Now broadcasting in widescreen…Sheldon Johnston discusses the myth that homes are selling way under list price in Edmonton:
Update - one of our readers has suggested we present the same data in a list to sale ratio format so here it is:
They also wanted to know how the ratio had changed over time, so here you go:
Edmonton Real Estate Market Weekly Update – April 27/12
Edmonton Real Estate Market Weekly Update – Star Wars Day
Edmonton Real Estate Market Weekly Update – May 11/12
Edmonton: The epicenter of North America
The Edmonton Real Estate Blog is written by Sheldon Johnston and Sara MacLennan of Coldwell Banker Johnston real estate; both are licensed real estate associates in the Province of Alberta.
Aside from blogging, Sheldon manages the brokerage and assists clients buying and selling real estate in the Edmonton area, while Sara focuses on marketing and business development. If you're thinking of buying or selling real estate, or if you're interested in a career with one of Edmonton's most successful teams, contact them at blog@teamjohnston.com.
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Johnston Real Estate
The fact there are still people paying more than list price tells me that some still don’t get that we are in the beginning phase of a severe real estate price correction…buy quick, before prices start rising again!!
It means that in any market where you have buyers and sellers and you have a well priced product that the market place sees as well priced there is going to be demand for it.
Sheldon,
In an uptrending market, I would agree with you. But in a declining market, what may appear to be a well priced product today, won’t be well priced for long.
Some people take a long term view when buying a home. Some see this market as an opportunity and for some the right home is worth paying a little extra.
Sorry Sheldon – I’m not convinced. Is this analysis based on the final list price or the initial list price? A few properties I’m interested in have been taking $40-50k off of their initial listing price after sitting on the market for 60-75 days with no takers (in the 600k-800k range). Given the wide range of home values perhaps a histogram with bins based on percentage of list price would be more convincing.
Final list price. Final Sale price. I understand what you’re saying. Some properties have also sold in days. Keep in mind this is just a snap shot of a certain perspective. For example if you do the same comparison by price range the average increases the higher the price. The price range you are talking about is where you would potentially see more movement.
The current issue of MacLeans (The one predicting a 20% decrease in Canadian House Prices the cover) suggests that CREA sale prices are statistically invalid as they rely on a manual input of sale price by realtors who may not be inclined to show a price drop.
I don’t know if that’s true – certainly wouldn’t surprise me if it were – but if true that would call into question many of the published stats we see including this one.
Thanks for providing these stats, Sheldon.
I agree with Jabberwock that there still seem to be significant price reductions in the 500+ range. Not sure whether this is also still true below 500K.
Your graph seems to indicate that homes sell when they finally get close to the price that feels “right” to buyers.
Getting to that right price seems to be a struggle for many sellers who have adjusted their price downwards 5 or more times, sometimes by up to 30%.
Great advice!
Very nice read. Thank you for the information. Will apply this information and wait to see the results.
If you publish the sale information incorrectly you get fined. It is also cross checked by seller agents and buyer agents reporting independently. At least for the Edmonton real estate board. Why is it so important for us to have accurate information? Because the members who use this information to price their properties need accurate information as do the buyer agents who inform their clients. Mcleans is wrong but believe what you want.
And I guess you believe what you want. But dont forget, when this all started you predicted that prices would go no lower than 5%.
BNN is running specials on the Canadian R/E prices. The Canadian Real Estate Board or whatever has said that across Canada the average sale price is going to drop by 8% and pick up in 2010 by around 1% (I enjoyed watching the guy squirm). They also say that some markets will be hit by a higher price drop. These markets are Calgary, Vancouver, and presumably Edmonton. So would the seller not be better off knocking their price down to where it should be according to the real estate forecasts. This way they will be guaranteed a sale and will not have to make mortgage payments on their house for the entire time on the market. Also they will not have to make property tax payments as well as utility payments. In the end they would still come out ahead. Off course sellers that purchased their homes at peak price will take a loss, so it is best to live in their house till prices appreciate again.
