go up 2-3% max by year end…unless folks buy up most of the listings at a discount because countless of homes listed now are crap, need immediate TLC and are not worth the asking price. some market testers are idiots and the EREB should refuse to list garbage at inflated prices. I.E. a dump in Delwood built in 1970 and needs upgrades, etc should not be at same price as a newer bungalow…
We will be coming to Edmonton in May and are looking to buy. What are your thoughts — will we be buying in just before the drop in prices? Perhaps it is better to wait? Or by that time will there be a rush again?
bob,
I think that’s the connundrum that a lot of people are in. I know plenty of people who are asking the same question.
There are (at least) 2 schools of thought. Inventory is very high now and your choice is about as good as it’s going to get, and there are some fantastic deals to be found as well. In the fall when demand goes down there will probably be a drop in prices….how much is the big question. To answer that, a person would need to know how much of the present inventory will be around in September. How much of the present inventory is people just fishing? How much of it is homes that are currently rented but the owner put it up to sell during the high season, only to melt away off the listings this fall? New home builders sales agents are starting to see some funny things now too. They are getting potential move up buyers coming in and saying we want to move up, but are worried about selling their present house, so they’re putting their present house up for sale…and if it sells….they move up. It’s the exact opposite of what was happening over the last few years…..so how many of those homes are on the market for busy season only?
If it was me….I would get someone who knows the market really well (that I trusted) whether a real estate agent or not and get a price and location in mind and go beating the bushes for a great deal. If you don’t find it…be prepared to wait until you do find it.
One final thing. If you’re looking to buy a single family detached home….homebuilders have backed way off and new stuff coming on to the market is a trickle. Inventory there is probably nearing it’s peak. If you’re looking for a condo…there is a huge amount of new product coming on and the conventional wisdom says a lot of it is spec/investor owned…so waiting until this winter might be better.
This is just my opinion, so take it for what it’s worth. Good luck!
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“Indeed, as far as house busts go, Canada can claim some fame. Our December 1989 to September 1998 slow motion crash was the fourth-longest of 24 busts among OECD countries, Goldman said.
It came in at 35 quarters, behind only Japan’s 67-quarter marathon during the 1990s, Germany’s post-unification slump of 52 quarters and Switzerland’s 45-quarter downturn during the 1990s.
In terms of price declines, Canada’s 1990s slump was the second-smallest. At a 16% decline in real prices, it came in ahead of Germany’s first property slump – a decline of 15% during the 1980s.
The biggest decline in price terms was the Netherlands which posted a 50% decline in prices in the early 1980s, Finland at 49% and Japan at 44%. Together with slumps in Sweden and Spain, these are considered the “Big Five” crashes and were accompanied by banking crises, saw significant public bailouts, had fiscal costs ranging from 4% to 24% of GDP, and caused great economic damage.”
http://www.financialpost.com/creditcrunch/story.html?id=450447
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The above mentioned examples by BAD have one thing in common, that they all had been triggered by a huge economic slowdown, that’s what we do not have here, in Edmonton, Alberta.
In fact, as you see in Sara’s quotes from the papers, this year alone, $20 billion being invested in this province, something all the above mentioned places lacked of.
That explains, why our RE prices are not going to that direction.
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Current Edmonton area inventory: 13,755
http://www.polarissells.com/search_mls_map_form1.php
Current Calgary area inventory: 14,526
http://www.realtyexecutivesapex.com/search_mls_map_form1.php
Total: 28,281
Average price in Alberta: $359,953
http://www.crea.ca/public/news_stats/statistics.htm
Thus we have approximately $10 billion worth of unsold inventory in Edmonton and Calgary areas.
Either $20 billion of total investment in Alberta is not that much or we have a staggering inventory glut.
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Bad,
Do not waste your time to prove what you want to say (although I am on your side).
Peolpe think your numbers are unreal.
People think the price drop in last few months (half year??) is unreal.
The only real things are:
1. We have oil and we are the only place to have oil.
2. People will come to Alberta to find a job because you cannot find a job in the other places.
3. The houses are affordable (even if they are at $1M) because we have the highest income in Canada.
Bad,
You missed a big article,
http://www.reportonbusiness.com/servlet/story/RTGAM.20080417.wcrea0417/BNStory/Business/home
You’re welcome..
BAD,
The recent run up of the inventories in Alberta is not the result of an economic disaster, where people selling everything, because of their inability to pay for things, therefore, it’s a bit less worrisome.
In fact, right now, that’s the only reason prices are not going up significantly anymore.
Nate,
In that article, actually they say, things are slowing down, but prices are still going up!!
Only 5%, but it’s up.
