Here is our update on the Edmonton real estate market. (Previous week’s numbers are in brackets). For the past 7 days:
New listings: 356 (430, 373, 467)
# Sales: 146 (155, 149, 177)
Ratio: 41% (36%, 40%, 38%)
# Price changes: 357 (376, 375, 471)
# Expired Listings: 150 (578, 279, 166)
# Canceled/withdrawn/terminated listings: 47 (47, 33, 47)
Net loss/gain in listings this week: 13 (-350, -88, 77)
Active listings for single family homes: 3236 (3228, 3362, 3436)
Active listings for condos: 2219 (2221, 2285, 2299)
Sheldon wrote up some thoughts on the numbers this week:
Last month I was amazed by the high level of sales of properties in the Edmonton market in comparison to the activity in the stock markets.
This month though the wheels have fallen off the sales wagon much like they did in September 2007. Sales are down largely due to uncertainty in the economy and the markets. Currently sales are trending similar to what I expect for December – there have been 389 sales so far this month, and at that pace we’ll end around 900 which is more typical for December. Its too early to tell but from week to week you can get large variation of activity and its not surprising that things have cooled with all the negative press out there.
Its too early to tell if November will be like September 2007 all over again, and if sales will bounce up in December like they did in October 2007. I do expect sales to perk up a little bit as the stock markets have stabilized in comparison to their radical free fall in early October.
I personally have a lot of buyers I’m working with that are watching from the sidelines to see what’s going on, and many othes are making their decision based on their own motivational factors. However, all except two of my listings have sold this year and I am currently struggling to maintain any inventory to sell. I also see more first time buyers starting to stick their heads into the market, many are now seeing the opportunity cost narrow between paying rent and ownership.
It kind of reminds me of the 90’s out there right now. We’d go through swings of absolute quiet then rushes of pent up demand would spike sales. Staying in tune with what’s going on is definitely a key to success in this market whether buying or selling. In the short term I expect the downward trend on the average price to slow due to lower activity and higher list to sale ratios. The overall average price so far this month is down approximately 1% to $314k, 1% for single family to $358k and 4% for condos to $227k.
Some interesting tidbits out recently:
• Increase of 15,000 full time jobs in Alberta for October putting employment at an all-time high in Alberta
• Decrease of almost 5000 spec homes compared to last year in comparable inventory.
An interesting side bar that I know will get a fair bit of discussion is a recent release from the conference board of Canada that states Alberta’s economy will be affected by what’s happening in the states, but it predicts that Alberta will fare far better then Quebec and Ontario with a growth rate of 1.2% next year.
“Decrease of almost 5000 spec homes compared to last year in comparable inventory.”
What do you count as spec homes? From September CMHC report the number of homes under construction decreased from 16,262 to 12,535. The number of homes completed and not absorbed increased from 836 to 1576.
CMHC said in their most recent report that last year there were over 6000 spec homes in the builder’s inventory and we’re now down to jut over 1000. I don’t have the link because I have to run to an appointment but if I find it I’ll post it.
As a potential first-time homebuyer, I just wanted to say how much I always enjoy the blatant positive spins on the market.
Low sales periods are always equated to “pent-up demand” but somehow high sales or “normal” sales are never equated to creating a demand vacuum. 15,000 new jobs in the province is equated to 15,000 new homeowners but house affordability (or lack thereof) is swept under the rug. How many of those 15,000 earn enough to afford a home right now? How many of those 15,000 are foreign workers who will not be able to stay in Alberta permanently? Luckily I can see through the spin.
I will enter the real estate market someday and, just like all the sellers are warning me, I probably will miss the bottom. But until then, I will say that waiting and saving every penny has worked very well for me. Yes, I have a landlord. No, it is not the bank (that will be my landlord after I buy).
As a side-rant: if a house is simply a place to live (which it should be), isn’t lower house prices (ie. greater affordability) a good thing? Sheldon, you need to cheer on this price correction and quit denying that we are now experiencing the down-side of a classic pricing bubble.
***Travis,
You obviously completely misread what I wrote. Low sales are low sales. I don’t control the sales but if you think there is no demand sitting on the sidelines waiting for signs of confidence then thats your opinion. Anyway, it’s pretty typical that people who always spin the negative think I spin the positive.
Just one question though…If you are waiting to buy at the “right time” and everybody should do what you do, then wouldn’t that be the wrong time because everybody is doing it?
I have heard many times on this blog that housing is currently “unafforadable”…and I think it;s important to clarify what exactly “affordable” means.
Housing is deemed affordable when the price is less than five times a family’s annual household income.