Currently I’m putting an offer on a home originally listed in July at 359,000. They have knocked down their price in January to 299,000. My offer is at 275,000 to a max of 280,000. My feeling is even at that purchase price the house might lose 5,000 to 10,000 in value. I will see what happens today. I believe the owner can sell at that price and still come out on top. This house was built in 2003 so the build quality should be good and the owner at that time would have paid somewhere in the 200,000 range. Hopefully they did not take out the equity on that house when it was worth much more than the purchase price.
Maybe I’m a speculator in the negative direction.
Where’d you come up with that figure?
Wathed the BNN report on Monday. The “analyst” they had Monday predicted that the average price of Real Estate in Edmonton to drop to an average price of just over $200,000 and the price in Calgary to drop to around $250,000.
Would of liked to seen all weeks reports, wonder if they have repeat shows in the evening.
Sheldon, your going to have to watch you terminology when you use the word majority of the sales are going for 5-10k under list. This is completely false as only approximately 20% of the sales are falling into this category. Thats make you sound as truth full as jack layton and his NDP majority government in Canada right now. It would be true that the majority are going for 5k to 30k under list price with and approximate median of 15k off list price. Can’t provide exact number because your chart doesn’t provide details.
I agree with you in that if you find your dream home and it is still conservatively mortgaged go ahead and buy it. If you are a picky buyer its a great time to secure a long term home, even if it may depreciate another 10-30%. As you can pay off this amount in 5 years if you have a reasonable secure income and didn’t over finance. It’s not a bad idea to do all your caculations on a long term average of 7% interest even if you lock in for 5 years. Possibly even overpaying your mortgage by the 2.7% spread for the first five years.
Hi Sheldon, Long, long, long term reader. Of pretty much everything you and your partner have written since April of 2007. Your prediction, a very concrete one, was that prices would dip no lower than 5%, and that although the short-term of pricing was uncertain, the long term looked very good. The date was June 27, 2007, and it was housed in a small correction note to stats that you had reported previously. For convenience’s sake, the page is on this address: http://edmontonrealestateblog.com/2007/06/
This seems pretty clear to me. In the short-term prices would dip no lower than 5%, in the long term things look good. When you say “good”, I assume that you mean that prices would go no further down, likely higher, cuz that would be “good” for sellers and people holding houses. That wouldnt be good for buyers though. Did I interpret this wrong?
Duke I’ll forgive you for falling asleep during my video. I didn’t say that the majority of sales were happening between 5-10,000 below. I apologize if you took it that way. What I meant to say and maybe I wasn’t clear enough was that the majority of sales are happening between the two price categories we established. Of 5-10 thousand and 10-15. I hope that clears it up what I was trying to say. And yes you’d be correct that the vast majority of properties are selling for between 5 – 30k below list price.
I also said time will tell. Based on the data and trends I was looking at then I felt that was reasonable. I certainly didn’t predict the freefall in the stock market in Oct – Nov of 08 and had that not occurred I may have been right, who knows. However, that is the problem with predictions up or down you really never know the future until you look back and go “ah ha”.
Good Info as always.
I would be interested in seeing the same graph above in a percentage above/below sales price.
This would help the scaling of high value and low value properties.
Instead of actual dollar amounts – you could have a percentage below (0-2%, 2.1-4%..) or above the final sales prices compared to final list price.
Also – A comparision versus a year prior or 2 would be very helpful – although I imagine work intensive.
But the point was….beliefs. Not the Ah ha. I certainly get no joy out of this crisis that we are in. Everyone has their own beliefs. The person prior has a belief that you believe is wrong. You yourself have a moderately positive set of beliefs regarding the future progress of this real estate/economic crisis (the two are relatively inseparable) that come through in quite alot of your comments. They certainly have not been accurate to reality. Indeed, your stated belief has to this point been about 15% off the mark. But of course, time will tell. Im sure in 15-25 years, prices might come back to your predicted mark. And then of course it could be said that this was the long term that you were referring to. Thanks for replying to my comments and I will continue to read and think seriously about your presented information.