Karl said:
>>>The above mentioned examples by BAD have one thing in common, that they all had been triggered by a huge economic slowdown, that’s what we do not have here, in Edmonton, Alberta. speculation –> RE crash –> economic slowdown
karl,
Prices are coming down out west, don’t know where your coming up with your info. Prices are down $60 G’s from this time last year and the listings have increased 3 fold from this time last year.
My above post is incorrectly posted, should have been:
Karl said:
>>>The above mentioned examples by BAD have one thing in common, that they all had been triggered by a huge economic slowdown, that’s what we do not have here, in Edmonton, Alberta. speculation –> RE crash –> economic slowdown
Economic slowdown was caused (not triggered) by RE crash in Japan.
that was the average price of a SFH that has fallen 60 G’s in Edmonton
My above post is incorrectly formatted again.
Sheldon, I think the text rendering software has a bug. Anything between a “greater than” symbol and a “smaller than” symbol is discarded. Is it treated as a html tag?
Here it is, a third time. With different delimiters used.
Karl said:
===The above mentioned examples by BAD have one thing in common, that they all had been triggered by a huge economic slowdown, that’s what we do not have here, in Edmonton, Alberta. ===
In the case of Japan’s RE crash, the order is:
subprime (Japan style, bank corruption) –>speculation –> RE crash –> economic slowdown
Economic slowdown was caused (not triggered) by RE crash in Japan.
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Dave, you are right:
“You can lead a horse to water, but you can’t make it drink.”
Nate,
Nothing we didn’t know, eh? Thanks.
Bunny,
“You can lead a horse to water, but you can’t make it drink.”
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FRONT page Lead news in Globe and Mail. And the panic to set in.
Housing boom ‘officially over’
LORI MCLEOD
Globe and Mail Update
April 17, 2008 at 2:39 PM EDT
Further from Globe and Mail
“Canada’s six-year housing market boom is officially over. Aside from a few choice Prairie locales, sales are melting faster than this year’s snow pack,” Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc., said in a research note.
Double-digit declines in sales activity in “more markets than you can shake a stick at,” suggest the weakness has spread across Canada rather than being centred in any specific market, Mr. Porter said in an interview.
Vern
From the same article.
None of the markets in the study showed a decline in home prices, and like many other economists, Mr. Porter expects moderate price gains this year.
“The residential average price continues to increase, unlike conditions in many U.S. markets,” said CREA president Cal Lindberg in a statement.
“The size of the increase is returning to what we consider more normal levels for most markets in Canada, reflecting a sound but cooling market for existing homes.”
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A blast from the recent past:
“Miami Real Estate Market Is Returning to Normal”
http://www.turks.us/article~story~20070206001337907.htm
“Housing market ‘getting back to normal’”
http://findarticles.com/p/articles/mi_qn4176/is_20060120/ai_n16025765
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So the foreign bubble heads are back under new names infusing all kind of pessimism, ignoring the facts and making all kind of mistaken comparison to the Netherlands, the US and Japan. Their posts are full of hatred and envy. I repeat the question that was asked before: why you are so bitter about Alberta? If your house in Arizona is being foreclosed upon, why do you wish that everyone face the same fate caused by your flawed economical system?
http://tinyurl.com/576ta7
Comment removed for personal attack. See code of conduct.
Breaking News from The Globe and Mail
Housing boom ‘officially over’
LORI MCLEOD
Thursday, April 17, 2008
It’s time for Canadians to bid the housing boom farewell as data for the first quarter of the year, released Thursday by the Canadian Real Estate Association (CREA), showed a 13 per cent tumble in existing home sales year-to-date.
“Canada’s six-year housing market boom is officially over. Aside from a few choice Prairie locales, sales are melting faster than this year’s snow pack,” Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc., said in a research note.
Double-digit declines in sales activity in “more markets than you can shake a stick at,” suggest the weakness has spread across Canada rather than being centred in any specific market, Mr. Porter said in an interview.
Home sales waned and new listings surged in the first quarter of 2008 as activity in Toronto cooled and a glut of sellers hit the markets in Western Canada, according to CREA’s data.
I have been telling my better-half for a while now to wait for the mainstream media to finally begin to report some negative news about the real-estate conditions. I told her that when the mainstream media finally reports it, things are far worse than they are reporting.
This is something I noted while keeping a finger on the pulse of the US real estate market.
Media outlets tend to be biased on the optimistic side (due to sponsorship and other popular sentiment), but eventually the news is so obvious that they cannot risk any further damage to reputations by denying the obvious.
Take a look around at the signs blowing in the wind. Look at sales statistics and inventory. Bleak.
Sure the media and Specialists are reporting modest price gains in homes this year, but be honest with yourself and be realistic.
Does anyone remember less than a year ago when if you had a place up for sale, it sold…and likely for more than asking; with a mini-bidding war on your property?
Now inventory is rising unabated and properties are wallowing, people are reducing asking prices, and showings are far and few?
