The average residential MLS sale price in February was $308,970, down 2.5% from $317,049 in January 2009. The average residential sale price in February 2008 was $338,347 in February 2008, $321,307 in 2007 and $211,531 in 2006.
Looking just at Edmonton (as opposed to the entire MLS are) the average sale price of single family homes was $349,740 (down from $361,442 in January '09 and $388,298 in February '08). Condos were $22,912 (down from $237,888 in January and $260,483 in Feb '08).
Now that we've got prices out of the way, lets have a look at the one number that was better than last February – the sales to new listings ratio was 41%, compared to 30% in January and 36% last February. This was due to stronger sales than we saw in January, and fewer new listings than we say last February which is a good sign.
As you can see, new listings are much closer to the normal range than we have seen in almost two years:
Overall there were 1075 residential sales, compared to 730 in January and 1287 last February:
I've create few additional sales charts that give you a good idea of just where these sales are occuring:
More analysis and stats when the final numbers (including inventory) come out in a few days.
The price trend is intact.
Robert what do you mean by your comment?
Looking at the graph monthly sales seems to lag all years listed. New listing is the second highest. Sales to listing ratio still puts us in a buyers market.
Conclusion is that prices will continue to fall. I can’t wait for the authors conclusions. Hopefully they will ahve a conclusion even if it is bad news for the sellers.
“The average residential sale price in February 2008 was $338,347 in February 2008, $321,307 in 2007 and $211,531 in 2006. ”
Those numbers are a bit scary. Gains in just about every financial market have dropped well past their 2006 prices.
Could we see an average below 250k in a year?
Likely not. Other markets will show higher volatility due to ease of liquiditity. Real Estate being a less liquid asset is not prone to the same sorts of volatility. It would be naive to conclude that these two types of markets are 100% correlated. It’s just not that simple.
Nate,
You’re way to much of a doom and gloomer. A year from now prices will be still be around $300. You’d have to wait at least two years to before you see $250.
Stop listening to the media. (While they were allowed to help drive prices up two year ago), they are now the scum of the earth for their propaganda of “house prices in Edmonton are heading lower”.
I was just pointing out that almost all of the explosive gains took place in 2006, and we’re now trending towards prices last seen in the last quarter of 2006.
Looks like 2007/2008 are a wash.
But you’re right, blame the media and those “doom and gloomers”.
Sheldon and Sara,
I really appreciate the statistics you provide on your website. The information is always timely and it is always useful to compare multiple measurements side-by-side.
Having said that, I was wondering if you could start including a new measurement. Although I am suggesting this slightly tongue-in-cheek, I am genuinely curious as to what this graph would look like:
I will never forget the monthly report from EREB two years ago. Sadly, I can’t find it on their website today, I guess they have pulled down the 2006-07 info. At the end of the article, the EREB president cited that the huge influx of real estate agents in Edmonton was an indication that the market would continue to be strong. Having Warren Buffet’s advice in the back of my mind (be fearful when others are greedy), I took this statistic to mean the opposite. So… can you graph the monthly number of real estate agents operating in Edmonton over the last three or four years? If it was good enough for the EREB, it’s good enough for me. Maybe it would shed some valuable information on the subject.
Guys good news rates are going down. BNN reports that on Tuesday the BOC will cut rates by half a point. This could translate into the mortgage rates for fixed terms dropping by .25%. I am very optimistic this means I could likely get a 5 year fixed even below my guaranteed 4.30%.
In light of this generally downward trend in price, and analogous to the foreclosure series that has been posted, I’m curious about the other side of the coin – what the formula is for people who are in a losing battle with their mortgage?
In other words, what if someone owes more than their home is worth, what is the magic number for one to cut bait so to speak. What if you’re in a mortgage term that, for example, you bought for $550,000, you mortgaged at $500,000 and after 5 years you will still owe $480,000, meanwhile your home is only worth $420,000 today? (Hypothetically, to illustrate the point.)
I’m not talking about missing mortgage payments, that’s not the issue, it’s more about equity vs. value and getting into the market at the wrong time. When is it better for someone to walk away from a mortgage?
What are the concequences for someone’s credit when they walk away from a mortgage? Does it mean that all your other loans will be called in? Or can you live your life as a renter, with an otherwise normal life as you rebuild your credit? How does this work?
http://www.talktoyourlawyer.com
“are now the scum of the earth for their propaganda”
i love it… the media didnt start putting negative pressure on RE until months after the prices gapped down but its somehow all their fault.
Ryan,
I mean’t prices are continuing to head lower.
You can’t walk away from mortgages in Canada like you can in the US. Your bank will chase you into bankruptcy for the difference.
