You never know what the winds of change will bring. Stock market woes one day, huge rallies the next… Billion dollar injections… Real estate sales up 65% from the previous year for Edmonton…
How does one manage all the risk and uncertainy in markets like this? If you believe some of the people on this blog a good time to buy is NEVER. If I’d listened to these people I’d have nothing. In the late 80’s when interest rates where 16% it wasn’t a good time to buy. In the 90’s we were in a recession and it wasn’t a good time to buy. According to many of these people it wasn’t a good time to buy when the markets were going up…Rolling my eyes now. So it’s not good to buy when everyone is buying, and it’s not good to buy when everyone is selling and you have more choice. Truth is many of these people want you to live in the same fearful state they do.
Anyway, if you are coming on this blog and trying to decide when to buy then maybe now isn’t the right time for you, but it’s a start as you’ll hear both sides of the argument.
Risk is manageable.
Uncertainty is primarily psychological (fear, panic, euphoria). You can control your risk factors and tolerance. For example stocks vs mutal funds, long term revenue properties, flips or a home.
You can limit risk by:
1. Doing Your Research – Knowledge can be very powerful as it lets you see opportunities where others see only uncertainty.
2. Working with professionals – Experts of different specialties can be huge assests to you in mitigating your risk. Seldom are you the professor that you think you are. The problem with real estate is that you may think you’ve been doing everything correctly all along only to find out later, and at significant expense, that you didn’t do things correctly and that there was a lot of little stuff you missed. Many times that little stuff can be become extremely costly in real estate. (REALTOR’S, lawyers, appraisers, mortgage brokers, financial planners and so on.)
3. Diversifying - Don’t put your eggs all in one basket. Do I need to say more here?
Dealing with uncertainty is sometimes a matter of nature vs nurture. If your tolerance for bad news is low, then the next couple of years are going to be really tough on you and you’re unlikely to see the forest through the trees. If you see opportunities in uncertain times, and you manage your risks wisely, then you can come out ahead in the long run.
Don’t get choked by fear spread by people who are using that fear to profit from you.
Edmonton housing market is continuing it’s price trend downward. Why? Aren’t sales up?
I’m sure after Oct and Nov we will see the impact of the fallout in the US on sales figures here. People get scared and shut down. It’s going to get ugly.
Sobering news for Alberta and how it may affect real estate at large in Wild Rose Country…
Calgary’s economic growth this year and next could be the slowest in a generation: http://www.canada.com/calgaryherald/news/calgarybusiness/story.html?id=b157258d-91bc-4371-a450-b75bc86cc12e
RBC has downgraded its forecast for the Alberta’s economy for the rest of 2008:
http://www.canada.com/calgaryherald/news/story.html?id=81588197-3559-414f-9baa-b502b1811aba
However to be honest, some good news…just maybe:
http://www.canada.com/edmontonjournal/news/opinion/story.html?id=5fa43547-649b-4d33-be32-923d05fc9a16
With oil at $80 a barrel, alberta government revenue will be slimmer, no doubt. With big oil cutting back on projects who knows what effect it will have on some home prices. Uncertainty is the word of the day for Alberta.
After 15 October, how can the average family get into that typical edmonton shoebox on a 5 sq ft yard for $375000 while coughing up $18500 cash down? Impossible when you consider this:
http://www.miller-mccune.com/article/777
***Deleted*** Who got $20000 to put down on an Edmonton home when it is very likely that prices will go down further and that hard earned $20000 dissapears?
How long does it take to save $20000 in today’s economy?
My forecast: prices will dip down no matter what.
It’s gonna be a bloodbath.
I’m gonna buy that river valley view condo when it goes down to $%225K from $300K now…
If you trust these economists then you will certainly be broke, try to develop your own logic, Thursday the market drops and all you hear is dooms day predictions, Monday the market has its largest gain ever.
Over the weekend I was socializing with some Engineers and consultants from the oil industry, the cost of production of oil is still between 30 and 40 dollars a barrell.
Canadian dollar has devalued around 20 percent from its peak, which will make construction materials more expensive.
Lower dollar is a huge stimulus for our economy, the same silly economists you are quoting predicted that our dollar will stay on par with the US.
If Oil goes down so does our dollar and makes it cheaper to produce.
Our housing in terms of US dollars is down around 36 percent from the peak.
There were only 2000 lots serviced this year and next year there will be a shortage of homes because the population growth has shot up, and building permits are down drastically.
This is the first time in a decade I have seen that in many cases the mortgage is cheaper than rent.
So we have 5 months of inventory and a stalled new home construction, so where is the sky falling.