Recent figures showed housing prices in Canada were 12.1 times in Vancouver, 7.0 in Toronto and 4.3 in Edmonton.
http://www.canada.com/theprovince/news/money/story.html?id=b1b44bcc-80fe-42a7-ac25-f954e33e211e
This data tells us that housing in Edmonton IS affordable…..the main reason that sales are sluggish has little to do with affordability…it;s instead due to people taking in the NEGATIVE spin that the news are throwing at us 24hours a day and hoping to “play the market” and “find the bottom”.
If it wasn;t for the media….we’d most likely be chugging along just fine.
Why do media give us negative spin?..because it;s well known in marketing circles that bad news headlines create a much stronger reaction/interest in viewers than good news.
I’m all for cutting through the spin and getting to the facts…but you need to be wary of spin on both sides.
JamesM,
You are missing the most important point. Yes, 4.3 times income is barely affordable, however in many other places it is 1.5-3 times income. And now compare Edmonton to other places. Both Vancouver and Toronto are way better, better infrastructure, better climate. Edmonton has always been an inexpensive town, where people could sacrifice their quality of living and get more disposable income. For everyone not in oil-gas industry it is better to be in California.
***Yeah Right…Its way better…I think I;ll stay here…and when L.A. falls in the Ocean the pro Edmonton people will have won
(sarcasm)
I agree with a lot of what JamesM has said. It would be good to get more balanced information. A good set of statistics on the EREB site (without a Marc Perras’ commercial) would make me quite happy.
Just to comment on what JamesM has written: I would argue affordability is an important aspect of where prices ought to be and expectations of future prices will decide where prices go in the future. Affordability and expectations both point towards lower prices for a while yet.
It was curious that JamesM cited an article that was relatively bullish (with exception of the Edmonton affordability number). Some comments: first of all, those numbers tell me that affordability in Vancouver and Toronto has very little to do with the income of the average resident and a lot more to do with the income of out-of-town speculators. Secondly, I would like to know how affordability is defined as “if income is 1/5 of purchase price”. This rule of thumb is probably reasonable, but there are a lot of other factors such as cost of living, number of children, etc. Thirdly, I would like to know how they came up with 4.3. The most current information I could find (at bottom) says that the median income of Edmontonians was $63,128 in 2005 (and median income is the correct number to use here). Even if we adjust that to $67,000 for 2008, today’s price of $358,000 is 5.34 times income.
So, if we talk about where prices are going, that’s where newspapers and blogs can fight it out. I would actually defend the newspapers because, over the past two years, they wrote positive stories when prices were on the way up – so it would be unfair if they did not report the downturn as well.
At this point in my life, I am fortunate that buying a house is optional. If I can wait and if I am trying to be wise with my money, there is no reason to buy while prices are flat (or dropping).
http://www12.statcan.ca/english/census06/data/topics/RetrieveProductTable.cfm?ALEVEL=3&APATH=3&CATNO=97-563-XCB2006049&DETAIL=0&DIM=&DS=99&FL=0&FREE=0&GAL=&GC=99&GK=NA&GRP=0&IPS=97-563-XCB2006049&METH=0&ORDER=&PID=96272&PTYPE=88971&RL=0&S=1&ShowAll=&StartRow=&SUB=&Temporal=2006&Theme=81&VID=&VNAMEE=&VNAMEF=&GID=838054
R. Where is it 1.5 to 3 times for affordability? Can you get a JOB there? I’m sorry but Edmonton has to wake up, it is turning into a big city. I have lived in Toronto, and the weather sucks as bad as here in the winter, summers are better in Edmonton, too humid in TO. Vancouver is nice and yes agree it should be more, although in recession times, I think being able to get good jobs will win over “nice” places, especially losing big time on stocks.
So, at 5 times their income, our tenants should be able to move into an average-priced home….
But they can barely make rent – and rent has not gone up ever, since they moved in, years ago… yes, we are missing out on revenue, but they keep our property in good shape, and that’s what counts for us.
Why won’t they be able to qualify for that average-priced house?
Student loans, car loan, furniture package “buy now and pay forever”, credit card debt, child care costs…. No vacations, no fancy hobbies or expensive habits.
The rule of thumb only works when there is no significant other debt!
JamesM: If you do the math on affordability I’d argue that it is a factor. The stats I found for median family income put it at $75,000 this times 4.3 (the income to house price ratio you mentioned) would price a home at 322,000.
