No sooner had I pushed the publish button on my "weekly update" this afternoon did I receive notification from the REALTORS® Association of Edmonton that the monthly numbers were ready! I don't think they're trying to ruin my vacation but they are certainly giving me lots to do! Just kidding…. They obviously worked hard to correct the problem and release the numbers as quickly as possible.
Anyway, here is what June 2009 actually looked like:
That is a lot of sales! The highest number of residential sales for June ever (that I am aware of) and the third highest number of sales for any month (that I am aware of). What is causing this high number of sales? First it's seasonality – there are always more sales in the spring than in the rest of the year. Second, record low mortgage rates and lower prices. Third, there have been a lot of people sitting on the fence, waiting to buy for a couple of years now and a lot of them have decided now is the right time for them since things are more affordable.
Of course, with an influx of buyers comes more competition (we've seen this on many of our listings that have received multiple offers in the past two months) and increasing prices:
And more sales means dropping inventory. But that is not the end of the story…
We typically would see the number of new listings drop in June, but they have stayed flat (3180 new listings in May, 3179 in June). Some home owners are starting to jump in with the buyers as well… what I mean is that I'm starting to get a lot of questions from owners who were thinking of selling a couple of years ago but decided to wait when the market turned. Many of these people rented out their properties, or some decided not to move up or down or out of Edmonton. My guess is many of these people are going to try selling again this summer because they feel the market is improving and it's time to cash out. I wouldn't be surprised to see a higher than normal number of new listings in July and perhaps even more than we saw this month.
What could this mean for the market? Well, for buyers that have reserved a rate with their lender it could mean more selection and less competition as the summer progresses, which would be an ideal time for many to buy. For sellers it could mean that they should put away their rose coloured glasses until next year (or maybe the year after that). Whatever it means, the market is certainly unpredictable and we're all going to have to wait and see what happens.
June definitely turned out to be the best month so far for sellers this year, with an 80% sales to new listings ratio is was most definitely a seller's market:
The absorption rate also shows sellers had the upper hand, and for the first month this year I'd say the absorption rate was normal:
Hope everyone has a great weekend and I do look forward to the discussion that is generated by these numbers.
Is I’ve said before price inflation does not have to respond turnover. Risky assets (equities, commodities, slum property) just got snapped up like a junkie buys heroin and hoarded as an inflation hedge in a classic a bear market rally (which are to be expected during a period of deflation – some of the greatest equity rallies took place during the early 30s). That trend just broke – $$ is going back into US Treasuries. Look for deflation in risky assets.
June should be the last month in a long time that sales are strong and that sellers are selling…
Look for September to show a serious downturn. Prices will dip by 10% while sales will typically average 700 per month between now and end year.
Where do you get a 10% price drop? I’m not discounting it but just curious as to what you base your estimate on.
I know shares and property are very different beasts but I think we are seeing some similarities both in price movement and buying/selling behaviour. In the share market there was a small rally (approx 25%). This has caused many people to get back into the market. There is a real belief I think that the worst is past us and people fear missing out on the uplift. I think people have the same mentality in the housing market – better buy now while interest rates are low and prices are low. They don’t want to look back and think they missed a wealth creating opportunity. I don’t know whether the buyers of the last few months will look back in a few years time and be happy or upset. BUT if they can afford their mortgage (factoring interest rise) then they should be happy. While this blog is good we do sometimes speak like houses are a liquid asset that can be brought and sold like shares. Think long term (10 years) and the prices of today will look very appealing.
I simply base my prediction on what I’ve been saying here for the past 6 months.
Supply & demand rules every market.
That Edmonton RE prices doubled from 2001 to 2007 is an anomaly. Certainly, demand was very high while supply was tight. But that is now over with. Done. This is why RE resale prices went down by 22% from the peak.
That Edmonton had a spring rally at all is spectacular if not crazy, given the record sales and price hikes… This was caused by free money (2%) given by the banks.
As soon as interest rates go back up – as they will – you will see sales go down and supply grow as sellers want to “cash in” on their homes, especially the flippers who built in early 2007 and were stuck renting. These folks should have listed by now. For sure.
Not so much of a sellers market above 500K..
Year-to-date, only 688 (or 7.6%) of all sales were in the 500K + range. Compare that to the current inventory, which has more than 30% of all single-family homes listed above 500K….
It seems that, THIS MONTH, homes above 1 million sold a lot better than homes between 750K and 1 million…
Go figure what’s wrong in that price range. Is that where the rose-colored glasses must come off?
I’m not sure the doubling of house prices over a 7 year period is an anomaly. Lots of western real estate markets double in price in a 7 year period. It is mostly to do with an expanding population growing quicker than new housing developments. Prices went down by 22% because the whole world was a mess and lots of people were forced to sell houses while others baulked at buying (low sentiment). Once confidnace comes back into the market I think you will see consistent price growth again. The population is still growing (ie people get older and move out of their rented flats and buy houses). This opinion is based on normal interest rates. If interest rates go through the roof then all best are off! Just for the record I don’t think interest rates will get out of hand. By that i mean they won’t go above 8%. 8% and below is actually normal.
Spud ..you mention “Once confidnace comes back into the market I think you will see consistent price growth again. ”
Yes I agree… too bad this will likely take five to seven years…maybe even a decade.
If you have some time, do some research on Japan’s property bubble in the eighties.
Did it double or were prices extremely low prior to 2001?
Why is Japan held up as the template for what will happen? What does Japan have in common with Canada? Japan supports your doom and gloom outlook. Look at Australia which is more like Canada in that they have a heavy reliance on commodity prices. You will see that about every 7 years there is a flattening of prices and even some decline in prices. However pretty much every 7 years prices double. They have been effected by the GFC as well.
Can’t fault your opinion because it is an opinion. I don’t think it will take 5 – 7 years for confidence to return. Within 2 years economies around the world will be approaching normal, the share market will have lifted substantially from todays lows and people will generally be better off. Japan is unique and not an indication of what will happen every where else.