Here is our update on the Edmonton real estate market. (Previous week’s numbers are in brackets). For the past 7 days:
New listings: 550 (558, 686, 627)
# Sales: 273 (321, 310, 257)
Ratio: 50% (58%, 45%, 41%)
# Price changes: 522 (563, 693, 628)
# Expired Listings: 787 (72, 74, 202)
# Canceled/withdrawn/terminated listings: 158 (163, 290, 62)
Net loss/gain in listings this week: -668 (2, 12, 106)
Active listings for single family homes: 4183 (4457, 4415, 4382)
Active listings for condos: 2882 (3094, 3111, 3105)
The monthly stats just came out yesterday so I’m going to keep this brief. That’s the biggest drop in inventory all year, and the highest number of expired listings. I guess people don’t have a big imagination when it comes to expiry dates. I would expect we will see a lot of those come back on the market, but I also am hearing a lot about sellers trying to rent out their "second" homes. Our thoughts on that are here…
As you can see inventory is dropping, sales will also drop as the year goes on. Please note I have changed the start date for the chart below to January 08 so it is only showing stats for this year now. Ineresting how the new listings and sales trends are almost parallel with about 400 more listings than sales on average.
Alright I guess I wasn’t that brief….sorry…have a great weekend!
EREB stat’s are up but the New’s Release isn’t on the web yet. Looks like SFDs continue to decline with a June price of $381,384. Condo’s were up marginally on the month but down relative to the same month last year (@$262,365). Check all the stats at the link below:
http://www.ereb.com/pdf/MonthlyStats.pdf
Also it’d be wise to read the new TD study that came out about a week ago:
http://www.td.com/economics/special/pg0608_housing.pdf
Not a very nice picture for the Edm and Calgary market short or long term.
Thanks for the stats, Sara. Much appreciated.
Any idea why the net loss is -668 when calculating new listings minus sales, cancellations and expirations, while the difference in Total Active listings is only -486 compared to last week? I have noticed this discrepancy consistently.
Here are a few numbers I pulled from the Real Estate Board’s quarterly sales report by price range, for January through June:
Year-to-date, we are seeing only 72% of the Sales volume across all price ranges, compared to 2007.
The bulk of all Sales continues to happen between 300-399K, just as in 2007, but at only 85% of the 2007 volume. In 2006, by comparison, the bulk of all Sales happened between 100K and 300K.
The volume in the 500K+ range was only 61%, and below 200K we are down to 42%, compared to 2007.
Compared to June 2007, the residential average price is down by only 1.92%, but for single family homes, it’s down by 8.6%, which seems to indicate that Condos, which are down by only 1.06%, are outselling detached homes by quite a margin.
With a lot more Condos still under construction, according to the CMHC, there could be additional pressure on prices for detached homes, when those Condos reach completion.
O,
Good article from TD – unfortunately, this information, althought dated June 26,2008 – is outdated:
“Alberta will have further weakness in the near term, as
Calgary and Edmonton will likely see prices continue to
fall for another 3 or 4 quarters, dropping 8% to 10% from
their peak, after which prices should stabilize and start rising
at a low single-digit pace.”
The “peak” according to EREB and Bob Truman was in July of 2007. The “8-10% drop” occurred from July to Dec. 2007.
“3 or 4 quarters” has already past since the peak of July ’07.
“Prices should stabilize” – that was Jan. 2008 – current.
Which tells me that we are now in the “start rising at a low single-digit pace”.
I fail to see how this is bad news in the short and long term???
Rhettro,
You not serious are you? Do you think that TD would issue a forward looking report 7 days ago with outdated information. That is an optimistic way to read it for sure. Disregarding future tense for past tense and all. The market in Edmonton has yet to soften, since prices have remained while buyers and sellers have had a tug-of-war on whose price expectations are right.
Prices are going to continue to fall over the next 2-4 quarters. Especially, as the condo supply bubbles and people need to sell their second and third homes.