The house price in the states is at 2001 levels. Average price of real estate in Edmonton will definitely drop to at least $200,000 (2005 levels). Some predict even a further drop to 2001 levels.
http://www.canadian-housing-price-charts.235.ca/canadian_housing_price_chart.htm
I am interested if you know of any analyst who is right 100% of the time, or how many have been off recently.
Where do you get that I’m off by 15%? The average price at the peak was approx 354 and is currently approx 317. That would an 11% drop off the peak. The article was written in June 07 which would make it a 9% drop. I’m off by 4% on the average. I have on a number of occasions also contradicted CMHC and REA predictions of increases. If you think it “might” take 15 – 25 years for prices to recover then you and I are seeing things from completely different perspectives. But using your math that might only mean 5 – 7 years
I’ve just added graphs, number of sales by list to sale price ratio, average list to sale price ratio since 2005. Hope this helps.
This is all interesting info. I have a negative point and this is because I am a first time buyer and would like to get into the market for cheap. Everyone must understand that you are taking a huge risk in buying a house in todays economic climate. Therefore the price offered reflects the risk you have to take in order to purchase a house.
Isn’t this what banks do? Don’t they offer you loans and set your interest rate based on a certain risk factor?
Anyways only in time will we know what the final price drop was through this recession.
Fred if you think that home prices will drop by ~35%, I hope you’re not holding your breath. I don’t imagine you’d be willing to take a 35% pay cut along with it. It’s all relative. Edmonton’s market barely moved for 10 years or better all the while everything else got more expensive. Everything, including housing has gone up, however, housing overshot is now coming back to more reasonable levels. 2001 levels? I highly doubt it.
Ryan, you are correct you have to factor in risk. At some point the opportunity cost between renting and owning will become a more important factor in pricing. In many cases some sellers have factored in a discounted sale price to sell quickly or ensure a sale and if you’re going to try to discount it further the chances of reaching an agreement are pretty slim. Someone will recognize it for the value it is even if you don’t. For example one of my team members, Derek had a buyer he was working with that would offer a certain amount less no matter what the value of the property was. This is a great idea if you want to overpay for something and end up with the second best choice. The seller he eventually will buy from will likely have their property over priced more and being willing to discount his price more than a correctly priced seller, yet that property maybe clearly inferior.
Don’t be surprised, if you don’t get it!
Mike, was not me who said it, was another Financial “expert” on BNN.
A freind of mine lives in Tamp, they have had a 50 percent price drop in some areas, not sure he or I would of ever beleived that.
Would not surprise me if we did go down another 35%.
You and I have no say in the price. Its means nothing whether or not we are willing to accept what is going on.
You don’t want to take a pay cut, quit. You don’t want to accept a lower price for your home don’t sell.
When house prices were soaring, the stock market and commodities were also soaring. People felt very very possitive. That no longer exists.
It’s amazing how seasonal list to sale price ratio. According to the historical pattern the ratio should go up now or very soon. Let’s see if this year is special. Being on the market back again, I can see how difficult it would be not to buy something this spring when (ignoring the economic recession) warm sun will shine and birds will sing.
Sorry, guess I was going on Condos and houses only. And according to median (a statistic much less skewed by outliers, and therefore more reliable on the whole than the average) both are off according to Bob Truman’s Stats[SFH HOUSE: July 2007 (410K) - January 2009(336.8K); Condo: July 2007(269K) - January 2009(225K)]. Both are either more than 20% or are pretty darn close. Im sure that there would be a similar trend using square foot, probably even using your stats. Im just using Bob Truman’s as they are easy to access. I nonetheless think that my statement is well backed up by data. And yes, if you think that in 5-7 years we will be back at this level, then we really are seeing things differently. But thanks again for being so respectful of my different opinion, you are very good at that on this blog.
In the middle of the worst recession in history we only gave up $60-70,000 in prices, can you imagine the prices, if things picking up?
And it will come UNANNOUNCED and UNEXPECTEDLY, just as the bust came!
Thanks for your comments.
Norwood and Calder seems moderately priced, less than $300,000 buys you a nice home, I lived there, I know.
HOW LOW CAN YOU GO?
