Here is our update on the Edmonton real estate market. (Previous week’s numbers are in brackets). For the past 7 days:
New listings: 456 (492, 455, 529)
# Sales: 198 (276, 228, 218)
Ratio: 43% (56%, 50%, 41%)
# Price changes: 341 (390, 363, 369)
# Expired/Off Market Listings: 174 (221, 226, 204)
Net loss/gain in listings this week: 84 (-5, 1, 107)
Active listings for single family homes: 3454 (3395, 3374, 3329)
Active listings for condos: 2253 (2232, 2209, 2217)
Inventory, especially of single family homes, is still on the rise. We thought inventory would have peaked by now, and even though the pace has slowed it is still increasing.
The REALTORS® Association of Edmonton is reporting 1323 sales so far this month, and with only two days left it looks to be another low for monthly sales for at least 6 years. The average residential sale price sits at $329k (down $1k from last week and $6k from last month), single family homes at $370k (down $1k from last week and $17k from last month – probably one of the biggest drops in a single month we’ve seen) and condos at $244k (down $1k from last week and $4k from last month).
Looks like a great weekend is in store – enjoy the city and don’t forget to visit Heritage Days!
In a earlier post Sara made a comment that if interest rates go up 0.25% that for the same given monthly payment the purchase price would need to drop 5%. If all the other variables remain unchanged, isn’t that precisely what would happen when interest rates go up?
Now, this would most heavily affect the people who are buying places that they cannot afford (e.g. people who need to get CMHC to insure their debt). I wonder what the percentage of real estate buyers fall into that category. Is that statistic published anywhere?
Hi Sara / Sheldon,
I was wondering if you were privy to how the sales are distributed. I.e. how many salesm, or % of sales, were made 350-400k / 400-450k / 450 – 500k…. etc etc etc. The only indication we currently have is a comparison between the mean and median. It would be intteresting to see how they’re changing throughout the months
Once again, thanks for all your work on a such a great site!
Prices down $17 K in a month, while inventory climbs and sales plummet.
Pop goes the bubble.
Check out the Case-Schiller house price graph…Canadian housing prices just hit the same record high level (% up from 1990 prices) that the US homes hit…in 2005, just before there bubble started bursting.
Speculators will now be purged…there are no more emergency rate cuts and new stimulus money to pull out of a hat this time.
Speculators, where? They were culled long ago. Bubble, where? Show me the run up in prices? Did I miss something in 2009? I must have ‘slept in’.
Here is the run up in prices CMD. Apparently you have been sleeping for about 8 years.
http://www.greaterfool.ca/2009/04/01/wrong-answers/
As you can see from the chart, the bubble started to deflate in ’08 before loose lending standards and emergency rates propped it back up. A sane person would look at the run up demonstrated by this graph and say, “something is not right here.”
By the way, it will not only be speculators who will be culled by this. Young and naive first time buyers who got caught up in the “get in now or else,” BS are going to get hammered as well. Interestingly enough, a friend of mine almost bought with a $20k downpayment 2 months ago (I told him to hold out for a while). He would have lost his DP by now plus another $10k in CMHC fees and closing costs. All that before even moving in. He is going to look again in the fall. There is absolutely no reason to rush into RE right now.
I stand behind my conservative prediction that we will drop 25% by the summer of 2012. As we have dropped 5% so far this month we only have 20% more to go.
Actually unless he sold he would have lost nothing.
Nothing like a down month to bring out the doom and gloom, I told you so stories! First of all Spence, unless your buddy was trying to flip the house for a quick profit, he wasn’t losing anything. You don’t make or lose money until you sell the stock. The best advice you can give him is not what month or season to buy in, but tell him to buy with the idea of living in it for 10 years that’s the best protection he’ll ever get. Or better yet if he’s going to be stressed over a month of data…don’t buy at all, period. Nothing wrong with renting. Secondly I highly doubt the housing market is truly down 5% this month nor do I believe it was up 5% in March. It’s simply a function of a revival of the luxury market early in the year and the likely slowing of the same at this time of year. A few big numbers can really screw with a lot of little ones.
I do agree with you though that the general trend should be down for the rest of this year. After that, there’s just to many variables to consider. Strength of the economy, rate of in migration, interest rates, inventory (how many homes on the mls are actively being rented right now and how many are people who want to try and sell at what is a pretty well advertised peak, but aren’t really going anywhere?) As for a 25% correction in 2 years, here’s something to think about. The U.S. 20 city composite indices measured from May 2006 to May 2010 peak to trough is -29.1%. So you’re saying we’ll have a U.S. type collapse over the next 2 years. Since you brought it up, the U.S. did the same things as us with interest rates, plus they instituted multi billion dollar programs for renegotiation of mortgages, and home buyer tax credits, neither of which we did. In fact back in April we were tightening lending standards. In short the U.S. housing market was so screwed, it didn’t respond to anything that was thrown at it. In Canada, it acted as a healthy market should have, with increased demand and rising prices. I just don’t see that kind of downside here. However if oil were to go to 40 bucks and stay there, we’re hooped.