After that it’s going to be lackluster single digit returns with a whole bunch of people in negative equity positions.
So yeah, bad in the short and long term as I see it.
Why do you think prices will start rising now?
Do we have a supply shortage?
The price of oil has dick to do with real estate prices in Alberta as we have seen over the last year. Oil almost doubles in price and houses prices fall.
We had this conversation at work about the TD report. The specific references are important in getting the meaning right. The most important point is the forecast is based relative to the “peak” reached last year. The forecast of 8-10% down from the peak is interesting because that’s where we are now. Even comparing year over year prices, we could stay exactly where we are now and would still be falling until at least November (almost 2 full quarters away). One thing I take away from this report is that TD thinks we’ll be back at the peak at the longest, next June/July if I’m reading it correctly. That seems excessive to me considering we’ll likely end this year flat. Are they really suggesting a 10% increase next spring/summer! I highly doubt it as there will likely still be plenty of inventory through this time next year. Reading between the lines, they expect the inventory issue to be more or less brought under control which it will as new home starts, SFD especially, have been in a word, pathetic, but it will still take time to get rid of what we have now.
So instead of drawing on 800 starts a month (a high percentage spec homes to be flipped), we’ll be getting 250…all with owners living in them.
As an aside, to all those who have been regular contributors to this blog…can you tell me who predicted in Dec/Jan that prices would go nowhere and inventory would peak in June?
Until either economic catastrophe or alternatively sudden massive influx of people things are likely to remain pretty stagnant. Until then the “crash” cheerleaders can hang on every monthly 1/4 percent drop as proof the real estate world is ending and the “we’re heading up and nothing is wrong” fans can hang on every 1/4 point rise as proof of a turnaround. Seems like much ado about nothing to me.
My new prediction? A 2-3% drop in avg and median price in the fall, leaving us unchanged for the year.
Hope everybody has a great summer.
Rhettro (and Itchy),
You’re assuming Truman/EREB MLS numbers for Edmonton and Calgary are the same as TD’s (non-MLS?) numbers for all of Alberta – pretty shaky assumption.
From the TD report:
“Our expectation is that monthly data will show year-over-year price declines for another 2-3 quarters of data (the typical duration of home price corrections in Canada), out to the first quarter of 2009. Alberta prices should then start growing again, albeit modestly at 1-2%, on a year-over-year basis.”
Itchy,
“One thing I take away from this report is that TD thinks we’ll be back at the peak at the longest, next June/July if I’m reading it correctly.”
How did you come to that conclusion?
O,
While I agree with you that publishing a report with outdated information would be silly and support no future credibility – I feel that some of the comments made in the report, in particular the ones I quoted, can be seen from a more positive position.
I simply question how slow growth can be seen as “not a very nice picture in the short and long term”. It seems to me that we have gone through our “correction” from July-Dec 2007 where prices came back 10% (or more) and we are now is a stabalizing period before returning to “normal” real estate growth.
So for now we can agree to disagree, time will prove one of us right.
Brent,
You are correct that oil prices have little direct influence on Alberta real estate prices – however, higher oil prices lead to more investment (drilling, refining etc.) by oil companies, which means more jobs (in oil and other related fields from restaurants to sales), which increases populations, which increases demand for housing…. I hope a lot of people aren’t expecting to see the crazy 25-60% YOY increases we have witnessed, however, good positive growth can be anticipated in 09 and 2010 (7-9%). IMHO
Finally Itchy,
Good points – too much “chicken little” and “rose colored glasses” going on – I have similar conversations with clients, friends, and real estate agents all the time – seems people can’t be happy with regular normal growth – like it was up until 3 years ago.
We only differ slightly for the closing months of 08. I still feel that we will end up slightly (+4-6%) YOY.
Cheers!
RJ,
Good point – I overlooked the YOY comment which would make their analysis be much more accurate.
