Here is our update on the Edmonton real estate market as of noon today. (Previous week's numbers are in brackets). For the past 7 days:
New listings: 333 (414, 361, 379)
# Sales: 256 (227, 287, 256)
Ratio: 77% (55%, 80%, 68%)
# Price changes: 168 (205, 220, 204)
# Expired/Off Market Listings: 161 (132, 361, 135)
Net loss/gain in listings this week: -84 (55, -287, -12)
Active listings for single family homes: 1912 (1959, 1934, 2095)
Active listings for condos: 1562 (1587, 1541, 1675)
Looking at the month so far, the REALTORS® Association of Edmonton is reporting 771 sales, which should put us around 1400-1500 sales this month which would be slightly above average. The average sale price is currently sitting at $316k (down about $10k from last month), single family homes at $358k and condos at $242k (also both down from the end of last month).
Much of the activity has been driven by the low interest rate environment. We are seeing well priced single family homes selling very quickly, often with multiple offers. I am surprised that the average sale price seems to have fallen with the activity we are seeing. However, it is not unusual to see a seasonal dip in pricing.
Have a great weekend!
http://www.greaterfool.ca/
With house prices rising, and incomes not, with bidding wars in many centres and real estate values at a record level, one question looms: Where’s the money coming from? How are buyers, especially newbies, pulling this off?
Well, chew on this: Two years ago when RBC did its annual survey of homebuying intentions it asked first-time buyers how much of a down payment they planned on making. Twenty-one per cent said their down would be “between $1 and $5,000.”
That was in 2007. Since then there’s every indication things have gotten worse. In fact, for people taking out mortgages today it’s estimated the average amount of equity they have is just 6%. The leaves 94% of the house value as debt. And while reliable statistics on this are hard to find, my banker buddies tell me that virtually every new loan they write these days is for 5% down, with a 35-year mortgage. After all, if you’re buying in Vancouver. Calgary or Toronto, that’s the only way banks can swing the deal.
So this answers the question of where the money to fuel this housing bubble originates. Bankers. And why would banks take the major gamble of loaning, say, $380,000 to people who are buying a $400,000 house and only have $20,000? If markets fall 10%, or even 5%, that homeowning couple’s equity is entirely wiped out. In fact, the value of the home could easily drop beneath the value of the loan, which would constitute an absolute loss for the bank.
And here’s another good question: If I want to buy that $400,000 house and have $200,000 for a downpayment, why am I paying the same mortgage interest rate as the first-timers who barely have pizza money? Don’t they constitute a larger risk? Where’s the risk premium on the money loaned to them? Why is this system so screwed up that ultra high-risk borrowers have money showered upon them by our famously conservative and prudent banks?
The answer’s simple: the banks don’t take any risk. It’s all on the taxpayers, thanks to CMHC.
Rahul,
Tell your investor friends that all monopolized the market 3 years ago that they were wrong and created a bubble that made it harder for young families to get into the market and that is why, as a taxpayer, that you have to contribute to CMHC. Oh and if you refuse to pay CHMC and the government decides not to charge that tax anymore, the bad news is that the younger couples and medium-low income families are going to move out of here, which will decrease the demand for houses in Edmonton, and therefore boomers like you probably will get stock with their one or 20 decreasing value houses, as it is the case with your investor friends!
Regards,
These are two of the dumbest comments I’ve read in a very long time. Land is non-portable and so it’s value is always attached to the local economy. Where there are jobs, there will be people and people take up space, only so many people fit in a defined geographical area, so the value of the land goes up. You can’t create a land bubble where the economy sucks, even with CMHC. Young couples and medium-low income families are going to move out of Edmonton if there is no more CMHC?!?! Your argument then is that people move to where CMHC will cover houses as opposed to provable economic theory that demonstrates that people migrate to areas of high economic activity (Alberta, Sask) from areas of low economic activity (Maritimes). But since you openned with “tell your investor friends” and ended with “as it is the case with your investor friends” you sound like a bitter, angry person who never got into the market and wishes the days of cheap housing and high unemployment (they go hand in hand except in Toronto) in Edmonton would come back. Good luck with that real estate fantasy, in the meantime why not aspire to something better.
