Double whammy today – the final numbers are out from the board so you get the weekly and final monthly update at the same time!
The Journal bragged "City Home Sales Skyrocket in September" this morning, with talk of our strong local economy along lower prices and inventory to blame for the increase in sales. There was no mention of the end of 0/40 mortgages as part of the reason for the increase in sales, which we are starting to think may have had more of an impact than we originally thought. The coming months will tell…
No matter what has caused it, sales have been quite strong and almost made for a record September – up 65% over last year – while August and July were both up from last year as well. This makes for a pretty strong Q3.
For the first time this year, the inventory is lower than last year, at 8808 active listings.
Prices, as we know, have dropped during this period of high inventory:
From a supply and demand perspective…supply is dropping and demand is up:
We’ll keep a closer eye on this with our weekly updates….if there is a drop after Oct 15 we’ll know the 0/40 mortgages have at least something to do with the increase in sales. 
Here is our update on the Edmonton real estate market. (Previous week’s numbers are in brackets). For the past 7 days:
New listings: 479 (434, 486, 616)
# Sales: 255 (274, 243, 300)
Ratio: 53% (63%, 50%, 49%)
# Price changes: 457 (441, 434, 478)
# Expired Listings: 699 (209, 298, 225)
# Canceled/withdrawn/terminated listings: 68 (49, 52, 60)
Net loss/gain in listings this week: -543 (-98, -107, 31)
Active listings for single family homes: 3382 (3651, 3683, 3738)
Active listings for condos: 2200 (2428, 2454, 2503)
Happy Weekend!
Sheldon,
What are you seeing that leads you to believe that the 0/40 crowd was more of a factor than originally thought? I posted a while back on another topic, my own supposition that the increase in sales and drop in price were connected to the 0/40 crowd getting in at the low end price wise. In my post I said it was the only logical conclusion unless interprovincial migration had ramped up again which I thought highly unlikely…..well guess what I found http://www.finance.alberta.ca/whatsnew/index.html
Look for the link to alberta population report for 2nd quarter 2008.
I guess people are coming here in a big way again. I mean non permanent resident plus interprovincial migration total of 20,169. That number has only been beat once in the last 4 years….3rd quarter of 2006.
If we can hold that kind of number for a few quarters…with the lack of building that’s been going on (or not going on), things could tighten up much quicker than I thought. I mean 9921 net interprovincial migration for all of 2007 and 6730 for this quarter alone. The rush out of here for Sask and B.C. looks about done.
I know the press isn’t exactly forward looking when it comes to reporting, and tend to get in a rut of reporting whatever the popular belief is at the time, but a reversal of a trend after a year and a half could be somewhat newsworthy! Instead we get day after day of Schiller calls for meltdown yada yada yada.
The demand vs. supply graph pretty much sums things up.
How much longer can we stay like this before prices start tanking? I’m surprised we’ve held up this long.
interesting market out there.. it’s like watching a movie.
i wonder what’s going to happen next.
Hi George are you suffering from graph dyslexia or should you maybe enroll in a graph reading course at your local college? Thanks for the laugh, I needed that after a long week.
Car27,
How is his point not valid?
Are you suffering from comment reading dyslexia or should you maybe enroll in a comment reading course at your local college? Or maybe just learn to not always resort to ad hominem attacks.
An interesting combination is approaching; Tighter Lending via 0/40year being gone, and higher interest rates as of several days ago, and possibly higher in the future.
TD’s 5 year fixed is up to 7.2% Yes, there are better rates out there, but the point is that rates have jumped again, not fallen. Combine this with the soon approaching changes in the 0/40 year lending and I firmly believe that Sheldon and Sara will see a correlation through sales.
If the BOC lowers their rates, I don’t expect to see mirrored adjustments in mortgage rates from lenders.
Regardless, there is quite a show going on South of the border! We may one day be telling our Grandchildren that we lived through these times just as our grandparents did.
Very entertaining.
Hey itchy,
Thanks for the post. Migration numbers are always informative ahead of the curve.
The entire globe of finantial “experts” says the world economy will contract and enter recession even with the $700 billion bailout pkg in the US. I am an optimist, but I think if we really believe Edmonton will walk away unscathed in the next leg of this downturn I think we are truely fooling ourselves. I will wait along time before re-entering the real estate investment world. (I’ve been wrong before)
itchy,
It’s too soon to call it a trend. And the number to really look at is net interprovincial migration as the international numbers are capped. We aren’t anywhere close to the interprovincial numbers we saw in 2005 or 2006 that caused the buying spree…. wishful thinking though!
Upgraders, Upgraders, Upgrades….
$ Billion and $ Billions and $ Billion
Job and more jobs and higher net-migration, back to
Upgraders, Upgraders, Upgraders!!!!
