What a difference a year makes! If you'd asked me last January what records the Edmonton real estate market would set this year, I certainly wouldn't have answered "record sales in June and July," unless I was referring to record lows.
Today we're reporting the MLS® sales stats for Edmonton only, and next week we'll add the stats for the REALTORS® Association as a whole (as soon as the numbers are released). We will then send out a special Annual Report and 2010 forecast to our subscribers – don't miss out, subscribe today!
December was very good for single family home sales in Edmonton with almost record sales. It seems as if people have forgotten about last December and concerns about the economy don't seem to be impeding sales across Canada. If concerns about the economy are impeding sales then watch out when the gas sector in Alberta starts to recover:
Condo sales were about average for December in Edmonton, but they are still much stronger than last December:
This next chart is a sneak peak at the annual report we'll be sending out to subscribers next week. Looking at the year as a whole, single family sales were very strong (higher than the previous two years), while condo sales lagged behind (only slightly better than last year). Actually, looking at the past five years, this year closely resembles 2005 (the year Sheldon and I often refer to as the last normal market for Edmonton).
Prices tell a different story from sales… The average sale price of single family homes in Edmonton is down to $365k from $370k last month and $380k last year. Condos are sitting at $238k, up from last month ($228k) and last year ($233k).
The price per square foot of single family homes is down slightly from last month and equal to last December at $256 while condos have been on the rise for two months at $231 (almost equal to last year – $233).
All in all December was a strong month for the Edmonton real estate market – about what we were expecting based on the past few months, but certainly not what we were expecting at the beginning of 2009! So 2009 came in like a lamb and went out like a lion, while 2010 has started like a lion and we'll keep you posted throughout the year on all the changes in the Edmonton real estate market.
If the supply of homes does increase, the recent moderation in the pace of house price declines may not be sustained. The combination of increased unemployment and the eventual increase in interest rates implies that the last of the price declines has probably not been seen yet.
“it’s a bubble in search of a pin and it’s gonna find one.”
This line is the perfect description of how one should think about the massive capital dislocations we have created in our market. Basically, the bubble has gotten so big that there’s no point in even trying to determine with any degree of certainty what the actual “pin” or catalyst will be to pop it, the key is to identify where the price appreciation is most egregious and brace for the impact in the most sensible manner possible. The larger the bubble gets the more “pins” emerge that could eventually pop it.
Have a great new year.
Not sure if I fully agree with you. However, some of your points around unemployment and interest rates are valid – especially when Government plans to announce some cuts for the next year which will eventually affect all of us.
having said that though, I dont think there will be a total bust as you sort of suggest. I think the house prices are at a very resonable and affordable state at this point in time. I mean at an average 90K income, you could definately afford 4ooK house, given you are in a good credit shape. Also, many oil and gas workers will be back to work in 2010 since a few ‘on hold’ projects are going back up again. and as Sheldon suggest, recovery will be solid if natural gas market recovers (not sure if that will happen though).
Also, at this point in time, all I saw during the last month was more sales than new listings and I see that as a positive sign and a very strong spring market.
LOL!
Not sure what is so funny. I happen to agree with all of Al’s comments as well. All we can do is wait and see. But odds are that with such low inventory right now (trust me, I’m looking), strong sales/higher prices will follow into Jan. That much is obvious.
Sorry but I’m with George – this market is a bubble in search of a pin.
Klaus is one of those who has no supportive arguments.. So, can’t really count on his opinion, unless he happen to have a crystal ball.
What were gonna see is alot of people rushing to the bank to get a mortgage at these current rates, buying into a market that is already 30% over valued, which will drive it up even more. THEN… the Feds change the rules to 10/30 (the “pin”), prices drop, people foreclose, I buy a house for what its really worth. What I dont understand is why realtors don’t want the houses to decrease in price, doesnt that mean more people interested in buying, more sales, more commish? Also, since when was it the realtors job to forcast the future on property value? what did these realtors say to people in 2007? The past is irrelevant, historic trends mean nothing when the world economy is continually changing, mostly for the worse.