However if I go to the MLS affordability calculator to determine what I could afford with a $75,000 income (assuming 2.5K in property taxes and a 5% interest rate) I get 289,000…the calculation works on debt service ratio so suppose I have a car payment and revolving credit to the tune of 1K per month I can afford 220,000. So I do believe the pricing has shut out a good portion of perspective buyers. I’ll put the disclaimer that the affordability parameters are as defined by the mls and not by banks.
Unrelated I do think media reports are also intimidating buyers but in fairness I also think it was media reports that created the frenzy that led to the “boom” in prices.
“the main reason that sales are sluggish has little to do with affordability…it;s instead due to people taking in the NEGATIVE spin that the news are throwing at us 24hours a day and hoping to “play the market” and “find the bottom”
The prices started falling before the negative media… Sadly there seems to be a 3 to 6 month lag with them.
***I would agree it has more to do with confidence then anything.
Sheldon
Also… on the topic of ratios I can find news to support my point of view as well
“There’s a simple measure of sanity in housing prices: the ratio of median home price to income. Historically, it runs around 3 to 1; by late 2004, it had risen nationally to 4 to 1. “All these people were saying it was nearly as high in some other countries,” Zelman says. “But the problem wasn’t just that it was 4 to 1. In Los Angeles, it was 10 to 1, and in Miami, 8.5 to 1.”
http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom#page1
A correction is justified, affordability has changed dramatically since I moved here in 2001 from Sask. At the time I paid 150K for a brand new 1200SF bi-level on a large lot. I had a salary of 70K and was sweating bullets when I bought it. The second house I bought was a 1900 two story in 2005, the lot was smaller with poorer finishing and construction techniques. I paid 245K for this house in 2005 and just sold it for 390 after 36 months. My property tax assesment was 463K and I believe someone may have actually paid that during the hype last summer. I have purchased another property allready but if I was renting right now I would wait it out and watch the market for awhile. We may be done correcting but I would not jump the gun, when prices start to rise it will be gradual anyways.
The global real estate bubble, built upon easy credit, has burst. The credit cycle will be much different going forward for at least the next 5 years or longer. Prices are in decline and this will continue until prices reach a level that is in-line with long term average price appreciation. When they get there, at best, one should expect that they will flatline. And despite what CMHC or other housing optimists say, Canada and Alberta are not immune to this, and BC and Vancouver is most at risk.
Just to reply to Sheldon’s question: Yes, I am hoping to buy at the “right” time. I don’t worry about all the demand on the sidelines because the “right” time for me is NOT the “right” time for everyone else. It’s easy to look at the real estate market and equate it to the stock market. The stock market can crash over night, whereas the real estate market is gradual. These days the stock market can jump 1,000 points in a day, the real estate market is gradual. What I’m trying to say is, the bottom of the real estate market is not going to be a one-time shot. The “bottom” of the real estate market (not unlike the early ’80s) is more likely to last for months or even years. Even if the “pent-up demand” all come out of the woodwork and sales spike for a couple of months, I will still get a house. I may not pay the low price, I will probably miss the bottom, but I will pay less than I would have had to pay today.
Now I I have a question for Sheldon: I am a saver, I carefully consider every purchase I make. Every dollar I save goes into my down-payment fund. Back in May 2007, my wife and I were looking for a house to buy and we were ready with our 5% downpayment. A year and a half later, we have saved and prices have come down. We now have a 15% downpayment. Sheldon, if you were in my shoes (and a house is a want not a need), would you buy a house today or would you wait a year? Our savings will have grown and we might be able to put down 25%. Doesn’t that sound like a good plan?
Travis, you only need 20% to not pay CHMC, so you probably want to wait until you have that, if you already have 15%
Hey Travis,
As long as house prices continue to slump and you don’t mind renting, why don’t you wait until you have 100% down to buy (that’s a little extreme but you get my point). I wish i would have waited a bit longer (took the plunge in June). I don’t think you will be left in the dust when things start to rebound. So just hang in there. It’s a great time to be debt free.
Oh yeah,
Thanks to Sheldon and Sara for providing us with regular stats.
“We declared early this year that the housing boom was over, and these figures on the surface would suggest the bust has begun,” Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc., said in an interview.
http://www.globeinvestor.com/servlet/story/RTGAM.20081114.wmls1114/GIStory/
Six big oil projects now on hold plus many more potential slowdowns at fort sask, layoffs in oil and gas occuring everywhere, only a dreamer thinks that real estate is not coming down hard. We have been lucky so far in the fact that few houses yet have been listed by people that have to sell. If that changes look out. Look at all of the expired listings, some developers are already filling basements back in.
