For the past couple of weeks I think every major newspaper in Canada has published an article with something similar to the above headline. And almost every article has mentioned the fact that the slumping national sales are mostly due to the slow down in Edmonton and Calgary. It seems all this information comes from a report by the Bank of Nova Scotia.
"Home resales have fallen for four consecutive months, and the inflation-adjusted average resale home price registered its first quarterly decline in seven years during the first three months of this year."
Scotiabank Adrienne Warren said a major national correction — like the slumps that followed the housing booms in the 1970s and 1980s — is not in the cards.
“Our long-term housing price model puts average home prices in 2007 at about eight per cent above their long-term trend, compared with a premium of 12 per cent and 18 per cent, respectively, at the 1976 and 1989 housing cycle peaks,” she said.
Canada’s real estate market is not overbuilt and households are not excessively indebted, Warren added. “At the end of the day, we predict a soft landing for the Canadian housing market, with somewhat lower sales and construction, and a period of relatively flat inflation-adjusted home prices.”
One thing for certain, the market in Edmonton has no tolerance for seller’s "testing" the market with a high asking price right now; if a home is not priced sharply it won’t even get a nibble from buyers, let alone a viewing or an offer. Even well priced homes are getting a flurry of activity for the first week or two on the market and if there is no offer accepted then interest seems to tail off. There seem to be plenty of window shoppers out there, but these days it seems most will only take the plunge if they smell a deal. The funny thing is average prices are still up slightly over April…
Sheldon/Sara,
A lot of people are suggesting that the reason the average price is holding steady is due to less entry level homes being sold, so the sales mix has changed in a way that is skewing the numbers. Would you guys corroborate that?
It is interesting how a few monthts can change a process lasting for seven years. Not only that the market itself is changing, but also, as you mentioned in the article, the attitude of the people. Sellers cannot afford to set the price higher. Even the slightest mispricing can have fatal consequences for their success. I am a realtor in Toronto and my clientele has also registered this change. It seems that the press has done a good job.
I know how some of you love cut and paste but this is good from Gath Turner’s blog yesterday.
****Comment truncated….please just post a link to articles instead of copying and pasting the whole thing. If you quote another blog/site/newspaper include a link.***
Brent,I bet, you spent a whole day and night to come up with that many bad news, all on one page.
So, what do you want us, readers to do now, sell, buy, hold or just run away?
By the way, I do not care anymore, what that Garth Turner guy says, because long years ago (10-15) he
predicted, that all canadian RE prices going to lose a lot of value
in the coming years, simply, because “baby boomers” start selling their properties.
So, guess, what happened in the past 5-10 years?
Re prices, countrywide, gained more in value, than ever before.
The US crash has had an effect on real estate in Canada in one sense for sure. I was going to buy in Winnipeg next…I’m going to be buying 1 or 2 houses in Phoenix, Arizona. You can actually purchase in an outer area like Ellerslie Road (only way nicer with bigger houses) starting at $90,000 for 3 bedroom 2 bathroom homes. There’s no way I’m investing in Canada…and I know speculators like me that managed to cull their properties down to their primary are feeling this way.
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The U.S housing market:
“The inflation-adjusted price of homes fell 7.7% on a year-over-year basis. At the same time, the prices of other goods and services rose 4.6%, according to OFHEO.
“The nominal price declines aren’t as spectacular as they would be if we didn’t have so much inflation,” Schiff said. “Houses are becoming a less valuable asset relative to the cost of living.””
http://money.cnn.com/2008/05/22/real_estate/ofheo_report/index.htm
Bear in mind that we also have a fairly high inflation in Alberta, thus flat nominal prices for housing translate to about 4 or 5% yearly drop in the real value.
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Garth Turner… Do exactly the opposite of what Garth says and you would be in the right track.
Check “What Garth wrote in 1999″:
http://stockbullz.com/What-Garth-Turner-Wrote-In-1999
From above – “Canada’s real estate market is not overbuilt and households are not excessively indebted, Warren added.”
This is the same type of overly-optimistic info that was being broadcast throughout the US in late 2005 and 2006 when people were in denial about the state of Real Estate. It is an attempt to bolster consumer confidence when consumers really should be trying to reduce debt loads and saving.
Canada’s real estate market IS overbuilt. Inventory is rising almost everywhere.
As far as households not being excessively indebted, I really beg to differ on that one. There are so many people out there with no savings and only debt to be had; new vehicles, Brick cards, visa/MC … multiple properties.
When these statistics come out that Canadians are not overly indebted, these kind of stats can be skewed by the increase in home-owners equity.
Too many rely on the equity in their home, which only really matters if you liquidate it. Otherwise it is just debt if you tap into it with a HELOC or otherwise.
There are simply too many winds blowing against Real Estate these days to be so bullish; rising costs for food, gasoline, home-owners costs, record-setting inventory, etc. I really can’t see any excuses why prices will continue to rise. Just using the word “fundamentals” or asking way too much doesn’t quite cut it.
*Sigh* even the savers are gonna lose on this one
although not as badly as those with too much debt.
Michael….how about record high employment, growing wages, and falling interest rates (Royal cut its 3 year rate by .8% on Saturday). It’s always nice to help out the bears when you can only see the down side….which I agree is real also. That’s why things are roughly balanced between upside and downside. It’s also why we’ve seen a little tick up in price and I suspect we’ll see a little tick down in price this fall during the historically slower sales, and weaker price season.
Tory,
don’t take this comment the wrong way. I have not thought this through in detail, but why would a community welcome speculators? What’s the value-add they provide in the overall picture? I can see the role property developers play, and I see where long-term investors fit in, but is there a positive impact through speculation?
Fair question, mdm, and I take no offense at all!
In the case of Arizona, I guess it can be viewed as helping recovery in that area. The Americans are no fools, they’re setting up shop – setting up information seminars in Canadian hotels. Also anyone been to Vegas lately and seen the Canada qiosks?
I’m no fool either. I know that I may see some recovery in the value of my Arizona home(s) near the end of the next presidential office…maybe even the one after that. What I’m doing is different than a flip we’ve seen in Alberta merely because I am holding onto the homes for 5+ years. I may be an absentee land owner – but the Americans have a very different view than yourself about Canadians coming down and bailing them out to a certain extent.
I live in Kelowna and we have quite a few Albertan/Vancouver/Foreign adsentee land owners that have held onto their properties for many years. The result is that we’re constantly battling with Vancouver for the most expensive market.
I’m 26 and I’m investing in the babyboomer’s retirement…Kelowna, Arizona…wherever!
Thanks for the clarification, Tory.
My interpretation of a speculator is more of someone who wants to be in and out with a quick profit.
Since you say you are planning to hold on to your properties for 5+ years, I would rather consider you an investor.
I am in the same boat, and since I don’t squeeze the last cent of rent out of my tenants, I consider I am doing something worthwhile for the community