Edmonton Real Estate Market Weekly Update

27 Responses to “Edmonton Real Estate Market Weekly Update”

1. edmonton Expat 29. May, 2009 at 3:17 pm #

   Wow!

   This is great! A seller’s market. I guess that all the bubblers were hoping that the end of the $0/40 years would kill the market will be dissapointed.
   Who knew that SFH would now be affordable with 2% mortgages?
   For those who bought at the peak: refinance now. You’ll save tens of $1000′s.
   I guess that the next few months will make or break this newer trend.
   As long as demand is there…
   For now, I will be leaving for my camper for the week end.
2. Flo 29. May, 2009 at 4:34 pm #

   I personally know of two homes that got sold this past week. Both were only on the market for a few days. One condo was sold the day after its first and only showing. The reason? The sellers priced their product right. It was listed $15,000 lower than an identical unit(I mean IDENTICAL!) in the building. Homes priced right combined with current interest rates should have no reason to sit on the market for long.

   My fiancee and I even got a call from the sales manager of a builder we’d been working with informing us that the developer in the area we had been considering was discounting their lots 12%!! Of course this could be due to the new building code changes starting June 1 which could potentially increase the price of the home enough to null the 12%.
3. Jason 29. May, 2009 at 5:31 pm #

   Better buy now or be priced out forever!!
4. Another Fred 29. May, 2009 at 8:23 pm #

   I recall a couple of posts that went like this a few weeks ago…

   Me: Oil prices are climbing. If we get to the $60-$70 range, Alberta’s economy will stabilize, maybe start to grow again.

   Various negative nancies and bears: The sky is falling! Oil prices have no effect on the economy! You are dreaming if you think higher oil prices are going to set things right again!

   Hmm, oil prices closed over $66 today, and now this weekly report. It’s been about 3 or 4 weeks of strong reports now. Maybe it’s just part of a normal spring jump. After all, there can’t possibly be a correlation between oil prices, and the economy and RE activity. Certainly not here in Alberta!

   Then again, this could be just a dead cat bounce, oil could fall again. But I think anyone out there hoping for 2001 prices in Edmonton again is going to be waiting for a long, long time… Maybe if we see $20 oil, and less than $3 natural gas, then I’ll jump on their bandwagon.
5. Andrew 29. May, 2009 at 9:02 pm #

   This isn’t related to Oil Prices but rather a combination of Interest Rates and seasonality. Interest rates will be going up (many small lenders have already increased, banks will follow in 1-2 weeks) and the normal market peak will soon be over and we’ll see what kind of Market we find ourselves in.
6. FirstTimeBuyer 29. May, 2009 at 10:51 pm #

   It’s not the $0/40 that the bubblers were hoping on – it’s the seriously messed economy, in my opinion.
7. Spence 29. May, 2009 at 11:38 pm #

   You hit the nail on the head Flo. If you price your place right, it will sell. There is a condo building behind my house that has about 10 units for sale. Half of them are very closely priced. Why would you not want to be the “deal” in the bunch and drop the price a few percentage points? It must drive Realtors nuts when their clients over price their properties. What a waste of time (and money) eh? If I was a realtor, that would probably be right up there on my list of pet peeves. The other would probably be escorting buyers around to multiple listings in slower markets that generate little sense of urgency. Great to see the numbers picking up. I am still a bear, but I am hoping for stability in the market. Beautiful weekend, enjoy everyone.
8. Edmonton Expat 30. May, 2009 at 5:50 am #

   Interest rates are not going anywhere soon. Unless the banks increase their own prime, at their convenience, which would sabotage this economy.
   The BOC will make an announcement on June 4 about interest rates. Expect nil changes.
9. roadrunner 30. May, 2009 at 9:41 am #

   Obviously you are not following what is going on in the bond market. Interest rates have been climbing sharply. Not all mortgage rates are tied to the Bank of Canada rate, particularly the further out the term is. If this continues (and it will), you will see that mortgage rates will quickly follow. This economic cycle will also see the highest interest rates that we have seen in many years. The only thing that will prevent that is a collapse in the economy. So either way, the long term outlook for real estate is very negative.
10. DaBull 30. May, 2009 at 10:10 am #

    There are ticking down again, probably going to stabilize around here.