The high market since April has been artificially maintained due to low rates.
As soon as the BOC raises the rate which it will do before soon, a huge panic will unleash as the last wave of sales will occur.
The BOC will raise rates by ONE full point before September and banks will raise their prime from 2.25% to a full 4%.
Before 2012, sales will virtually die and as folks resign their mortgages between now and 2015 at higher rates, the affordability factor will have eroded and defaults will be higher and more listings on the market will inflate supply which will cause a price crash just like summer-fall 2007.
With one full point increase why would prime increase by 1.75%?
wow.. people really seem to think that the interest rates is the ONLY driver for higher sales. Its also funny that people can actually predict all the way till 2015 and expect that what they are predicting is correct. I agree that when interest rates rise, there will be an impact on affordability but it will be misleading to believe that due to rise in the interest rates, the entire housing market will bust. There are many young professionals out there, that have waied for a few years for this type of market and when it has come they are taking the advantage.
Many people I have seen are now locking their rates down for 5 years at 3.99% or even lower. So, I would think that these people are ok for atleast five years and who knows what happens in five years.
OK.
If the BOC’s prime is set at 0.25% why are major banks’ prime at 2.25% then?
The opposite is true.
When the BOC lowered its overnight rate a bunch of times, the major banks sometimes never lowered their lending rates.
Check for yourself.
So…… as the BOC raises the rates by 0.25 or 0.50%, you can be certain that banks will double that raise… Hey, it’s what banks do. It’s a “wait & see”…
Agree with you Al. Those bears have such a simplistic view of the effect of interest rate rises. You must remeber that interest rates only rise if the economy is improving. Don’t look at interest rates in isolation.
I think the 2% difference between the BOC rate and prime is normal historically. I guess that difference is for profit, operating costs and some risk associated with lending. At first when the BOC lowered rates the fact banks did not follow was more due to the credit crisis as opposed to the the normal way they operate. When the credit crisis subsided the banks lowered there prime rate as the BOC held steady at 0.25%.
I don’t expect the same divergence to re-emerge as the BOC raises rates.
We’ll have to say what the bond yields have to do first.
Yes… interest rates rise only when the economy is improving. OHHH, no, wait.
When inflation because an issue, interest rates will have to be risen drastically…. anyone remember %20 mortgages?
Great article. I’m glad to see the housing market showing strength in Alberta. It is the same story in the Toronto area, as home prices recovered and sales are actually up from last year.
Frank inflation becomes an issue when people have money to spend on goods and services. Not too many poor economies (properly managed) experience inflation
My little corner of the market is down about 20% from the highs. (Even though buyers are trying to convince me it is down more
Inventory has moved into strong hands and new listings are coming in about 10% higher than November. The investors/buyers that bought last year in the face of extreme pessimism aren’t in for a quick flip. If prices go up 20% quickly they may be tempted; but, no one here is predicting that. Markets tend to do what they have done. Listings will move to November 09 levels, the sales/listing ratio will bounce around 70% (it would be nice to have a moving average to take out some volatility) and the average prices will be stable plus or minus 5% depending on the sales mix.
Please keep in mind my mid year predictions for the market — just chugging along — were accurate. However, I did get the prize for the worst forecast at the Financial Analyst dinner one year.
Information is derived from sources believed to be reliable but no warranty is expressed or given
I am interested where this bubble theory comes from.
CHMC Oct release forecasted a 3.4% increase in MLS Avge price for Edmonton 2010 (as well as 5k+ job growth)…and the balance of 2009 went very much in line with their assumptions.
CMHC team have good stats to back their argument (see link below if you’re interested), so I’d need to see the same kind of supporting evidence on the negative side before I started panicking about bubbles, pins, ballons or any other kinds of floating objects coming into contact with very sharp ones.
http://www.cmhc-schl.gc.ca/odpub/esub/64343/64343_2009_B02.pdf