The only problem with YOY data is that you have to wait a year to find out what happend. Based on the last 12 months (July 07-July 08) the “bottom” occured in Nov/Dec.
And you are right – I was going off MLS info, not all house sales such the FSBO – I feel it is a safe assumption that MLS represents a good cross reference of the “pulse” of the real estate market…
rj,
I quote “After stunning cumulative price gains of 45%-65% in the last 2 years in those markets” (Calgary and Edmonton)”our base-case forecast builds in a peak to trough correction of 8-10%. Our expectation is that monthly data will show year over year price declines for another 2-3 quarters of data (the typical duration of home price corrections in Canada), out to the first quarter of 2009″.
So it would seem to me that the 8-10% figure is attributable directly to us.
As far as the return to Peak value, the argument we had at work centered around semantics. What were they referring to, year over year or in reference to the peak to trough comment? As we were reading it out of the newspaper and not the actual report it’s really clear to me after reading the actual report they refer to year over year. I love how newspapers edit reports to save space….thereby changing the meaning of the report in the process. This makes much more sense with low single digit growth on 400,000 avg price as opposed to the 10-12% needed to get back to the peak. As I stated I thought it was highly doubtful this would come to pass for my stated reasons in my previous post.
RE the TD report.
The TD report is difficult to follow because it doesn’t clearly explain what it means by “peak”.
The report can get confusing when the discussion of trends shifts from the national level to other levels such as regional, provincial, and municipal where the “peaks” are different.
In this sentence, from page 2 of the report, Rhettro thought that the words “their peak” meant the city specific monthly peak (for Edmonton, July 2007):
“Alberta will have further weakness in the near term, as Calgary and Edmonton will likely see prices continue to fall for another 3 or 4 quarters, dropping 8% to 10% from their peak, after which prices should stabilize and start rising at a low single-digit pace.”
The quote Rhettro picked from page 2 is more fully explained by the quote picked by RJ from page 5.
“Our expectation is that monthly data will show year-over-year price declines for another 2-3 quarters of data (the typical duration of home price corrections in Canada), out to the first quarter of 2009. Alberta prices should then start growing again, albeit modestly at 1-2%, on a year-over-year basis.”
When you read the quote on page 2 with the quote on page 5, it is much clearer that TD means the YOY price change based on monthly data. TD isn’t talking about the price change from month to month.
The quote picked by Rhettro is part of the introduction which starts on page 1 which also talks about YOY price change, not month to month price change:
* chart showing YOY % change for the Canadian Housing Market
* text stating: “The year-over-year price growth for existing homes in Canada’s major markets fell to only 1.1% in May, down from 8.6% just four months earlier.”
Maybe TD should get an “outsider” to proofread the report – someone at TD who hasn’t worked on the report and whose brain isn’t filling in the blanks.
For the night owls of the group the ereb new’s release is up… as always it’ll be interesting to see how the media spins it…
“Calgary and Edmonton home prices in April and May fell to below year-earlier levels. The combination of significantly higher listings, reflecting the desire of homeowners to take advantage of the past increase in
prices, and weaker demand, due to the past erosion in affordability, are leading to declining sales and softer price
performance across the country, but particularly in the west.”
Well noted O.
I guess by the time you get to the bottom of page 2 you forget that they are still refering to YOY prices….
Maybe that is why they don’t have people on the outside proofread these reports – we might actually understand them! LOL
My point still to this report (and other media reports) is that YOY data does not show/mention the “trough” that seems to have occurred in Nov/Dec 2007 – good for people like us who follow this market closely – bad for those who are casual observers….
Calculated from the EREB detached home numbers:
In the first 6 months of last year, sales in the 2 most expensive sections (W & SW) accounted for 33.6% of all Edmonton sales; this year, its 37.8%.