    May 2009
    Date 1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr
    05/21/09 0.13 0.19 0.30 0.45 0.89 1.36 2.16 2.86 3.35 4.27 4.30
    05/22/09 0.13 0.18 0.30 0.49 0.92 1.39 2.23 2.96 3.45 4.36 4.38
    05/26/09 0.13 0.18 0.30 0.50 0.96 1.45 2.30 3.05 3.50 4.42 4.45
    05/27/09 0.18 0.17 0.29 0.49 0.96 1.50 2.43 3.22 3.71 4.58 4.59
    05/28/09 0.14 0.15 0.31 0.48 0.97 1.52 2.46 3.22 3.67 4.52 4.54
    05/29/09 0.14 0.14 0.30 0.47 0.92 1.42 2.34 3.06 3.47 4.34 4.34

    http://www.ustreas.gov/offices/domestic-finance/debt-management/interest-rate/yield.shtml
11. DaBull 30. May, 2009 at 10:21 am #

    If the US wants interest rates lower they will start buying the long bond again, like they did in March. That’s why long term interest rates went down. It’s call quantitative easing. The US is not going to let higher interest stifle the prospect of growth at this point. Maybe a couple of years down the road but not any time soon. If they did allow interest rates to increase it would surely collapse the economy, not the other way around.
12. roadrunner 30. May, 2009 at 11:08 am #

    sorry to burst your optimism DaBull, but the Fed and US Treasury can’t control the level of long term interest rates in the long run. The market is simply way too big and the market will dictate where those rates will be. Just look at how much 10yr interest rates have climbed since the Fed first announced that they would be buying. Furthermore, the new supply, which is constant, overwhelms the level of central bank purchases. The two day bounce back in prices (lower yields) is just month end buying after a very sharp selloff (higher yields). Higher yields will resume very shortly. Good luck to you if you think the opposite..I am very happy to take the other side of that trade.
13. E-town 30. May, 2009 at 2:54 pm #

    Who said anything about 2001 prices? Most people were being berated for suggesting 2005 or even 2006 prices. 2001 prices are a thing of the past. Edmonton properties were undervalued in the late 90′s.

    1970 $21,446
    1980 $84,367 < - 4x in 10yrs.
    1990 $101,014 <- 1.2x in 10 yrs.
    1998 $114,536 <- ten years ago
    2000 $124,203 <- 1.2x in 10 yrs.
    2001 $133,441 <- Never again!
    2002 $150,258 <- $24K in two years
    2004 $179,610 <- $30K in two years
    2006 $250,915 <- $71K in two years
    2008 $332,853 <- 2.9x in 10 yrs.

    Look at 1980 to 2000. 1.5x in TWENTY years. Wow. In hindsight, no KIDDING a correction was due! The question is: where did the price correction end and rampant speculation begin? And the second question is: bubble or NO bubble, where is price support going to settle in 6, 12 or 18 months from now? Notice that prices in the last ten years went up 2.9x and from '70 to '80 prices went up 4x.

    As for interest rates, If someone mortgaged $300K today at 4% they are paying $1400/mo. Five years from now, with $40K paid off, here is what they will pay on the remaining $260K depending on interest rates (based on 30 year terms in both cases):

    % -> Monthly Payment
    4 -> $1200
    6 -> $1550
    8 -> $1900
    10 -> $2300
    12 -> $2600
    14 -> $3000
    16 -> $3400
    18 -> $3800
    20 -> $4200

    Yep. If interest rates go up, those people living from check to check and using credit for groceries and gas are going to be eradicated. Just like in the early 80′s.

    So yes, homes are “affordable” today, but with artificially low interest rates. Some believe that interest rates will always be this low, or that people can handle DOUBLE their mortgage payments five years from now, or that because “China needs oil” and everything will be a-okay. My opinion is these folks have way too much rose colored tint in their glasses IMHO.

    Cheers,
    E-town
14. E-town 30. May, 2009 at 3:20 pm #

    I agree with roadrunner here. According to three of my (independent) sources, mortgage rates are supposed to be going up – as early as Tuesday as a matter of fact. If you are a 1st time buyer, you might want to hit the bank on Monday and lock in a rate for 90 days by getting pre-approved. Might only be a quarter or a half point, but take the information for what it’s worth. I got it from mortgage brokers and people in the banking community. It could happen.

    Cheers,
    E-town
15. DaBull 30. May, 2009 at 6:10 pm #

    “the Fed and US Treasury can’t control the level of long term interest rates”

    They can when they’re the reserve currency of the World, there is no where else to run when thing go south in the World. Why do you think everyone ran to US dollar in Oct 2008. The world still views it as a haven. So if the rates increase beyond what the US deems as acceptable they will increase the amount of quantitative easing to bring them down. The rest of World can’t do much about it because if they do they will just die along with the US. The old catch-22 of fiat currency system with one reserve currency.

    The World knows what the US is doing but has to play along. Maybe in the about 100+ years another currency can take over, but that’s a long ways away. The World only has the US dollar at the moment, so they have to live with it.

    Quantitative easing worked in Japan, even though they were very late starting it and the US knows it works, that’s why they started it so soon.