I couldn’t have said this better myself. The numbers that some people pull out of their hats make no sense when you compare us to really troubled markets in the states. However your thoughts on the average based on the luxury market are bang on. We haven’t done the math yet but we will and that is our guess as well. Interestingly enough activity overall has picked up a bit and there a drop in inventory should be coming soon. I believe demand will normalize in the months to come. Many people bought because of low interest opportunities which sucked demand forward. I believe that is in part why we are seeing abnormal sales. My guess is we should return to just slightly under 2008 sales levels, but time will tell. Thanks for the great comment though. I wish I had the time to reply to some of the more outrageous statements some people post. However that in itself would be a full time job.
Your crystal ball is out to lunch,I bought mine from MEGABEAR Industries online and it’s predicting that by 2012 some two years from now, not a 25% drop but an actual inversion in the market, where sellers will actually have to pay buyers to take their homes. The going rate in my crystal ball is that the average seller will have to pay the average buyer on average $62,432.98 to transfer ownership of the average home in Edmonton with the average buyertor (formerly known as a realtor) earning $5349.72 in commission under a system implemented in late fall 2011.
Ha! I’m way more bearish than you’ll ever be. You should tell your friend to wait till then to buy when he can actually make money by accepting titles to homes no one will want by then.
This looks like perfect July 2005 USA. Our RE experts, broker, CREA, govt, salemen and anyone who makes money by RE transaction are trying to convince people that everything is normal and under control.
You have nothing to loose if looking for long term or not selling house. They are not talking about mortgage renters (0/40, 5/35) who are underwater..they are addressing future buyers.
Biggest Q is ……….How long these home rich and cash poor people can keep their negative equity?
Who cares how long someone is planning to live in a house? The house my friend was looking at 2 months ago (1/2 duplex) can be purchased for ~$15k less today and will probably be worth another $15k less in the fall. Waiting 6 months for $30k in savings is an intelligent decision if you ask me. I do not know exactly how luxury sales have been affecting averages, but prices in the range I follow ($300-$350k) have been falling. Seriously people, look at the graph I posted in my last post and ask yourself if the run up from 2002 – 2008 was a natural trend driven by strong fundamentals or hyperinflation driven by easy credit. I worked for 6 different homebuilders between 2003 and 2007 and I witnessed firsthand the way strings were pulled to get people with next to no money into houses. This ever increasing pool of newly “qualified” buyers drove demand and prices upward. I knew 25 year olds with multiple properties. I was one of them. As far as the price of oil propping up the housing prices, I beg to differ. House prices started to drop in the summer of ’07 just before oil prices made their dramatic ascent to their eventual ’08 heights. Home prices can drop even when oil prices are rising. I believe that any impartial observer would agree that current home prices are not sustainable. I would love it if the bulls on this blog would reveal exactly how much they stand to lose if the market continues to slow and prices continue to fall. I no longer rely on the housing industry to make a living so I guess I can call it how I see it now.
A dollar saved is a dollar earned. And dollar overpaid is a dollar lost.
These 10 and 20 year horizons don’t make a bad decision good. If you’re paying interest on the money the house better be appreciating because otherwise there’s better places to put 300k of borrowed money.
I also disagree with the month by month decisions as numbers do fluctuate. But I don’t think you can take those fluctuations further and saying a couple down/flat years don’t matter. I wouldn’t buy a declining market because it will “eventually” will go up.
Now I enjoy a good argument and I understand there bulls and bears and lots of money at stake on either side. Also I know people love their opinions and love to be right. But I would warn people just because there’s arguments on both sides does not mean that the future will be the middle of the road.
And also don’t get too cocky because there have been times in history where very smart people with lots of valid arguments have been wrong. In fact I’ve even been wrong once or twice.
Who’s laughing now….
20% to 30% prices decreases on the horizon by end 2011.
That $400K bungalow will be had for roughly $285K at which point I’ll afford Edmonton once again!
thanks for providing fantastic curves!
would u please lable the x ,y axis next time?
sometimes, I am confused without the labels.
Prices have been going up since the beginning of tine ,except for some temporary steps back, what do they see that is going to change that?
That’s something to keep in mind if you’re building a luxury home – don’t go too far or you could have a tough time selling when the time comes.
