Here is our update on the Edmonton real estate market. (Previous week’s numbers are in brackets). For the past 7 days:
New listings: 425 (486, 462, 435)
# Sales: 187 (217, 222, 191)
Ratio: 44% (45%, 48%, 44%)
# Price changes: 346 (354, 344, 324)
# Expired/Off Market Listings: 260 (250, 227, 494)
Net loss/gain in listings this week: -22 (19, 13, -250)
Active listings for single family homes: 3392 (3360, 3319, 3287)
Active listings for condos: 2119 (2182, 2176, 2182)
I was talking to an agent the other day, who was taking his clients for a second look at one of our listings and hoping they would write an offer. I thanked him for showing it and was joking with him a bit about the market and he said "people are so nervous about the market I can hardly get them write their names on a napkin let alone an offer to purchase!"
When you look at the sales numbers this week you can see that not that many deals are going together. So the question in my mind is: what happens in September? It used to be a guarantee that September was a slow month, but in ’08 and ’09 the market actually picked up in September.
The REALTORS® Association of Edmonton is reporting 1091 sales so far this month, which should put us close to 1300 for the month. The average residential sale price sits at $326k (down from last week and last month), single family homes at $371k (down from last week and about the same as last month) and condos at $233k (up from last week but down from last month).
Have a great weekend!
Just saw this on another blog. Good for a laugh if anyone has a few extra minutes.
http://www.youtube.com/watch?v=XJlaEtZ7zT0&feature=player_embedded
A few observations:
- Compared to 2009, 2010 is more of a buyers market. This can be inferred by the consistently higher ratio between new listing and sales. Higher ratio means more selection per sale, and more selection means more bargaining power.
- Sentiment seems unchanged since around April 2010. That is, the sales are a function of the number of new listings – they are moving together. On the chart, the blue and red lines are moving in unison and running in parallel.
What’s this mean for housing prices?
- Housing prices will likely continue to go down the rest of the year into the slow winter season.
Why?
- The Canadian housing market is cooling off. Even if Edmonton is less affected, people do read the news and hear about the declines in Vancouver, Toronto and especially Calgary (!). This adds at least some downward pressure.
- Gov’t wants to cool off the housing market and inflation and have raised interest rates. Again, people do take notice when they read the news and see that it’s not just talk. This adds at least some downward pressure.
- The U.S. is likely heading back into a recession (or still in recession if you are more cynical.) Again, people read the news and economic uncertainty leads to people sitting on their wallets.
- AB gov’t is running a deficit, and being the capital city does not help. Gov’t hiring freeze and wage freeze puts a damper on our city filled with gov’t workers. Again, not so positive.
- Lastly – Oil. Edmonton lives and dies on the oil industry, and hence, oil prices. Recession usually means oil prices will head down. Yes, there is the Peak Oil theory, and consumption from China, and even the possibility of a run on oil as we saw in 2008. But I’m focusing on the next couple quarters, and oil prices look to be heading down in the short term, not up. Again, not so positive.
Overall, the mood seems to be cautious for buyers in an uncertain if not somewhat gloomy horizon. I’ll look back in the coming months and see how I did.
)
M.
Note: Sorry “higher ratio” should be “lower ratio” in my post. My bad.
- Housing prices will likely continue to go down the rest of the year into the slow winter season.
Maybe, but don’t forget they always trend lower into the winter. That’s the market.
- Gov’t wants to cool off the housing market and inflation and have raised interest rates. Again, people do take notice when they read the news and see that it’s not just talk. This adds at least some downward pressure.
The five year qualifying rate has been dropping since May. So interest rates are actually going down, not up.
- The U.S. is likely heading back into a recession (or still in recession if you are more cynical.) Again, people read the news and economic uncertainty leads to people sitting on their wallets.
No it’s not, slowing maybe, but still growing.
- AB gov’t is running a deficit, and being the capital city does not help. Gov’t hiring freeze and wage freeze puts a damper on our city filled with gov’t workers. Again, not so positive.
Alberta has no debt and actually has surplus funds. The deficit is only on paper,so it’s only an on paper accounting deficit. As far as hiring the AB Gov is the most bloated work force in Canada. Alberta spends the most per capita on it’s citizens than any other Province and will so in the future.
- Lastly – Oil. Edmonton lives and dies on the oil industry, and hence, oil prices. Recession usually means oil prices will head down. Yes, there is the Peak Oil theory, and consumption from China, and even the possibility of a run on oil as we saw in 2008. But I’m focusing on the next couple quarters, and oil prices look to be heading down in the short term, not up. Again, not so positive.
Again, What recession? Oil isn’t going any lower. Read up on peak oil and you will understand why. Also even with $75 oil, almost all the stalled oil projects in Alberta are back on the table. Oil doesn’t have to continually go up for these projects to go ahead, it just has to be above a certain number. Which it is now.