I live way down south at 111th and Ellerslie. Just further south of my neighborhood there are a couple of developments that appear to have almost stopped. Sad thing is, there are a few homes that are built and appear to even be occupied with nothing but vacant lots and dirt around them. Who knows, maybe the developer will let them sod the whole area and live the acreage lifestyle until things pick up again. Here is a shining example from another southwest neighborhood
http://edmonton.comfree.ca/display.html?code=24515
Talk about little house on the prairie
Jason Edwards,
Layoffs occuring everywhere? Really….I haven’t heard of any, are you surmizing there will be or are you reading something I haven’t?
Itchy,
Jason is right, there will be a deep economic down turn in coming two to three months in Alberta. All big projects are either on hold or even cancelled. only 5,000 layoffs in Fort McMuarry. Suncor, CNRL , Albian projects are on hold. Most of the upgraders are either on hold or even shelved like Stathydro (delay), Petro-Canada (hold), NorthWest (gone). BA energy (gone) and others. All the projects are non-feasible due to Oil price especially upgrader projects. Suncor Voyegor project expansion was feasible until Oil $70 / Barrel.
I think it is right time to move from Alberta. House prices will reach to the bottom at the End of 2009. Better to sell early to minimize your loss.
We are going to a bust cycle is Alberta. The people of 80s must remember.
Couple of points in rwssponse to these postings:
- newspapers always pick up on a theme way after it has in fact become a trend. If you wait for the papers to start reporting good financial stories then will definitely have missed the bottom of the market!
- be careful about assuming your savings will grow. Interest rates are coming way down so earning 3-4% in a bank might not keep pace with inflation. Consider buying now and locking in a low interest rate. If you wait too long and interst rates have gone up the extra $10k you saved may dissapear very quickly if you are paying an extra 1% on a $300k loan.
- maybe a good oilers season will improve sentiment!
Nabil,
It depends. Had all these companies that were going to build upgraders hired people to build them? I don’t have any idea, but if they hadn’t yet hired people I guess there won’t be layoffs will there! This is my point. I haven’t been able to find any information on any layoffs affecting the oil sands on any kind of significant scale. Anyone I have talked to that have any affiliation with companies busy up there, indicates to me that there is enough work for at least a year. If the downturn goes longer than that, then there may well be more significant layoffs. The main thing to remember is that these companies have been having a proper bitch of a time laying their hands on enough workers for years and they are very leary of laying people off because they will have the same issue all over again when oil turns again. Oil sands is a little different mentality than park the trucks and cap the wells boys…we’ll call you when things turn.
What a bunch of baloney people. All the articles I have read on the oil sands have mentioned no layoff’s, just stalling future projects which would of put a squeeze on the labor market as it is anyways. A lot of companies indirectly related to oil and gas are more then happy to see this downturn because it will mean lower operating costs for them in terms of labor and material.
I personally welcome a slow down. But in no way or form does it represent a crash, the oil sands is not a huge factor driving our economy, remember? It’s the conventional oil and gas wells.
Gee I thought the World needed oil … guess not, who knew?
Lets face it yea there is a slow down World wide … and yea for the next coming years its going to be slower then it has been.
But the World is an oil hungry monster that needs to be fed and Alberta, Canada has a large amount of it.
Jeremy said:
“It’s the conventional oil and gas wells.”
I understood from most articles I have read that layoffs were coming down the pipe in the conventional oil and gas sectors. The lower price of gas combined with higher well servicing costs has forced Alberta companies to look to ramping up operations in BC and Saskatchewan and letting things cool off in Alberta. But does this mean layoffs? Or just a lot of travel time for Oilberta working boys?
As far as tarsands goes, there is this article:
http://www.cbc.ca/money/story/1999/01/27/alb_oil990127.html
Remember: Continuing to mine for bitumen itself does not need the same oil price for profitability. Although the sub $70 oil has put a damper on many upgrader projects, bitumen extration is still very profitable, where the break-even price is somewhere around $35.
Also, some do point out that a major component to Alberta’s 2006 and 2007 net migration figures were for construction and other trades related to home building, commerical real-estate development as well as “tarstruction” workers. How many construction workers for the remaining tarsands projects is another “number up in space”, but surely the demand for housing construction trades has dropped significantly.
So at first glance, it does not look that bad. And it’s not. But many financial gurus have been warning about a big YET! The whole trouble with a downturn – or outright recession – is that consumer confidence and spending gets hurt in so many areas you get a chain-reaction effect. Usually the order around here is a) front liners in energy get hit then b) businesses directly servicing energy then c) less direct indsutries hit, along with retail sales and other non-industrial services.