I know the answer:
Don’t go too low or they will chase you out of the house.
eh-eh-ha-ha
The recession is far from over. I think most analysts have just recently been reporting that the effects have only just started for Canada. Canada always lags behind the US time wise. There have been several articles as of late reminding us the when the US sneezes Canada catches a cold. Many predicting that Canada and other major trading partners of the US will be hit worse then the US.
Karl, its just begun…
No, Fred, they are talking about a 2009 recovery.
We are in just about the middle of it or 3/4 out of it.
Thanks for the update! – Interesting to see the breakdown over the years.
If the peak oil theory is correct then within a few years there will be a shortage of oil worldwide. In that case oil prices will be back around $100 (or higher) and Alberta will be one of the few places around where there are decent jobs available.
People from Ontario and Quebec will be flocking here to find work.
Maybe I’m wrong….
But then again, maybe I’m right.
OK
Have a nice weekend.
Even as bearish as I am on real estate in recent years, I have to agree with Mike here. Edmonton *was* undervalued when homes were $120K back in 98. By the end of 2005 we saw a correction of $80K up to the $200K mark.
Then the oil boom happened! We shot from $200K in the beginning of 2006 to $350K in 18 short months. The big question is how much of this is “further correction” and how much is speculation bubble? And, regardless of CAUSE, at what point is there price support?
Interesting interactive graph here: http://tinyurl.com/bzq88l
Look at these numbers:
1967___$15,442
1987___$76,878
2007__$338,009
1967 -> 1987 = 498%
1987 -> 2007 = 440%
Interesting. I wonder what average family incomes were in those years to compare increase in housing costs with increase in family incomes, to look at affordability in a different light…
Cheers,
E-town
Not sure if this is abit off topic, but I think housing dont really correspond with salary as in what Mike said.. if you look at edmonton and calgary.. well calgary housing is about 10-15% more.. and why is that? do the people who work there get that much more on avg? well for sure they min wage is not that much higher as their min wage is the same as ours? or lets take montreal and vancouver.. so the avg housing price in vancouver is more then double of what montreal is does that mean vancouver avg income is double of what montreal is? I dont think so. so why is there such a big price diff between the 2 city? I would imagine to build the exact same house the material and labour cost would be simular.. for sure it would not be double the cost. Honestly how long can housing go.. nobody no.. yes partly it is by supply and demand.. but there are other factors that is involved. As you can see the price of oil.. which suppose to be price on supply and demand too.. high of $140.. and these days it hover around $40, so that is a 70% drop in 6 month.. I dont think there is a 70% reduction is usage of oil around the world. But if someone knows for sure how much housing will be in the future.. they sure know a lot more then most of the other ppl.. if that person knows how much oil will be in 6 month.. please post it here.
Thanks for adding the chart that shows final price versus initial list price. Unfortunately, this will still not tell the entire story, since homes will often get relisted at a lower price, sometimes within just 30 days!
Or do you have stats that actually track a house from its original listing to the final sale?
Recently, I have seen houses come back that were taken off the market in late 2007 or early 2008. Some list lower now, others don’t. Sellers seem to have widely varying expectations of the Spring price trends.
Fred, just in case you are, in fact, holding your breath to see prices come back to 2001 levels, I suggest you get some oxygen soon. Prices around that time were probably too low for a city this size, and since then our demographics have changed quite a bit.
If this “bubble” bursts in a similar way to the one in Toronto, in the late 80s, you should not expect to get back to the same price levels from which the bubble took off. So, 2001 prices – probably not….
Great thread Sheldon, Sara, and fellow bloggers. Beautiful day in Edmonton today….hopefully yesterday was the last deep freeze of the year.
Ummm, think I mentioned earlier (twice now) that this was just a quote from an Analyst that I saw on BNN.
Thanks for the advice on the oxygen – doctor I presume.
Size of the city has nothing to do with price.
Have a nice weekend.
It’s not linear you idiot. There’s tons of support in 1960 for $10000 houses too so why not argue prices will fall that far!
So, sellers agents and buyers agents have no reason to collaborate to keep the avg “posted” price up? Similar to gas companies? Who performs the independent third party checks?
McLeans is a fairly competent magazine.