Even if properties increase in low single digits or even flat-line…investors tend to ignore the interest costs, maintenance, utilities, property taxes which will outstrip those gains easily.
I am not sure what a Foreign Bubble-Head is, but I do take great interest to read about “economical” trends and conditions outside of Alberta and Canada. These Economic Trends from abroad will provide you with a clearer understanding of the current situation in Real Estate and possibly a potential model for future expectations.
bunny
In Japan, they do not have any oil
to fall back on, like us here, so our RE prices will not crash that easily.
….
A few words about inventory:
In a city of this size, a million people and growing, what would anyone consider as a normal inventory of SFH?
About 2500-3000 right?- that’s normal.
You have a 1000 transactions each month on average, so it’s good for 3 month,
anything less than that and you say, there is no selection out there, multiple bidding taking place etc.
Now, we have twice as much as would be normally, around 6000 or so, temporarily.
What’s the big deal?
There is almost a years worth of inventory based on current sales levels Karl.
The boom is over for Ontario, Ontario is going into recession. The boom is over in BC as the buzz around the Olympics is waning. The boom is over for Saskatchewan, it is powered by speculative buying. The indicators show that the boom has not started for Alberta yet, 200 Billions of Capital investment will be spent in Alberta within the next 5 to 7 years. Oil is high and will remain high. Alberta is the only place in the world where more Oil can be produced:
Mexico may not privatize the oil industry and oil production is declining,
http://tinyurl.com/3hskbh
Oil discovery in Brazil way much smaller than originally estimated
http://tinyurl.com/3f7wqd
Venezuela imposes windfall taxes. Combined with current royalty in Venezuela, the government in Venezuela will pocket over 90% of any thing over $70 per barrel
http://tinyurl.com/3lgw7h
“The boom is over for Saskatchewan, it is powered by speculative buying. The indicators show that the boom has not started for Alberta yet”
DUDE! Do you read the newspapers at all?? The boom is just starting for Saskatchewan and it’s going to have the fastest growth this year!
It doesn’t matter how great the economy is in AB or SK, it matters how the housing industry can handle the influx of new buyers! You can still have a great economy, but if people don’t smell a deal, their not gonna buy!
The housing market is completely bloated in Alberta! Edmonton is a BLUE collar city, not freakin’ New York City. No matter what, most of the buyers in the market will be making lower middle class wages and cant afford half million dollar bungalows.
You all just living in a dream world or something? Prices are going down, no matter how great this economy does. The builders are more than ready to deal with the flow of migrants now, theres plenty of lots and plenty of inventory and lot’s of competition for buyers. It’s awesome, our province is finally going back to normal.
Karl said:
===In Japan, they do not have any oil
to fall back on, like us here, so our RE prices will not crash that easily.===
I was refuting your point that economic slowdown precedes RE crash. And you are off-topic now. Does that mean you have nothing to refute back?
Every economy would have some resource “to fall back on”. It could be Alberta’s tar sand, Japan’s manufacturing R&D(Toyota, Canon, etc), or China’s cheap labor. However, none of the known resource types are speculation proof.
In other words, when everyone knows about that resource (tar sand), it is priced into the RE price.
Our current price level already reflects the fact that everyone knows about the potential of the tar sands. If the tar sands fails to grow at the previous rate, the RE price level cannot be maintained.
I caught some heat in December ’07 from a few of the posters here for my comments posted stating prices will melt down. I just wanted to post that my clients and I are now all in cash. Guess who is having the last laugh now.
Just finished Japanese History 224 – Japan’s RE crash was actually a government correction of the insane inflation and increased the interest rates by a huge amount overnight (it was on purpose). Just before the crash, it was true that 1 square meter in some districts like Ginza fetched 1.5M, the “Entire RE value of Tokyo = Entire RE value of USA” at the time, also “The Land Under the Impreial Palace in Tokyo = California”.
“Everything out West” is not dropping. I live in Kelowna and March saw a 9.18% increase to $542,236 average, DOM 60, 3,953 active listings.
Alberta will be fine, it’ll just be a strange year. Maybe some people will bounce back from Saskatoon? LOL
Wish someone would tell all those potential buyers about the 20 billion in investment in the Alberta Oilsands. There are so many old and beaten for sale signs on my route from work to home that its beginning to look like there is something wrong with this city.
Could the increase in crime (murders), inflation and high costs have anything to add to the problem?
Enjoy the snow this weekend.
It’s looking like we will be down almost 50k from last April.
http://www.bobtruman.com/Edmonton_SFH_stats/page_1918017.html
Edmonton RE: -12% from 52 week high. Down 10% from last april.
EnCana Corporation +42% YOY
Suncor Energy Inc. +30% YOY
Oilsands Index. +34% YOY
TSX Composite index +4.7% YOY (but down about 3.5% from it’s 52 week high)
Seems like Alberta Real Estate has missed out on the growth experienced by the Albert Energy Sector over the last year.