The Europeans have committed limit less amount of money to combat the financial crisis, the US is printing crazy amount of money and the interest rates are falling.
You ask me I see escalations in home prices, I don’t recall a single time in history when massive amount of printed money was not followed by huge inflation and rising home prices.
http://www.cnbc.com/id/27159117
I think it is not advisable to hang on to cash.
“A vicious deflationary cycle” could then ensue, says Tony Tan, deputy chairman of Government of Singapore Investment Corp., a sovereign-wealth fund that oversees more than $100 billion.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aD24rTsF1jwE&refer=home
Squiddly,
Alberta provincial gov’t based their 2008 budget on $80 oil – seeing how oil has been at $100-$150 up to last month, I think we will be fine.
As for your questioning of how people can save money – maybe you need to think outside the box. If the dream is big enough, the facts don’t count – people will scrimp, save, take a second job, do whatever they can if they really want to buy that home – no matter what their income level is….
Just my $.02
Looks like Garth Turner is now the “Greater Fool”!
A global recession WILL affect us but I don’t think we will crash in Alberta. However, there are lots of small businesses external to oil that will suffer.
6 mo or so should show us where things are going and give us all time to adjust to new trends.
I think house prices will fall – not crash – and that 6 mo to a year from now may be a good time to buy.
Edmonton single family sales to Oct 14 283. Avg price down $6,600
http://www.bobtruman.com/Edmonton_SFH_stats/page_1918017.html
Edmonton condo sales to Oct 14 150
Avg price down $17,400
http://www.bobtruman.com/Edmonton_Condo_stats/page_1918040.html
Squidly, how many fools live above their means in Edmonton? In your view, everyone and their dog lives pay cheque to pay cheque and spend every last penny in their account. Not everyone is that stupid. If you can’t come up with $20k down, someone else can.
Try to live below your means. Just because you make $20/hour does NOT entitle you to a 2000sqft house, a BMW, a MB convertible, annual trips to Mexico, annual cruises and the latest and greatest in electronics and snobby clothes. Unfortunately, a lot of 20-somethings have 99% of their assets invested in BMWs, Versace and D&G’s Autumn 2008 line. What’s their value in a year? Nothing for the clothes and virtually nothing for the BMW. I’ve never seen more Ferraris, Lambos and other high-end exotics in my life. I’ve been to many cities that are 10x the size of Edmonton and they don’t have that many BMWs, MBS and exotics driving around.
Sure, the fools will perish and never buy a house, but not everyone is a fool. If you live pay cheque to pay cheque, you actually DON’T deserve to own a house because there are so many expenses associated with ownership. People like that should be renters and will be renters for life.
When everyone stops caring that’s when the correction will be over. Same thing with stocks. The media builds things up and sends people into an absolute frenzy. One day people get sick of being sick and stop caring and carry on with their lives.
People in Edmonton started boasting and obsessing about there house’s value and real estate in 2005 to May 2007 with all the crazy increases. That 2.5 years of crazy growth is hard to knock out of the system and to carry on.
I predict that prices will remain on a very small decline for another year (late 2009).
That will also allow the poison in the US system to further run it’s course.
People will move on. People continue to live.
Its a day for mourning,October 15, as a new era begins in the real estate landscape with the passing of the Zero Down for Forty mortgage. One of the key bottom-up drivers to the market for real estate has just vanished, and now affordibility becomes even more challenging for those that now have to come up with a $20,000 plus down payment for the average priced home.
Good bye suburbia, hello run down rental unit.
Well the price trend is still intact. Prices of SFH’s in Edmonton are dropping $10,000 a month on average.
http://www.bobtruman.com/Edmonton_SFH_stats/page_1918017.html
Been in that house you just bought for a whole two months and that $20,000 down payment that you scratched and saved for is gone. Poof!
Well Brent, they still have a house. Invest in the stock market and poof there goes 20K and all you have is a piece of paper that says you lost 20K. Put all your eggs into cash and with the recent drop in the Canadian dollar and poof, you just had your buying power reduced by 20K. Your so smart that I will bet you have a secret plan of where to invest in order to not lose any money right! Let me guess, you invested all your hard earned bucks into rent! Excellent move exlax.
Well Brent, they still have a house. Invest in the stock market and poof there goes 20K and all you have is a piece of paper that says you lost 20K. Put all your eggs into cash and with the recent drop in the Canadian dollar and poof, you just had your buying power reduced by 20K. Your so smart that I will bet you have a secret plan of where to invest in order to not lose any money right! Let me guess, you invested all your hard earned bucks into rent! Excellent move exlax.
No car, I work internationally and write my hotel expenses off against my U.S. income.