I hear a lot of talk about people buying with a 25 or 30 year time horizon, and it helps ease the pain of even a pretty significant drop. Fair enough, but it ignores some pretty big realities:
1. The average 30 year old is NOT going to have 25 or 30 years of employment without significant interruptions, and budgets today aren’t allowing for that. Most people couldn’t go 1 month without a paycheck.
2. The average time people are in their homes today is about 5 or 6 years from the data I’ve seen. So, people aren’t buying their homes for 30 years, they are buying them for five, to “trade up” again with all their new home equity (or take it out and go on a vacation with it, or buy a nice vehicle, like many of my friends have done).
So, the don’t worry about what happens to the price over the short term argument sounds reasonable, but it doesn’t match up with today’s reality for most house buyers.
CREA couldn’t forecast the weather for the next 5 minutes.
1.2% decline
http://creanews.ca/2010/07/30/resale-housing-forecast-revised-2/
5.5% increase
http://creanews.ca/2010/06/02/resale-housing-forecast-revised/
13.3% increase
http://creanews.ca/2010/02/08/resale-housing-forecast-extended-to-2011/
Read more: Edmonton real estate market – Home Prices Drop in July
Need input from the Real Estate Guru’s:
A friend of mine and I are considering buying a home in Sherwood park for about 460k — we are both twenty something professionals. Our idea is to keep it for a few years and sell, and go our separate ways. He is gung ho yet I am paranoid. My fear is being stuck with my buddy in a few years in a house that is worth a 100k less than what we paid for it.
Honest opinions please.
In my opinion you would be better off renting a house (of similar quality) with your friend. If house prices are lower when you go your separate ways, the process of going your separate ways would certainly be less messy if you were renting.
Or, if one of you wants to sell and the other doesn’t, that could be tricky.
To turn the question around: why do you want to buy a house together? As an investment? I’d recommend you check out the rent vs. buy calculator at the NY Times to guide your decision.
http://www.nytimes.com/interactive/business/buy-rent-calculator.html
I just quickly ran the numbers and unless you assume a very high average appreciation rate per year, it’ll tell you to rent at current market prices.*
* I did a quick check on Kijiji and MLS and found a few examples of ~$450k houses, and similar places on Kijiji rent for about $1800-$2000/mo.
Thanks for the reply.
Initially we wanted to buy as an investment, rather than throwing money away in rent.
My other option is buying something on my own for 350ish I guess.
And again, I’d say use the Rent vs Buy calculator to figure it out. Sometimes it makes sense to buy, sometimes it makes sense to rent, depending on the market. What doesn’t differ from market to market though is if it’s costing you significantly more to buy than it does to rent, you’re better off renting. My analysis of the Edmonton area came to this conclusion when I moved here.
My rule of thumb is to take the sort of house I have in mind, and find out the cost to buy and the cost to rent. If fifteen times the annual rent is about the same as the purchase price, it’s a balanced market (i.e. it doesn’t matter if you buy or rent). If the purchase price is significantly more than annual rent, then you’re better off renting.
In my case I rent a place for $1900/mo, and the current prices on MLS for similar houses are around $510,000. This is in Terwilligar.
The annual rent is $22,800, and * 15 is $342,000, so that is definitely in the “keep renting” territory since by this measure the houses are $168,000 too expensive. If prices drop or rents rise to change this ratio then I would change my opinion.
DancesWithLysol thats a very good response I agree 100%.
Myself as a 20 something professional I have had 20% down payment saved for my first home for 3 years now however I have been holding off for this exact reason.
Myself being multinational I just dont understand why I would ever have to spend 350, 000 on a townhouse in a praire province as big as this.
Recently I invested in some investment property back in the Island I was born Barbados. Reason this investment makes sense is the housing market for obvious reasons is a lot more steady there, and quite frankally the land is situated on an island near the ocean which is rapidly running out of places to build residential housing.
Not only this I personally am not directly involved in the Oil industry, although I earn a good income for my age it does not compare to some of my friends who are in trades who earn 6 figure incomes.
I feel bringing in 75k a year, and the thought of having to purchase a 350k starter home for just myself is ludacris. The housing market is so far out of touch which the average personal income is ridiculous.
I said it before I said it again, I personally think housing prices in Edmonton are wayy over inflated….. If the economy turned and housing prices started to climb again, without me getting a SIGNIFICANT incrase in salary I would simply opt to live some place more reasonable
I.e Ontario, States etc. As the white color industry I am in doesn’t really get paid better being in Alberta.
I am not the only person who thinks like this, sometimes Home owners need to sit back and put themselves in the shoes of first time home buyers….