Japanese style meltdown very highly unlikely to occur in this province.
We are oil producers and they are oil importers, as they have none.
And oil and water is the big issue now worldwide, something Canada has in abundance.
House sales in Calgary down by one-third in Calgary
http://tinyurl.com/5vzo5d
Reminder: We are not supposed to copy and paste parts of an article (copyright).
Everyone compares sales this year to sales last year which were abnormally high. No wonder it looks like sales are down. Try comparing to an average of 2002-2006 and see what happens. Doesn’t look too far out of line does it?
Also, there’s nowhere near a YEAR’s worth of inventory. Yesterday it was at 5.82 months based on a 2 week rolling average for sales. Still higher than the 2-4 month supply it should be, but let’s not blow this out of proportion.
Calgary buyers now looking into the much more moderately priced Edmonton market.
Ignore 2007? Should we all buy some bank stocks too?
Was just a freak year in the financial sector afterall. I’m sure Bear Stearns will have a repeat of their 2002-2006 growth…
Nate
YES!!! You should buy Canadian Bank Stocks now. They are paying a great dividend at the moment and have no where to go but up. All the bad news had been more than priced in to them.
Well, Nate I think it’s not fair to compare a local boom situation to a foreign meltdown, that’s been brewing over years and different in nature.
We are in a somewhat unique situation here, in Alberta.
For one thing, we are able to pay our mortgages.
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Canadian banks have been hit already by the US mess and that news is priced in.
Due to the persisting ‘credit crunch’ and the current Canadian real estate situation with the possibility of continuing housing price declines one has to consider the risk of increase in number of mortgage defaults and foreclosures. That may cause additional losses and put more downward pressure on the bank stocks.
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Nate
Encana
2005/04/19 $82.75
2008/04/17 $84.44 +2.04 over 3 years.
Suncor
2005/04/19 $46.70
2008/04/17 $116.30 +149.04 over 3 years.
Oilsands Idx
2005/02$157.60
2008/02 $361.90 +129.63 over 3 years.
Edmonton Residential RealEstate.
2005/03 $183,189
2008/03 343,760 +87.65 in 3 years.
Edmonton Residential Real Estate performed 43 times better than Encana
Suncor performed 1.7 better than Edmonton Residential RealEstate.
Oilsand Index…. was a hard thing to buy into back in Apr 2005, unless you have lots of money and could buy the Oil Sands Sector Index data and then go and buy the companies it tracks. Otherwise you would have to wait until April 2006 and buy the SciVest fund. Up +1.93% since Apr 2006.
http://scivest.com/doc_bin/SOSIPF%20Class%20F%20-%201%20Pager%20-%20Mar%2031%202008.pdf
If not you could buy the Claymore Oil Sand ETF (CLO) in Oct 2006 and would be up +31.63%.
Just to put things into perspective.
Obviously bear stearns isn’t connected to Alberta real estate. But ignoring 2007 prices seems pretty ignorant when looking at the trends.
Neil, Encana’s stock split in 2005 when it was just under 40. It’s performance has also blown away Edmonton RE.
Nate ok
Then Encana is at +104.04% over 3 years.
Just goes to show the stockmarket is a way better investment than realestate. To bad they won’t let me live on the TSX trading floor though. ☺
More good news: Daily oil buttetin is confirming that Alberta gas drilling activity will increase by 4 billions dollars this coming season 2008-2009 year over last year:
http://www.dailyoilbulletin.com/
To see the details, you need a subscription, but should be tomorrow in the other press.
Looking at the details, it looks like Encana and Talisman are coming back.
All I’m saying is that sales are not in a slump relative to ‘normal’ years in the recent past. Last year was a buying frenzy and it’s ridiculous to expect sales this year to be on par with last. Yes they’re down from last year, but last year was abnormally high.
Here is an interesting read well worth your while:
http://tinyurl.com/5m2qlk
When we get guys like Mish giving us advice and informing us, we have already dropped our paddles in that famous creek, and should listen well.
More good news. The headlines for tomorrow’s Globe and Mail would be : The lost boys of oil and gas are back
http://tinyurl.com/4n96pt
Don Campbell predicted that the second half of 2008 would be the real estate come back for Alberta as drilling activity would pick up substantially due to commodity prices. I guess his revelation is coming true.
Any weekly update yet?
Do the newspapers accept RE advertising ? How much of it do they print ?
Do the banks own the houses they have mortgaged ? There is no vested interest there, correct ?
Sounds like things are going on sale….which would be a great time to buy. It still makes me wonder that people get upset when prices go down. If you’ve bought into a good economic zone then it’s going to turn.
Me? I’m buying.