Earlier this year the media and real estate associations reported confidently that sales were significantly higher than 2009. Wait a minute, wasn’t the first quarter of 2009 precipated by the plunge of the financial markets in the last quarter of 2008? When we saw those reports we tried to cool some jets and explain that this was not a big deal. Now it’s time to get ready for the negative headlines again.
While 2009 started out very slowly, by the second quarter you could feel something was in the air. It felt like confidence and money. It was like the last quarter of 2008 never happened. It had been collectively wiped from the psyche of every buyer and seller we were dealing with. Low interest rates and news of economic stability bouyed these sentiments. So with all that cheap money in 2009 we saw sales recover to levels that astounded me. If you’d have asked me in March of 2009: will we see record sales in June and July? I would have asked: "What type of medication are you using because you seem perfectly calm while your leg is on fire?"
It is possible that we will go from an all time high in June ’09 to an all time low this year. So it stands to reason that if the increase in home sales was reported the way it was, what are they going to do when the numbers for June are reported? Will they hire an orchestra and book the Edmonton River Queen for a final titanicesque serenade down the river while the world ends, or will they simply ignore the unignorable?
Lets put things in perspective – the sales are right where they should be. In 2008 inventory of homes and condos in Edmonton was at an all time high. While sales were sluggish the market was more balanced than it had it been in a long time with buyers in the driver’s seat. First time buyers made the biggest impact, seeing opportunities to buy a homes because of the amount choice available, increased negotiating position and relaxed prices. So today sales are in line with 2008, thought slightly lower. The reason they are lower than 2008 is two fold:
- Many home buyers in the Edmonton area moved their purchases forward to take advantage of the lowest interest rates of a generation.
- Changes in financial regulations by the Canadian government and CMHC to curb the exuberance of home buyers went into effect in April. While these changes have been widely talked about they were not dramatic enough to make a huge impact immediately, but they were enough to tip the scales.
Our market is far better off long term with these changes and the sales we’ve had in 2008 and 2010 than the heddy sales of 2006, 2007 and 2009 (especially 2009 which seemed out of whack with economic realities).
So where do we go from here? My not so bold predictions:
- Short term pain on pricing for sellers.
- Inventory levels are far off of 2008 and there seems to a tolerance for higher inventory in our market. Our high inventory is still a lot lower than a lot of cities our size
- Inventory will will start to fall off in mid July to early August at the latest. There are a lot of sellers who are trying to get their 2007 purchase price back now that will come off the market again when they don’t succeed.
- I look for sales to continue to be the below 2008 levels until October of 2008 when you can get ready for the headlines again.
- Increased confusion from the consumer – are we up or down?
It will be interesting to see what the media has to say. It seems like they always put a bearish spin on real estate stories.
Media with a bearish spin on real estate stories? Usually their only interview is with the people who release the numbers (real estate boards). “sales are up” or “prices are up” or “market is heating up” or “market is great for buyers and sellers” or “great time to buy” or the bears favorite “buy or be priced out forever”.
I don’t blame the media for this because who else are they going to talk to? Nobody professionally tries to bring real estate down. Maybe Garth Turner.
The real estate boards have the numbers and the statements anything else is just opinion.
That being said more and more people are turning away from the main stream media and towards internet blogs and message boards. And you thought traditional media had spin!
I’m avoiding the headlines in favour of real data. The last few years have generated enough strange numbers to produce some truly absurd percentages, which to a journalist is better than a Starbucks quadruple Venti with a double shot of methamphetamine.
You’re absolutely right on that we’re in a much healthier place now. There’s going to be another swell of stupidity when interest rates go up another half point, and then again when people realize we’re still shy of the 6% back in 2008.