If you include surrounding communities, sales in the 4 most expensive areas (Edmonton W & SW, St Albert and Sherwood Park) accounted for 39.6% of all Edmonton and area sales in 2007; and 43.1% in 2008.
While not conclusive, it is suggestive of a sales mix “shift to quality”. Put another way: the median/average sales price has remained relatively stable, but the median/average home sold has improved (that is, buyers are getting more for their money). An “apples-to-apples” benchmark price index (such as Case-Schiller) might reveal a larger drop in home values than the average/median sales price suggests.
***You are absolutely correct RJ. Not only are we seeing a lot more sales in the higher end price range, but we are also seeing buyers getting a lot more for their money. In other words, buyers have gotten used to the idea that they need to spend $400k for a half decent single family home, it’s just that this year they are getting a way better home than last year. When we evaluate a property the value is far lower than the drop in average prices would suggest compared to last year (it’s common to evaluate a property for $100k less than last year). Another reason “averages” are very dangerous and should not be considered when evaluating a property. Sara***
Rhettro,
“And you are right – I was going off MLS info, not all house sales such the FSBO – I feel it is a safe assumption that MLS represents a good cross reference of the “pulse” of the real estate market…”
The MLS and TD numbers may also differ on source of data, methods of calculation, criteria for inclusion as a sale, etc – which as you suggest may not amount to much overall.
But the most notable difference was that you were looking at only Calgary and Edmonton numbers, while the TD report appeared to be for all of Alberta – and that is likely significant.
Itchy,
“I love how newspapers edit reports to save space….thereby changing the meaning of the report in the process”
I didn’t read the newspaper report, so I can’t comment specifically, but in general I agree.
RJ,
Very true, however the report makes specific references to the Calgary and Edmonton markets so one could assume an arguement from that standpoint – either side though can be accurate. I guess that shows another reason why these “reports” should be proofread…
Off to a wedding, we can continue later…
Averages…. blah.. here is some real info for you to chew on. Maybe I invested in the wrong areas but here you go…
My Riverbend house was appraised at the “peak”, then I had to sell in Febuary 08 for 23% less. My investment downtown condo for 26% less. My other SW rental fell 19%. So yes people are getting more for their dollar now which screws up the stats. Seems the higher and nicer the home the bigger percentage lost. Starter only seemed to lose 10%, in between close to 20%, executive.. forget ablout it…
I’ve now lost 80% of what was my net worth thanks to Alberta… How many others are in my shoes??? when are we going to start seeing mass foreclosures because not many people keep more than 20% equity in their properties… Maybe that is why sellers are holding strong to those of you who seem to think all sellers can sell their homes for nothing.. You can’t sell for less than you owe to the bank, and many people must be getting close to the limit? That is why I feel we are now approaching “stability”, because Edmonton needs half the inventory than any other city to be “stable”.
I should have invested in low paying hyped up saskatoon I guess…
Great Blog! I have been selling real estate in Bend Oregon since 1981 and find it refreshing to find a helpful blog like yours! Keep up the good work!
http://www.bendoregonrealestateexpert.com/
Cripes, I feel for you. Although I am hoping that prices for high end homes come down more before I buy one again, it sucks that this comes at the expense of someone else’s drop in net worth….
Sara commented that she is seeing more sales in the higher end price range, since people have started realizing that it takes $400K for a decent single family home.
I am actually monitoring the 600+ range and don’t see much movement other than price reductions.
In 2002, we came from Toronto, bringing with us very well paying jobs. Although we would have qualified for a huge mortgage, we decided not to spend more than 325K on a house.
We ended up in a nice ravine property in SW Edmonton. Most neighbors were the original owners and had probably spent far less, but we all saw our equity increase dramatically, in 2006 and 2007.
Here is my question: How many of our neighbors would actually buy their homes today, if they had to purchase them at the current market value assessment of 800K+ with a hefty mortgage? And how many would settle for something cheaper?
At the same time, huge numbers of “McMansions” went up all around town, adding to the already existing inventory of high-end houses.