One could rent a pretty nice pad for $10,000 a month in Deadmonton.
Then again, why would you want to?
LOL
http://www.minyanville.com/articles/inflation-deflation-Fed-crisis-Credit-debt/index/a/17847/from/yahoo
Brent,
Let’s not make a mountain out of a mole hill. If you compare Oct. 07 to Oct 08 yes prices are down SO FAR – but not at the $10k per month average that you are shouting about.
Also the month is not complete – lets wait until then to determine the severity of the situation before we start running around like chicken littles…
No, they haven’t been dropping 10 K a month for a year. But they have for the last 3 months and were on track for a 12 K drop this month. I bet Edmonton SFH prices are down 100 K from their peak by the end of November using BT’s stat’s. ****Edited. We’re not a gambling site. sheldon ***
***Edited….If you’d like to continue that line of thought you can provide your email address to him and you guys can work it out separately. The rest of us aren’t interested. sheldon ***
These are dark days, and they’re going to get darker very soon.
http://www.generationaldynamics.com/cgi-bin/D.PL?xct=gd.e081016#e081016
***Comment deleted. Impersonation. See code of conduct.***
Using the average selling price of $360K for an Edmonton SFH, let’s see what that can buy in Montreal:
http://www.firstcorp.ca/lake/
In Ottawa:
http://www.firstottawa.on.ca/first/listingDetails.php?MLS=710366
In Winnipeg:
http://www.winnipegrealtors.ca/viewer.aspx?ID=2819085&type=residential,condominium,commercial,farms
WOW!!! Have you seen how big the yards are?
In Edmonton:
http://jerryaulenbach1.point2agent.com/Edmonton/Alberta/Homes/South_East-Zone_53/Ellerslie/Agent/Listing_1585393.html
What is wrong with this picture?
http://www.edmontonsun.com/Business/News/2008/10/16/7101611-sun.html
oil sands projects
There is no end to the slide of resale SFH…
http://www.bobtruman.com/Edmonton_SFH_stats/page_1918017.html
Even if the prices would remain by end month, That’s about a 2% drop from the previous month and a FULL 10% drop from April!!!
The full effect of 5% down and 35 years hasn’t kicked in yet!!!
They got to drop under $300K
Buckle up! it’s gonna be ugly out there!!!
Good article Mike.
The barrel at $75… that’s under the $80 that the Alberta government made its revenue predictions…ouch.
About Bob’s stats for first 1/2 of October… sales seem down a lot compared to other months… I wonder how the EREB king, Mr. Perras will twist that this month?
After so-called “skyrocketing sales” I wonder if he’ll work the fact that the DOM is down so far?
Maybe EREB will report “homes sell like hot cakes”? or “homes barely get listed before they’re snapped up”?
The province and the RE in Alberta will be fine.
It’s o.k if they don’t post a $ 8 billion surplus every year.
And it’s o.k if house prices will be a little more affordable to everyone.
A month from now we will be laughing at these market numbers, you see today.
TSX will go up, oil prices will go up and Edmonton RE prices will go up. And not by a little bit, but sharply.
http://history.cbc.ca/history/?MIval=EpisContent&series_id=1&episode_id=17&chapter_id=3&page_id=1&lang=E
Boom and bust in Alberta.
Anyone knows how to work MLS, I cannot select which area to select, like southwest, southeast, north. please help
***Inappropriate comment***
reb, you have to use the map now to zoom in on your area. So from the realtor.ca site, click on AB, then zoom in on Edmonton, then the neighbourhood you want. On the left hand side, select the type of property (house, townhouse, etc) bed, bath, cost, etc, hit search, and away you go, it will auto update on the area your panned to.
Karl, providing the swings in the market, and the fact that econimists are stating 2 to 4 years for recouping of losses, how do you figure everything will be back to normal in 4 weeks?
Note to admin: Still inappropriate?
Good times are back to Calgary….
and Edmonton SOON!!
Calgary Sun October 16, 2008
http://calsun.canoe.ca/Business/2008/10/16/7102191-sun.html
“OTTAWA — A second big Canadian bank is now calling for a recession.
Bank of Montreal said Thursday Canada’s economy will contract in the final quarter of 2008, and the first quarter of 2009, meeting the popular definition of recession.”
http://www.reportonbusiness.com/servlet/story/RTGAM.20081016.wrecession1016/BNStory/Business/home
***Comment deleted. Impersonation. See code of conduct.***
KARL said:
“A month from now we will be laughing at these market numbers, you see today.
TSX will go up, oil prices will go up and Edmonton RE prices will go up. And not by a little bit, but sharply.”