I hope my sarcasm was evident. The media are going to do what they can to sell papers or whatever. I didn’t hear much complainin’ when they pumped the market up and helped create the panicked buying of 2006-07. Why do investors and speculators expect to have it both ways?
http://calsun.canoe.ca/News/Alberta/2009/03/02/8584516-sun.html
Just look at the spin they are spinning here. Cmon Feb sales historically have always been busier then January.
HOW BOUT SALES OFF 35 % FROM FEB/09 which is a more telling tale.
CALGARY STATS
The CREB Prez’s blatant misuse of statistics in this article is just embarrassing. A fool might read this information and think, “Wow, the inventory dropped by 5 months in just one month’s time, I better get in ’cause there will be no houses for sale by April”.
BONNIE WEGERICH: comparing one month’s absorption rate to the next month is about as intelligent as catching a falling knife.
If February was a “good news” month for real estate in Calgary, why did inventory of SFH’s in Calgary climb by 7.7%? (Bob Truman)
Years ago, I learned in a night class on mortgages that you CAN walk away from a mortgage, in Canada, provided you DON’T have mortgage insurance on it.
That is, the bank will sell the home and won’t come after you for shortfalls.
So you won’t be chased into bankruptcy, but the bank may “retaliate” when it comes to other loans and investments with them. I can also not imagine this move would be good for your credit rating…..
Apparently, when your mortgage is insured, the INSURER will come after you for every outstanding penny
The insurance works in favor of the banks, not yours. Therefore, you are better off saving up for a sufficient down payment and avoid the insurance altogether.
The question is why you would want to walk away from your mortgage?
Let’s say you live in the home, you like it, your kids love the school they are in, you can afford the monthly payments, and you had purchased the home with the intention of staying there for the long haul.
Why would you uproot your family because of a temporary loss in book value – and lock that loss in, for good?
Otherwise, go and see an experience lawyer….
Thanks for the response, your long haul situation is a great point. One reason for moving is when someone needs to move for work. Or another is that they’ve gotten married and are having a baby and don’t want to live downtown anymore.
Maybe walking away from the mortgage is the wrong solution – it’s only because I want to learn more about it that I asked.
Maybe the solution wouldn’t involve lawyers necissarily, maybe there’s some negotiation to be done with the bank, if one were to move the mortgage to a new property, on whether or not the shortfall between the mortgaged amount and the new sale amount has to be entirely repaid? Does anyone have knowledge or experience with something like this?
I realize this isn’t something everyone should be doing, and it’s not an ideal situation, but I think it’s valuable to know about all the options. Thanks everyone!
It’s called a QUIT-CLAIM. (look it up)
People will be doing it soon.
You can’t listen to the media… This is actually much WORSE than they make it out to be!
Just curious, would like to hear your ideas out there.
If you are a first time home buyer and are looking to buy right now, would you try to get the lowest possible interest rate right now (even under 4%), and lock it in for 3-5 years, or would you go for a higher rate (e.g., 6.5 or 7%) and lock it in for up to 15-20 years?
Although a very low rate for the short term seems attractive right now, I’m leaning towards locking in a higher rate over a longer period of time as it seems to be less risky.
Thoughts?
jj
In my opinion, the best to go with the lowest possible short term rate, be it 1 year or even 6 month as rates will stay very low for a very long time and even when they start moving up, it will be slow and 0.5% at a time or so.
Simply, there is no valid reason for interest rates to go up.
Go lowest short term and save money.
That is a tough call jj. I think the 4 and 5 year fixed rates are the most attractive right now as there is little spread between them and the variable rates (otherwise I’d suggest variable). Plus it’s a good time to manage risk by locking in an interest rate. From what I’ve seen, the longer term (7-10 years) are quite a bit higher than the 4 and 5 year. The $64,000 question (quite literally in this case) is, “What will interest rates be doing five years out when I have to renew?”
Although I haven’t done the calculations to be sure, my thinking is this:
Go with a 5-year fixed and pay above your mortgage obligation every two weeks. In fact, pay at least what you would have if you had chosen a 6.5 to 7% mortgage. The extra dollars will be over and above your interest charges and will pay down the principle at a much faster rate. At the end of five years, the extra dent you’ve made in your outstanding balance should more than offset any increases in interest rates (fingers crossed). No guarantees here, but that is what I will do.
Of course, your best strategy is to not over-pay for that house in the first place.
Good question JJ!
We’ve been wrangling with that one ourselves. My husband and I were thinking of going with the lowest rate but for the longest term possible. Our mortgage broker has told us we could probably get a 15 year locked in one for 7% right now. While it reduces what we can afford for a house right now, it seems better than renegotiating in 5 years, just when things are going to pick up and the banks are going to hit us hard to make up for lost time
. Could be completely wrong though. It’s tempting to go with the lowest rate and then be approved for a home worth 70 Gs more than at the higher rate!