Josh,
Are these the 3 upgraders that you are chanting about??
A major industrial project has been put on hold in the Edmonton region because of high costs and a lack of skilled workers.
BA Energy’s Heartland heavy-oil upgrader was under construction in Strathcona County, but the multibillion-dollar project now will be shelved for at least four years.
The processing plant would have transformed bitumen from Fort McMurray’s oilsands into synthetic oil.
“The Heartland is competing worldwide for resources and financing, and engineering expertise as well,” said Gerry Gabinet, a spokesman with Strathcona County’s economic development department.
“So it’s challenging for firms that are not completely well-financed and have a good, long-term business plan as well.”
The facility was bought last year by Calgary-based private firm Value Creation Inc.
This is the second project in the area to be put on hold. Synenco shelved a multibillion-dollar upgrader in May 2007.
Petro-Canada will decide by the end of the year whether to go ahead with an upgrader it has planned for the region. – cbc.ca
George,
I agree it’s too early to call it a trend, but I was looking to find something other than 0/40 that may have had a part in the increasing sales for the last few months.
The important thing is to understand why we got to the high inventory we have. We got hit with a double whammy of a lot of people cashing in on their equity and moving back from whence they came and this coincided with the height of the builder and investor speculation craze.
Going forward, we know that there is no large pool of new spec homes coming on stream….the last of those came on late spring/early summer 2008. IF we get back to population growth like we had in the 2nd quarter of 2008, then, in my opinion, we’ll get back to more normal inventory levels by summer 2009. It wouldn’t take a lot considering we’ve been running 500-600 fewer new listings a month on SFH since June/08.
Of course, it could all be out the window with what’s happening in
Bushland to!
***Comment removed. Angry and rude.***
Hi again everyone, and thanks to Sheldon and Sara for one of the more balanced takes on the real estate market.
One thing that troubles me about the reporting on real estate in Edmonton is that figures tend to be looked at on a year-over-year basis. Given that we’re looking at a global slowdown, I went looking for real estate stats that covered other significant recessions in Alberta.
I found this post http://www.chrisdavies.ca/2008/07/edmonton-historical-price-trends-since-1962/ on Chris Davies blog which tracks historical prices from the EREB. The graph can be viewed here:
http://spreadsheets.google.com/pub?key=pKhf_Qhx1jfrbTbcuR-dHSw&gid=1
What I (a layman) see here is an unprecedented price increase from 2005 and 2006 that worries me, especially when compared to the big dip that began in ’82. It took the market seven years for average prices to return to where they were in ’82.
Should I be worried? My wife and I are looking at a 5% down 25 year amortization on a SFD in the $300K price range, with rates locked for 10 years.
itchy:
I agree with you 100%, there does seem to be a fundamental disconnect between housing price in Edmonton versus (insert almost any US city here).
There is an argument to be made about how it costs more to service lots here, to build homes, to provide services, however it still doesn’t seem to add up to the huge differential in prices. (mind you, I don’t have a spreadsheet for this, so I could be wrong).
One important point that you missed though. Mobility. Even if the Houston economy is om fire and the housing prices are 20% of what they are here, it’s not possible for Albertan’s to simply pack up and move to Texas. Labor laws and work visa’s are specifically structured to only allow people with very specific skills in, something that doesn’t apply to most people in Edmonton (including myself).
This one factor explains why there aren’t a TON of people moving stateside right now. You need to compare housing prices vs. economy for cities where it is possible to migrate to. ie: Edmonton vs Vancouver, Calgary, etc.
Sean that was my post.
I agree with you on the subject that there aren’t a ton of people cashing in up here and moving stateside to snap up those homes at 20% of the price that we have to pay up here.
If was easy, everybody would have left yesterday. LOL
It’s because of immigration laws and rules (6 months in – 6 months out for snow birds) Work Visa’s granted only to specific qualifications and for short periods of time (you must not take work away from a an equally qualified American) etc, etc…
The point is, why is it so much cheaper down there? They have equally if not higher the same standard of living. It ain’t third world down there? LOL
Brent/Sean, There are all kinds of reasons housing is cheaper in Houston.
1) Does anybody know where these houses are? I mean what’s the price difference of the same house in Lewis Estates vs. Mill Woods?
2) Houstons oil industry is mature…meaning investment in infrastructure and start-up (the most expensive part) is over with…much as Alberta’s was before technology made the oil sands profitable. Throw 100 Billion at Houston and see what happens.
3). Houston has access to the biggest pool of happy to take minimum wage or less, employees on the continent just 1 quick swim away. According to Wikipedia Houston’s population was a tad over 1.9 million……with an estimated 400,000 illegal immigrants. Have you ever been around large residential developments going on in the southern states? I have, many many times. Take a look and see the nationality of those who are building the house. What do you think they’re making? I don’t know either, but if it’s more than 25,000 a year I’de be floored. Try paying someone here 25,000 a year to build houses.