Poor Karl:
Oil falls at $69 a barrel…
http://ctv2.theglobeandmail.com/servlet/story/RTGAM.20081016.woilprices1016/business/Business/businessBN/ctv-business
The TSX drops almost 400pts today:
http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20081015/stock_down_081016/20081016?hub=TopStories
No, Gloria, those numbers are in within the city limits, MLS only and not including surrounding communities.
And that number is declining.
sabb,
Once the craziness stops at the markets, everything will be in upswing again.
The money, world governments throwing at the problem, alone, should be and will be enough to stop the bleeding.
After all, only 30 million American household failed to pay the mortgages, do you think, it’s going to take down the whole World?
It’s clear by now, that stock markets can gain and lose a 1000 points a day, oil can go as high as $140 in a month and drop back again and RE prices can move up and down in a very short time.
So, in a few weeks, if not days, things will be different—on the positive side.
Sorry, I might have pressed the wrong button…..
or the right one, but three times.
squiddly77
See, how quickly things are changing.
By the time you finished your post, the TSX is loosing 312 points only and oil is back over $ 70 again.
***Karl, save your breath. At this time its only down 38 points but the next time there’s a plunge in the stock prices he’ll be posting when its down big. Nope upside from him. Sheldon ***
squiddly77
See, how quickly things are changing.
By the time you finished your post, the TSX is loosing 312 points only and oil is back over $ 70 again.
http://www.chris-floyd.com/component/content/article/3/1628-not-enough%20-money-in-the-world-the-real-monster-in-the-meltdown-closet.html
Karl,this was posted on the bubbleblog, you might consider spending ten minutes reading it and finding out for yourself how we ended in such a precarious position. Most people feel that this is just a short term financial dillema, when it is anything but.
The following is from the article.
“That storm has now struck. The house of cards has fallen down, and revealed a hole of derivatives-based debt that could not be filled, literally, by all the money in the world, much less by the mere trillions that national governments are frantically throwing at it today.”
You can find out much more if you are interested by reading financial websites.
mike,
are you saying, this is the end of the World?
I said nothing at all.
WOW!
$70 oil, what bull could have possibly imagined that two months ago when all the talk was $200 oil.
Here comes $50 oil!
Canadian markets in the red again and the DOW up 400 points.
Well, it’s no surprise when 75% of the Canadian market is resource and it just keeps on tanking.
*** the TSX closed down 58 pts today and this is tanking? Or is it spin? Don’t take every commentors comments at face value.
Sheldon
http://ctvdb.globeinvestor.com/invest/investSQL/ctvx.show_chart?pl_comp_id=&pl_errmsg=&iaction=Chart&pl_primary_listing=TSX-I&iaction=Chart&pl_additional_listing=0&pl_period=36W&pl_chart_type=+&pl_sh_movement=0&pl_long_movement=0
Resource stocks have been tanking for months Sheldon. Take your pick… gold, silver, uranium, oil, natural gas, lumber, diamonds. It’s just been a sea of red for months.
Remember those high flying clean energy Uranium stocks that were all the rage and trading at $16.00+ 6 months ago. There yours today for pennies.
In the last month and a half alone the TSX has lost 4000 points to close at 9269 today. Why?
Because 75% of it is resource based and resource has been tanking.
***So I know the point your trying to make is that investing in Edmonton real estate is much safer. Who knew you’d be such a fan after all. Sheldon ****
The TSX-V is even worse, that’s where all your junior resource stocks are listed. It’s 52 week high is 3193 points, today it sits at 937. The TSX-V has lost 70% and the year isn’t over yet.
http://ctvdb.globeinvestor.com/invest/investSQL/ctvx.show_chart?pl_comp_id=&pl_errmsg=&iaction=Chart&pl_primary_listing=JX-I&iaction=Chart&pl_additional_listing=0&pl_period=60W&pl_chart_type=+&pl_sh_movement=0&pl_long_movement=0
This is just the beginning…
http://www.financialpost.com/news/story.html?id=885555
More grim news, more cuts to interest rates coming…
Wasn’t it like in the U.S. in the summer when we were all told “we’re not like the U.S. Don’t worry”?
The same is happening here.
Who’s gonna buy homes now when prices will plummet?
Who can reassure me that the house that I will buy with 5% down will not lose value? Because losing value is:
a. I lose my cash down
b. I have negative equity.
***No one can guarantee anyone anything but in the long term real estate will still be there and it will go up again. If you rent you lose your cash. If you have your money invested in the stock market you lose even bigger then in real estate. Plus if you rent and you got yourself a sweet deal and your owner gets foreclosed on your as good as homeless.
Lots of doom and gloom and lots of hope displayed over this subject.