    Good luck with shorting US long bonds.
16. DaBull 30. May, 2009 at 6:21 pm #

    US 30 year rate is 4.91% at the moment and they have a limit and will step in whenever that limit is reached. I also know mortgage rates will go up and down in a narrow range but they will never be allowed to go beyond whatever the Fed limit is. And it’s probable 5-6% for a 30/yr in US. Hence Canadian mortgage rates won’t increase much either.
17. Richard 30. May, 2009 at 7:52 pm #

    Who cares if the market is going up or down. It used to really bother me that the market was being pumped. The prices have dropped probably 12% in the last couple of years. Prices I think will still go down, but they won’t drop off a cliff. Bottom line if you are buying a home to live in and love you can’t really go wrong. If you are buying an investment then you take a risk. If you are stupid enough to take advice from people who make commisions from buying/selling – well I guess its just Darwin & survival of the fittest- I don’t care – its only money.
18. roadrunner 30. May, 2009 at 9:42 pm #

    I don’t need any luck shorting U.S Treasury bonds. If you have been paying attention to the market, you will have noticed that yields have been moving higher since December – very soon after the Fed announced the so called “quantitative easing” that you are so bullish on. You refer to Japan and how quantitative easing has worked for them. I assume you also know that real estate prices in Japan have been deflating since 1990….that’s right for close to 20 years!! Their stock market has not fared much better. After 16 years of falling prices go ask the Japanese if real estate prices always go up, (versus typical thinking here) even in the long run. So you must be suggesting that we are going to see broad based deflation a la Japanese style if you think that quantitative easing will be ramped up in North America. Hand in hand with that then, you must also be suggesting that our real estate prices and stock market will be going the way of Japan also. If you are not saying that, then I am again sorry to burst your optimism for the second time as quanitative easing of the scale you are hoping for with no deflation leads to only one other thing – HYPERINFLATION. That unfortunately is also a no win situation as you will see interest rates go to levels that would match the levels of 1980-81 or even higher -and you know what – that won’t be good for the economy or real estate either. So you see, either way, real estate is not the place you want to be overexposed to and particularly not over-leveraged to. How many homeowners do you think are out there with $300,000+ mortages? I would say lots!!
19. DaBull 31. May, 2009 at 1:29 am #

    For starters quantitative easing never began in the US until Mid-March. The US treasury has the ok to buy up to 300 billion in long term bonds until expiry in Sept 2009. So far it bought about 130 billion. In March when the US first started buying long bonds there was a small spike down before they again contined their slow climb up again. Yes, long bonds have been rising from there abnormal lows in late Decemeber 2008, but the spreads between them and mortgages rates have been tighting at the same time. But the spread can only tighten so much before mortgage rates have to rise and that’s when the US treasury will step in again. That’s why I’m saying they will not let the long bond climb anymore before they start buying again. And this time they will buy enough to actual make a difference. That’s why I say again… Good luck to anyone who wants to short US long bonds these days.

    Japan never started quantitative easing until 2001, 11 years after 1990. They kept the policy in place for around 5 years. During that time realestate prices stabilized and actual started rising again and so did the stockmarket. In mid 2008 all that changed and the Japanese economy again fell of a cliff. They have since started quantitative easing again and things are already showing signs of a recovery.

    And yes I think the US will follow in Japans footsteps but only from the period of 2003 to 2007. They won’t make the same policy mistakes that Japan did that kept their economy, stockmarket and realestate prices in the doldrums for almost 2 decades.
20. Combination 31. May, 2009 at 2:42 am #

    Especially if oil prices are rising, a one, two punch in the economy recovery stomach of higher interest rates and higher oil prices would surely derail any hint of economic recovery at this point.
21. A buck ain't what it used to be 31. May, 2009 at 2:51 am #

    Quantitative easing puts more money into circulation which keeps borrower costs down as more money is chasing potential borrowers, the downside is with more money in circulation the potential for inflation down the road rises and the question is how much inflation is tolerated before the Feds then raise interest rates to beat down inflation and when? The threat of inflation explains the current rise in commodity (read oil) prices, even though there is a current over supply, because investors are putting money into commodities as a hedge against the inflation they see coming with all the money (liquidity) that is being pumped into the system by the Feds.
22. roadrunner 31. May, 2009 at 7:29 am #

    Actually, for starters, the markets are great discounting mechanisms. It makes no difference when the Fed does the buying. What matters is when they first “announce” what they will be doing. The Fed announced that it would be buying bonds in late November/early December. That’s what led to the downward spike in yields at that time. It’s been a one path move to higher rates since then. Why? Simple. Supply exceeds demand – even with the Fed buying. So now that the market knows what the Fed is doing, the market looks at those purchases as great selling opportunities. Again I am sorry to say that you are seriously misguided if you think that the Feds can control longer term interest rates in the long run. Not only is the enormous increase in supply an issue, but the largest holders of U.S. government are getting concerned. Those would be the Chinese etc. They are getting extremely concerned about the value of the USD and what quantitative easing means for the currency. Good luck staying long U.S. long bonds. You are going to need deep pockets. But then you could always follow the North American way and go borrow the money – after all having lots of debt is a good thing.
23. DaBull 31. May, 2009 at 10:04 am #

    Actually they didn’t, that sudden drop in yield was the world running to the US bond as a haven. The Fed never announced that they would be buying bonds until March 2009, it was the bond market players that thought the Fed would have to step in and buy bonds from Nov 2008 to March 2009. So your mistaken in thinking that a Fed annoucement was the reason the yeilds dropped, they dropped due to demand for them, which was huge at the time. US bonds where seen as the last haven left in the World, even better than gold.