Also intersted to hear what others think.
Lock in your rate for the Longest term you can get!
Interest rates will skyrocket once inflation hits!
I would recommend locking into the nice low 5 year rates available now and doubling/lumping up payments against your principal over the next 5 years.
If you get your principal paid down quickly this way, interest rates going up to 6 or 7% in 5 years won’t hit you nearly as hard.
So I took a few minutes to calculate this. Please tell me if I’m wrong.
If you borrowed $300,000 amortized over 25 years, say the option is to lock in 4.25% for the first five years or to lock it in for the full twenty-five years at 6.5% (using monthly payments). During the first five years (having chosen the 4.25% rate), if you apply the $390 per month you saved to your mortgage, you would be ahead of the game as long as you can renew for less than 8.2% for the remaining twenty years.
Five years from now, 8.2% mortgage rates are not out of the question (who knows?), but I’m willing to take the risk that they will be lower.
Or you can make Cindy rich and buy gold instead.
Exactly.
Hyperinflation is almost completely out of the question right now, despite Cindy’s fears.
$30-40 trillion has been wiped out of the markets in the last few months. $1-2 trillion government spending sprees aren’t going to make up for that loss.
The government isn’t going to extinguish a recovering economy with 8% (or higher) interest rates once things start to improve. That would cause another spree of foreclosures and choke a fragile credit market.
umbuyersw,
“if one were to move the mortgage to a new property, on whether or not the shortfall between the mortgaged amount and the new sale amount has to be entirely repaid?”
Do I understand this scenario correctly? You have a strong reason to move, but your current home will sell for less than you owe on your mortgage.
You want to avoid having to pay the shortfall back to the bank, but blend it into a new mortgage for your next home?
Without insurance, a bank will lend you up to 80% of the value of the new home.
If you get a great deal on the home for significantly less than its value (as assessed by your bank), and you have a 20% downpayment, you may be able to swing that.
Don’t count on a bank “forgiving” any money and then lending you more, for a new mortgage.
Don’t take my word for any of this, though. If you need to walk away from debt, you should really talk to a lawyer to fully understand your options, and to a mortgage broker, as well, to see how this decision may affect your future mortgage transactions.
Thanks everyone. It does seem to make sense to take it as low as I can for the first 5 years. My concern is similar to Hanna’s above, in that we will be hit with very high rates once things recover. Taking a low interest rate now and being hit with a much higher one later seems to mimic what has happened down in the States.
Have you considered renting, rather than selling, your place?
That’s another reason to not over-pay right now. Just because the bank will lend you the money based on today’s interest rates, does not mean you should max yourself out. That’s been the method for too long: the bank or the car dealer or the credit card company said, “we’ll lend you X”, and too many people took the full amount they were permitted. Maybe they thought somebody smarter was taking care of them. “Surely, my credit card company wants me to afford the debt I owe them”. The truth is, many of these borrowers were in over their heads because too much credit was issued to them and they used it all.
It’s healthy to build in some room for the chance that interest rates will not be as favourable five years from now. If you knew interest rates were going to hit 8% five years from now, would you still borrow the same amount today or would you look for a home that was less expensive? If you want to avoid getting in over your head, don’t borrow the maximum amount based on “best-case scenarios” – use realistic numbers and even a few “bad-case scenarios” to determine your level of risk.
Cindy,
Rates aren’t going to sky rocket, where are you getting that idea. The BOC just dropped the prime another .005 today.
If the government let interest rates sky rocket they would be in more deep doodoo then they already are now. People that are upside down with mortgages worth more then their homes would be running away from them faster then Ben Johnson in the 100 M.
Did anyone see the headline in the FP Business Section of today’s (Mar 3rd) Edmonton Journal? There is a full page article on China’s demand for resources. Hmmm…hate to say it, but you heard it here first.
During 2008, average weekly earnings in Canada rose 2.7%.
The strongest year-over-year earnings growth among the provinces was reported in Saskatchewan (+4.4%), Prince Edward Island (+4.2%), and Alberta (+4.0%).
I forgot the link
http://www.statcan.gc.ca/daily-quotidien/090226/dq090226c-eng.htm
Kenny,
An increase in average weekly earnings (2008 vs 2007) doesn’t tell us much new besides confirming the fact that we had a boom. It’s a lagging economic indicator and as such not used by economists.
“Nate said in reply to jj…
I would recommend locking into the nice low 5 year rates available now and doubling/lumping up payments against your principal over the next 5 years.
If you get your principal paid down quickly this way, interest rates going up to 6 or 7% in 5 years won’t hit you nearly as hard.”
You’re absolutely right Nate!
If your mortgage rate is higher than the alcohol % of your beer it is time to re-negotiate with your bank. Rates are staying uber low for a long while.