Face it, house prices are going to continue to drop, no matter what Perras says. That guy makes me laugh, he sounds like a used car salesman. Out of touch.
What’s wrong with a dip in house prices? They went up so fast that it only makes sense that we see some correction occur. Besides, if you’re not selling, who cares? Real estate is long term. Thinking short term is why we’re in this stupid mess!
Just about all of the upgraders for this area are being shelved for the time being. Another tough realization. Are there still lots of jobs here? Damn rights there are, so there won’t be the same pictures of this downturn as in the ’30s.
Someone mentioned about cash not being a good position. I wholeheartedly disagree. Cash has been a great position for the past year. Cash would allow you to start shopping right about now and for the next year or so. Nothing wrong with that if you’re interested in getting wealthier.
What I wonder about are the people who get so upset at the mention of real estate prices dropping as though it is a personal attack. Maybe it has something to do with looking like a genius when your net worth goes up without having to do anything except for reside in a dwelling of your own. Get over it……
Let’s see who gets wound up over that truth!
Markets like these will ‘pare the herd’, those who know how to take advantage of it will come out further ahead then they ever were before. For others who are overexposed in their risk tolerence or cash flow levels will be left behind.
Like Warren Buffet said many months ago – you find out quickly who is covered when the tide goes down – for those who aren’t – its an ugly sight!
Analyze, Think, Act!
http://www.canada.com/story.html?id=555acd9c-c694-47e9-bada-44fe78575f86
mike, man, you always post those links to this site or to that site, I want to read your own opinion.
Oil jumps to above $72 on expectations global recession fears may be overblown
“I think the market has been way oversold,” said Gavin Wendt, head of mining and resources research at consultancy.
“But even in a dire economic situation, a lot of energy use isn’t discretionary, so I expect prices to bounce back…”
If they read and hear this enough that there is going to be a recession, they start acting like there could be a recession and cause a recession,” said Atkins, who doubts a recession is looming for Canada.
“There is a lot of hysteria and not a lot of hard fact. If you convince people to be scared, they will be scared.”
***Comment deleted. Impersonation. See code of conduct.***
Daily dose of reality.
In 2009, home prices down everywhere by 10%. sales down 20%.
That average Edmonton $360K SFH to cost only $325K next summer.
$850K homes in Calgary now sitting at $675K…unsold.
http://www.businessedge.ca/article.cfm/newsID/18803.cfm
“A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful”, say Warren Buffet.
“Most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense,” Buffett said.
“These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records.
“So … I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds.”
Well said and well done Josh.
I agree – fill your bucket with blue chip US stocks/funds/indeces…
Will still be a while before great gains are realized, but for us monthly dep. investors I left my EU fund put, and shifted about 30% of my monthly contributions into US funds, the rest is taken up between Canadian and Far East…
*** Comment deleted. see code of conduct. I appreciate your insight but there’s no need for insults ***
You must be a great broker with that attitude towards your clients – how can I invest with you?
Rettro,
Sure. Contact
grif.Gerry@scotiamcleod.com
I’ll tell you now, that I’ll stick you money in mutual funds, or “managed product”.
Thanks Gerry, but the pool of sarcasm that came out of my mouth with my last comments has left me pretty busy.
As an insurance broker I’ll stick to my UL and Seg. funds – that way I get the commissions! (And the guarantees)
Why do realtors change 7/3% as a standard rate.
Why not 1/0.5?
I’ve asked realtors before, they all say “I’m not allowed to go below 6.5/2″.
I contacted the EREB, and they told me there is no official minimum. They could sell it for free if they really wanted to.
If we all demanded it, realtors would be forced to drop rates.
*** Margot, I don’t charge 7 and 3. Having said that somecompanies will have their own policies as to what their salespeople can charge. Some have open ended policies and the agents decide. Many times you get what you pay for if you go the discount method but its upto you as a consumer to research and negotiate the best deal you can. But this isn’t the appropriate thread to discuss commissions. There are options for you to try and sell on your own where you pay thousands of dollars to do it yourself and then you end up reducing the price of your home lower than what you’d have to with commissions in, netting less in the long run.
Sheldon
squiddly77
TSX up 421 points so far,
oil is trading at $ 73.85
maybe we won’t have to take that
10% price reduction, it’s just too early to talk about next year.
*** It’s too early to talk about what the day will finish like, let alone the year. Sheldon
CALGARY SUN
October 17. 2008
“Real estate a time-tested investment.”
“It brings to mind an adage from Mark Twain: Buy land, they’re not making it anymore. ”
***Which brings to mind another Mark Twain saying. “there’s lies, damm lies and statistics”.
Sheldon