Are there enough buyers for that inventory? We decided to cash out in March 2007 and are now waiting on the sidelines.
In my opinion, starter homes need to become affordable again for the significant numbers of people who are currently renting, so that everybody else can “trade up”.
Cripes,
I applaud you for ditching those losing investments – at least you won’t end up being a bag holder. As people in the finance industry say “the trend is your friend”, “don’t be a dick for a tick” which you obviously are not. If the tech wreck has taught anyone anything you ditch a losing position and move on, you don’t hold it hoping it comes back.
There are many other real estate investments available that don’t require you to leverage the physical asset.
Anybody hear of people defaulting on purchases of homes? What are the legal consewuences when a buyer is unable to close on a home?
***For starters you will likely forfeit your deposit… you should speak to your lawyer about other potential consequences. Sara***
Anybody hear of people defaulting on purchases of homes? What are the legal consequences when a buyer is unable to close on a home?
mdm
“Here is my question: How many of our neighbors would actually buy their homes today, if they had to purchase them at the current market value assessment of 800K+ with a hefty mortgage? And how many would settle for something cheaper?”
To answer your question… A whole lot. Some one is buying in those big fancy houses in the new neighborhoods like Cameron Heights and Kingsgate in St. Albert. Poeple are buying so I guess their willing to pay those prices.
What you guys think, with the same price I have option to buy townhouse in good location at SW (Yellowbird) but with condo fee $225, and with the same price I can buy half duplex at Millwood without condo fee, both of them have similar size and age.
Which option do you choose? Thanks
Peter,
I’m one of those buyers whose place is selling for $100,000 less than one year ago, which is basically all of my deposit I spent 9 years saving.
What do you mean by
“There are many other real estate investments available that don’t require you to leverage the physical asset”?
Can I still invest with no equity(maybe negative equity next month)left in my primary residence?
Any ideas would be greatly appreciated.
Thanks,
Marc
Neil,
yes, there are people buying houses in the big fancy neighborhoods.
But that is cold comfort to the 178 sellers in the Edmonton area that currently have a house on the market between 800K and 1 million and have already waited an average of 190 days, and have reduced their price 1.6 times by 8%, on average.
Of those houses, 32 are new 2007 or 2008 construction, which have been on the market on average only 118 days. It seems that buyers are more attracted to new homes than to older ones in the same price range.
The time on market is a lot worse above 1 million, and not that much better between 600K and 800K.
Marc, why are you selling only a year after buying it?
Anon,
I’m not selling my home. However I now have $0 equity in my home. Therefore I have no equity to access for real estate investing, which I’ve always wanted to do.
mdm
I agree with you, if your going to spend 800k to 1 million I would either buy for location or something that has been upgraded to the look new, ie. granite, hardwoods, stone and netural colors. I have also looked at houses in this price range in older neighborhoods (pre-2000 to 1985) and most have dated decore or they need quite a bit of work. From a buyer perspective this cost money, I know I just did it in 2006, cost me around 100k to upgrade a 1999 build I bought.
I’m sure you have noticed that when a very well maintained, upgraded old home comes on the market it sells very fast.
Besides historically, houses in this price range take a lot longer time to sell than your average house. Ask Sheldon and Sara they know. Houses in the 2 million dollar + range can take years.
So I’m just saying that a lot of people are still buying these million dollar McMansions but with the current inventory they have more to choose from. This is just a sign that we are returning to a normal market. Maybe that saying is right, “Now is the best time to buy”. Throw some offers out there, someone may bite.
Marc,
if you want to access money for investing, take your 2008 tax appraisal to few banks or brokers, some will give you line of credit for that equity, this way you free up your own money and can invest on something you think is a good deal, but be very very careful, you don’t want to invest in something which may not come back up again.
Thanks for the advice Ash. I’ll think twice before buying. There seems to be too much instability in the market.