I always thought that some more restrained and sustainable growth would be a good thing but a full blown bust is not good for anyone (except maybe mother earth!). I can’t agree with those cheerleading a bust because ultimately they are cheerleading the next BOOM. Bulls cheerleading booms promote busts and bears cheerleading busts promote booms.
It’s the boom/bust nature of energy that we need to put a damper on. Aside from a select few that can manipulate markets to turn themselves a buck in either direction, it just creates havoc and chaos for the rest of us.
As a society we need to address the effects of rampant speculation on everything from oil to housing and even food. We also need to finally get Alberta more diversified and stop just paying lipservice to diversification. Oil dependent support services and associated retail spending levels is NOT diversification – just spin-off jobs from the energy sector.
We’re still a “One-Trick” pony. The burning question is: can we get away with it and for how much longer? Then after that come the environmental concerns and the political concerns about our governments blatent inability to manage infrastructure advancement and population growth in a fast paced economic environment.
Still mad about the $50M 23rd avenue exchange that is now going to cost us taxpayers a cool $125M.
Grrrr..
Cheers,
E-town
wow, I gave an offer this morning to buy a house and came with a rejection.
no counter either.
I gave 90 percent offer of their asking price.
I liked another house and it was pending last week and it’s sold now.
where’s the house market slow down that I’m looking for~
Connan:
If you’re a real 1st time buyer, then wait.
If you’re a real 2nd time buyer, why miss out on a cream-puff over 10%? Your home went down in value as did theirs – why expect top dollar for your home and a 10% discount for theirs? Just take your equity and get the home you want and stop worrying about being a “Sell high / buy low Oilbertan”. Greed will keep costing you your preferred homes and you’ll (like Sheldon said) get a GRRRRRRRREAT deal on a home you didn’t want… as much… Great… Deal. ???
If you’re a real estate agent posting counter-intelligence, well, it’s not working.
)
I bet you’re one of the three…
Cheers,
E-town
Boom/bust nature of energy? It’s not energy, it’s capitalism.
http://www.hu.mtu.edu/~wsewell/hu365/cptalism_marx.htm
Connan,
It tells me one thing;
Edmonton home sellers are not ready to reduce their selling prices any further.
karl,
it tells me that many people will regret later their not accepting an offer now. The same way it happened to those who haven’t accepted an offer last year.
yes I sold my condo earlier this year and now I’m homeless. I’m shopping around for a house. I looked around 8 houses and found 2 that I liked. One sold, one offered but rejected. Am I low balling giving 90% offer in this buyer’s market? I thought it was good offer.
I heard an expert on the Dave Rutherford Show on 630 ched on Monday talking about the “BIG OIL” companies and how the $55/barrel oil is affecting them. You can check out the archives and listen for facts. In a nutshell he said when they say that the cost of producing oil is $95 or even $100 a barrel, that number is an AVERAGE cost of production ammortized over a 50 year period. So if it costs $95 a barrel today and it’s only worth $55, that means that TODAY the companies have a cash flow issue, but in 49 years after the cost of production average is still $95 what will oil be worth? Logic tells us a lot more than today’s $55/barrel. He also mentioned that all of the big companies have sound Balance Sheets. I don’t think there’s a ton to worry about over the long term.
I also think that a lot of you have forgotten about the LONG TERM aspect of realestate. What happened to the landlords who waited 15 or 20 years to reap from their investment? Where did all the short sited investors come from? You came from 2005 or 2006 or 2007, you certainly didn’t come from before that! Try not to forget it. Ride the waves people!
I somehow feel this slow down is more artificial. I am sure we will be back on rails soon.
“Where did all of the shortsighted investors come from?”
They watched too many ‘Flip this House’ and other programs on TLC. There were/are too many people out there (not just in Alberta) in the real estate industry that should not be. The regression in the markets will weed out the “wannabe’s” and leave the industry back to the professionals who understand the game. If it was that easy to make money in development / real estate, everyone would be doing it. And when everyone starts to get into it, get out. That’s the first sign the cycle is topping out.
Oh, and the overall slowing of the economy is a good thing. The previous years of growth were not sustainable. This slowdown will ease the costs of labour, materials and overall inflation.
If people think that it’s just ” the conventional oil and gas wells ” that have driven our economy to where it is now, they are sadly mistaken. This boom is in large part a result of the oilsands along with other resource rich areas of alberta. Oil production does not end at Fort Mac that is just where it is removed from and partially processed since it is too thick to send down a pipeline in that form. It results in pipelines, upgraders, refineries, and tank storage areas. A loss of industrial construction will decrease the quality of life for all and damage are already unstable economy greatly.