It’s a nice try to compare the two, but as you can see there are some pretty major differences.
Brent/Sean
I got busy with something else and didn’t complete my thoughts, so I’ll give you some more reasons why housing is cheaper in Houston. Most houses don’t have basements due to soil conditions and, as you might suppose, a high water table.
In short, it just doesn’t cost as much to build a house in Houston.
Don’t forget that tax rates on everything between the two countries are different. Just as you can buy beer,smokes,gas,clothes and just about everything else you can name cheaper in Houston, so it goes with building materials.
Hi Nate, better take a look in the mirror before you accuse me of exactly what you just did. If you can not understand statistics then don’t lash out at those who do. Maybe you need to post on a stock market blog. You can rant all you want there! Good luck to you.
Brent,
That is the weekest arguement. You can look at two similar houses in the same city and find that sought of price differential. It depends on location within a city. Where in Houston is that house? Probably next to the oil refinary which provides a lovely haze over the front yard when the wind blows just right.
Brent,
The other reason house is so cheap in Houston, because the average lifespan for a male is 25 years….or less….
he-ha-ha-he-he
Well go ahead then and buy a $400,000 shoe box in flat land.
Be house poor to live in Edmonchuk, for what? Most of the world has never even heard of the place.
Karl and Brent,
Brent you are right. There are a lot of nicer places in the states with lower prices compared to Edmonton. Just look at Phoenix. You can get a 3000 square foot home in a gated community, with personal pool & hot tub, on a man made lake, for less than $350k.
This is mostly due to the sub prime crisis and all the foreclosures.
Due to the banks in Canada giving everyone and there dog a mortgage, it won’t be to long till we see the same foreclosure rates up here in Alberta.
The average home costs $350K in Edmonton? You get a castle here in Ontario!!!
Edmonton, $269K
http://www.rewedmonton.ca/detail/property/view/M201159362?QUERY_ID=1&DIRECTIONAL=2&Q_NEIGHB=Canora&ROWNUM=1
Now that’s a shoebox!!!!!
Here’s what a normal home should cost:
http://www.agentinottawa.com/Ottawa/Ontario/Homes/North_Gower/Agent/Listing_1853113.html
…and it’s in Ontario.
What or who has given the right to exploit home owners in Alberta by gouging?
car27,
If you look at the supply and demand graph, you’ll see around May/June of 2007 the supply took off while demand slid. While there have been ups and downs, the spread has remaind significant. I’m pretty sure that’s what George was referring to. With inventory over 7000 for more than a year, and demand under 2000, seems like a reasonable comment.
I’m assuming you were more interested in the recent movement to close the gap.
Brent,
Texas is flat too, isn’t it??
jo ontario,
Better put the flame suit on, Alhurtan’s don’t like to be told they are not up to par with Ontario.
Tho I %110 agree with you. 300k for a 40 year old shoe box that was build with the skill and care of a 3rd grade popsicle stick project. Or a 450k+ home that was just built with the skill and care of a 4rd grade popsicle stick project. All wrapped in cheap vinyl and you get to pick the color. Brown, Off Brown, Light Brown, Dark Brown, Mud Brown, Alberta Brown, Yellow Brown … get the trend here?
Don’t try to compare Ontario with Alberta, or Edmonton to Toronto. Its not fare fight.
Crude prices slipped under $90 today, the financial markets are in a free fall and building permits plumet (mostly in Alberta).
I hate to say it but winter is on its way in more ways the one.
http://ca.news.finance.yahoo.com/s/06102008/2/biz-finance-building-permits-tumble-13-5-cent-august-statistics.html
Regarding whether the unexpected and out of the historical seasonal pattern September up-tic in sales, one would have to suspect that if 0/40 was a significant contributing factor to explain it, that since its 0/40 is a national program that other markets other then just Edmonton would be demonstrating the same unexpected up-tic in September sales as well. Does anyone know if other markets, beyond Edmonton, are showing the same September results?
Further to above, preferrably markets outside of Alberta where economic factors differ but the 0/40 program still applies. If 0/40 is a factor, as a national program, it should be localized to just Edmonton or Alberta.
CALGARY — Oil sands stocks were being clobbered Monday, an indication the market continues to doubt whether these companies will be able to secure financing to plow ahead with expensive projects.
Upgraders, upgraders, upgraders,…
Trouble is brewing…
Edmonton is the only city RE sales jumped by that much, Calgary a little bit, but other cities are flat, so it’s not much to do with the 0/40 coming to an end, I guess.