Right now Alberta is a the bottom on the economic cycle, the only way it has to go in the future is up. To the moon Norton, to the moon. Well I hope not, we seen what happens already when things get out of hand.
Do I think house prices will go up, NO I don’t… they will most likely be flat or down slightly for the next couple of years and then after that head up at the inflation rate (what ever that may be). The only thing that may change this is, if all the new money unleashed into the economy creates massive inflation which will surely increase prices and wages. Just like it did in the 70′s. Back then oil prices were the culprit, now all the new money may be.
Instead of look at everything as a negative, why not try looking for the positive things instead. To me, even negative things have positive outcomes. Like what the 2008 financial crisis did to Alberta. It gave everyone here a reality check and this in the long run is a good thing.
I have to admit – awesome post DaBull! I will add one thing..
“- Compared to 2009, 2010 is more of a buyers market.” – I am not sure if I agree with this statement. A friend of mine built a brand new house (signed on July 2009 – completed in march 2010) and the value of his house today is higher then what he built for. The same builder in the same area for the same house on the same priced lot is asking for around 20K more.
“- Compared to 2009, 2010 is more of a buyers market.”
Anecdotal examples aside, when looking strictly by the stats, there’s been more houses to select from per house sold. That’s what I’d call a buyers markets.
Makoto
Great reply DaBull, and I think we are arguing similar points.
Couple things though:
– For the U.S., all the indicators are pointing to another recession. Growth is slowing because the stimulus has run its course. Time will tell, but things are getting strange down there. 43 million on food stamps, 1 in 10 mortgages in foreclosure, and California giving out IOU’s for the second year in a row is just not normal.
- Yes, Alberta has a rainy day fund and no debt. Rack up enough deficit, and that becomes a debt. King Ralph and his axe was not that long ago.
- “Oil isn’t going any lower.” Yes, I know plenty about Peak Oil. But that didn’t stop oil from hitting the $40/barrel range in Sept 2008, and Peak Oil did not start in September 2008. I agree with you that going forward oil will be a extremely important commodity, but that doesn’t mean oil can’t dip lower. From what I understand, the “magic number” for oil is around $60/barrel – staying below that for a prolonged period will cause big oil to start hunkering down.
In the longer run, I see the same bright, future for Alberta due to our natural resources. Looking past our natural resources, I hope our gov’t can keep Alberta relevant.
To sum up again, I don’t see anything that will change the current trend, which is mostly a seasonal trend with a more bearish undertone that 2009.
Like the bumper stickers say “Give me one more boom and I promise not to p*ss it all away!”
Have a great weekend all!
Makoto
“The five year qualifying rate has been dropping since May. So interest rates are actually going down, not up.”
Do you not know the difference between interest rates and mortgage rates?
A little economics one-oh-one ….
http://www.cbc.ca/money/story/2010/07/20/bank-canada-interest-rates.html
How could the province continue to run record deficits? Something will have to give and it is most likely jobs, big projects etc. They’ll burn through the rainy day fund in no time at this rate.
http://ca.news.yahoo.com/s/25082010/76/prairies-alberta-positioned-record-deficit-4-7-billion.html
Great analysis Makoto. Confidence has definitely taken a hit over the past few months and rightfully so. Two weeks ago I was in Vancouver and I discussed the market with a few people there. The situation on the West coast is not good. The same blog I found that youtube clip on is discussing one of the problems west coast RE is facing today.
http://www.greaterfool.ca/
In short, there are a lot of factors that will be putting downward pressure on RE prices and affecting buyer confidence as we move into the fall. Things could pick up in September, but i wouldn’t bet on it right now. There is too much uncertainty. I spoke to a successful optometrist while I was in Vancouver. He said that he loved it there but, since he cannot afford a decent home in the area he works in, he is thinking about moving to Edmonton in the new year (he did his undergrad here and he loves the city). He told me that he has been watching the market here and that he expects a modest correction but not enough to deter him from making a purchase when he comes. I agreed with him that Edmonton should not be hit as hard as some areas……….just 20%
Anyway, the fall should be interesting.
Man Ohki, I’d love to have the insanity of Sept 2008 back, when Mr. Market was so depressed he was giving away stocks for dimes on the dollar, I’d be buying again like I was then. It was like some cult that was giving away all their stuff because in a few short days they were hitching a ride on a comet to heaven. Times were good for anyone who didn’t bleat like sheep and panic like movie-goers in a theatre on fire. Bring on 40 buck a barrel oil again…cause it just isn’t a reasonable price for the product, anymore than a 9 oz bottle of Pepsi is worth a nickle, or 200K for a new home.
There are as many bears out there as there are bulls, period. At the end of the day you have to take both perspectives and render your own conclusion. There are some improvements in the economy when you look at the year-over-year results. Sure there are some weak spots or sectors that just can’t seem to get off the ground, but overall we’re simply bouncing along the bottom. I expect to see gradual improvements in 2011 and more in 2012. I was never one to believe that this was going to be a ‘V-shaped’ recovery.