Yes I am bitter because I do not make good money, I spend it carefully, I do not drive a nice expensive car, I do not have a flat screen TV yet, I do not eat out every weeks, etc… In a normal situation, I should be able to afford something nice for a reasonable price, but it is not the case.
I a normal situation I would leave and get a job somewhere else, a place where it would be cheaper to live and where my salary would remain the same. There are places between Alberta, Sask and the Maritimes. The reason why I am still here is because of my wife that wants to stay close to her relatives! In the field I am, I could probably find the same kind of job in a different province.
Am I bitter? Yes I am, should I be ashamed of it?! But I am not bitter because I never got into the market, in fact I own a place. The point of my previous reply was that you cannot ask young couples to put a big down payment on the table when they already are having a hard time to get into the market. I dislike the idea of having to pay higher interest rates only because I cannot afford to put $200,000 on the table. Such an idea would be a suicide for the housing market here, since it would benefit the richest and take more money out of the poorest families.
I got pissed off pretty easily when I read the first post, but I think I have good reasons to be. It is already hard enough to get into the market for some people that they do not need any more hurdles!
P.S.: My dad is stronger than yours!
Please read: I am bitter because I MAKE good money.
So I wonder if we will see the predicted 5-7% avg sfd price decrease until Dec. Probably be more like 4.5% (-1.5% per month). So far it still looks like July will be the peak for prices. But like Sheldon said, even it does slowly trend down from here on in, it was still an unbelievable year for real estate in Edmonton. I know I sure didnt predict it! Crazy times..
I concur Dan. These are crazy times. The year did turn out to be excellent for real estate. It’s been encouraging to see some inventory being eaten up. That being said, I personally don’t think it is a good time to buy. The rates are low, but when renewal comes up, people are going to be left with higher rates on substantial debts. I believe prices will have to come down significantly over the next few years. No, I am not a bitter renter, I own a home in the Southwest and recently renewed for 5 years with ATB at 3.5% (I don’t know if I’ll see a fixed 5 year at 3.5% again in this lifetime). I am happy in my home, but I am not strapped for cash because I purchased it six years ago for less than half of it’s current “value.” People purchasing at today’s prices are buying an unreasonably inflated product IMHO.
I have three siblings currently trying to figure out if now is the time to pull the trigger on a house. They all have decent jobs (50-70K), but are worried about spending 5-6 times their gross to purchase a house. That sort of financing doesn’t leave much financial freedom even with low interest rates. So they are holding off for now. My one brother almost purchased a smaller home for $300K two weeks ago. When he found out that CMHC fees and closing costs would almost eat up his entire $15K (5%) downpayment he got discouraged and pulled out. Now his goal is to save up for a conventional 25% down mortgage over the next 4 years.
I feel for the young people who have watched this thing balloon over the past 6 years and are now looking at twice the financial ball and chain that I was. I had a hard enough time stomaching my first mortgage at $150K. Somethings not right with this situation.
In other news, it’s looking like my RN wife will be taking some sort of a paycut in the near future…interesting times indeed.
Oh yeah, forgot to mention that George Bush was coming to town on Tuesday and will be sharing some of his thoughts on future trends shaping North America. Maybe he’ll shed some light on where our economy is headed. He seems like a trustworthy source
. My oil executive friend has a front section ticket for me so I will let you know if he provides some insights.
Thanks again for providing us with the stats Sheldon and Sara. You’ll hear from me when we outgrow our house.
Amen. I could not agree more on that one.
Very well said. We could always hope for a better future no matter what. It’s the only thing we’re left of. Thanks for sharing. By the way, I know a real estate coach who could also help many in the real estate industry make money despite the current crisis.
Tell your buddy to bring extra shoes to the George Bush thing. He may need them if he decides to throw one at old Georgie.
)