    The talk from the Chinese is just that, talk, it’s political posturing. They have been manipulating their currency for years and now it time for the a little US payback. They have to keep buying to protect the value of there current holdings.

    As far as your last comment on debt, your wrong again, if handled properly debt is a good thing. Why because these days borrowing money is almost free and interest rates, thanks to the policy of the US Fed/Treasury won’t flucuate much from where they are now. They will be range bound around this level for years. The US fed/treasury has a lot more power in their bond market than you give them credit for. But I guess only time will tell.
24. DaBull 31. May, 2009 at 10:20 am #

    In times like this the US Fed is more worried about growth, so inflation be damned. No US central banker or President wants to be known as the person who started the next Depression. The US will keep interest rates low until there is real signs of economic growth, not preceived growth from inflation due to a devalued US dollar. Hence Canada will have to follow suit because we are still to closely tied to the US purse strings. This is good for Canadian debt holders, good for Canadian hard asset holders, but not so good for Canadian fiat money savers.

    The main reason oil is rising is because even if a recovery of 0% happens in the Western World the current oil stocks and spare capacity will be eating up in short order. Currently there is not enough new investment in the oil complex to compensate for the rapid decline in supply the world is now experiencing. Hopefully investment picks up real soon or we will be in for another hugh price spike in the not to distant future and another recession, possible depression next time.
25. Andrew 31. May, 2009 at 12:21 pm #

    The BoC would like to keep rates low for at least the remainder of this year, but the market is pushing rates up. The BoC isn’t interested in pursuing the quantitative easing policies of the US, and the rates on the 5 year bonds are up more then 500 basis points this month (1/2 a percent).

    The spread between banks’ advertised 5-year rate (3.95%) and bond yields is now down to 1.39% from about 2.00% a month ago. When you factor in branch discretion, the spread is often even narrower. What this says is that rates are artificially low right now, and to expect a correction.

    A better resource then some of the US stats that have been quoted (the US bond/mortgage market is different then the Canadian bond/mortgage market) can be found here:

    http://www.bankofcanada.ca/en/rates/bonds.html

    Look at the 5 year benchmark.
26. Andrew 31. May, 2009 at 4:31 pm #

    Last time we had interest rates drop drastically was in early 1994, the low rates caused a “bubble” in the markets and my concern is the current cheap money will have the same results.

    Here’s what happened in 1994

    Month Mortgage Rate Average Residential Price
    October/93 8.75% 108,543
    Dec/93 7.75% 112,000
    Jan/94 7.25% 114,900
    Feb/94 7.25% 118,073
    Mar/94 8.95% 111,156
    April/94 9.5% 112,455
    Jan/95 10.75% 106,645

    Average Price 1994: 112,501
    Average Price 1995: 110,577
    Average Price 1996: 109,042
    Average Price 1997: 111,545
    Average Price 1998: 114,536
    Average Price 1999: 118,891

    So the low rates caused a swell in demand and created a short lived buyers market in which prices spiked to $118,000. It took 5 years for average prices to catch up with the 94 spike (8 years if you count inflation).

    Now that buyer would have seen a healthy return had they sold after 2007 even with inflation, but my point is right now I think we are seeing a spike in a generally down market due to interest rates.

    Average house price comes from EREB, the interest rates come from the BoC and represent the average posted 5 year rates by the chartered banks. I’d love to be wrong but I think current rates are causing a similar spike and when rates inevitably rise we’ll see continued softness in pricing.
27. DaBull 31. May, 2009 at 9:16 pm #

    Man a picture says a thousand words…. Just ran across this spread sheet. Looking at this you can sure see why Alberta real estate was so undervalued from 1984 to 2000 and why it increased so much from there on. Didn’t realize Alberta had almost no GDP growth during the period from 1984 to 2000. After 2000 it went through the roof. It weird that personal saving rate actually increased from Jan 99 of 1.9% to Oct 2007 of 11.45%. I guess Albertan’s are richer that we think. It’s very interesting the almost every category doubled since 2000.

    http://spreadsheets.google.com/pub?key=p71XFJHdqL2sTeEHdm9a5Xw&gid=0

    On the average wage category you can sure see the boom starting in 2005.

    Who ever made this, Thanks.