We’ve been tracking low sales and high inventory in Edmonton for a few months now, wondering when prices would be affected. It looks like prices have finally taken a hit this month, and a pretty big one at that. The average sale price of single family homes in Edmonton in July was $388,549 down from $397k in June and $400k in May. Condos were not hit as hard and sat at $237,112 in July down from $239k in June and $246 in May.
The decrease in average sale price was partially due to lower luxury sales – 18 homes over $750k sold in July compared to 28 in June. There seems to be a lot of bargain shoppers out there right now as many offers are being written but few sellers want to lower their expectations to buyer’s levels. In turn many home owners are opting to take their homes off the market and wait for a better market.
On a price per square foot basis condos actually improved from $232/square foot in June to $234 while single family homes decreased from $269/square foot to $264.
It is not unusual for condos to outperform single family homes at this time of year. Most families want to be moved into new their homes before the new school year starts, while many parents of college aged kids are out shopping for condos for them to live in while at school.
As always, these numbers are for the city of Edmonton only, when the REALTORS® Association of Edmonton releases the final monthly numbers in a couple of days we’ll have our final monthly report for the greater Edmonton area.
Hi, nice insights, however i can agree with you only in certain way,
Of course this is only my opinion, but it doesn’t look like the RE market is going to fall again. However this is only my insight.
Hi,
I hate to poke at your baloon, all pointers and pundits indicate that we are in a real estate bubble. To expect the Edmonton RE market to remail at current level is a bit too optimistic at worst. Fact is, the factors for a serious correction are already in place. They will take time to take effect. High CMHC down payment requirement eliminates a large group of entry level buyers, high interest rates and still rising is bad news for high-priced home ownership, low job market, sluggish economy, a worse economic outlook of the US, our biggest trading partner etc. is bad for everyone.
These are solid contractionary economic factors that will negatively impact the Edmonton real estate market. But they take time to take effect. And slowly but surely they will. Just like what happened in Florida real estate market in 2007. Back then, all the factors were in place for a serious correction of an overinflated RE market. But buyers and sellers refused to budge and blink. For a while. Cracks started to show in 2008. And the fault line opened up wide by the subprime mortgate bombshell. We know what happened next. The bottom fell out of the market. And the worst is not over yet in 2010.
My prediction: expect the market in Edmonton to correct slowly in the next 12 months. It will be like Chinese water torture for home owners who wish to sell. Eventually, enough of them will crack and start to dump their homes, causing dramatic drops in prices. Only then will buyers will show interest. A typical bubbled RE market correction is around 25% downward. That means, about $50K for a condo, and $100K for average family dwelling.
What goes up, must come down.
Good day.
Jamaal
Jamaal the real estate markets in Edmonton and Florida are as different as the climates.
Here’s my question to you, if all house prices in Edmonton dropped by $100,000 then a very large number of sellers would have no equity in their homes so then would have to take their home off the market, as they would have no down payment to purchase a new home. So if a very large portion of sellers pulled their property off the market wouldn’t the law of supply and demand drive the price of houses back up? Also your reference to
“High CMHC down payment requirement eliminates a large group of entry level buyers”
is wrong as entry level buyers still only need 5% down. If you mean entry level landlords then yes they have made it harder to qualify to be a landlord.
Also a 5yr fixed rate of 3.94% is hardly high
so I don’t see how your statements hold any water. Especially as lending in Canada is far more conservative than the US and we had far less sub prime loans going bad. The problem with easy lending is it artificially drives up the prices by speculators. So by making it more difficult for speculators to find financing will drive them out of the market, to gamble elsewhere
Lol soo many people are in Denial…. I checked this blog quite often and find it a very insightful source of information.
However it’s soo easy to pick out the home owners who post in utter denial.
House prices as with interest rates have no place to go but down, don’t get me wrong I wish this wasn’t the case but unfortunately it is true.
It’s also pretty easy to pick out the people who have not purchased a house for fear of always paying more than what they should and regret not getting into the market 5 years ago. For these people, claiming that prices must fall 20% and that all home owners are about to lose a chunk of money makes them feel better about their decision to not purchase.
Remember an opinion should be the result of thought, not a substitute for it.
Can you blame him? Would you buy something when you know it will be cheaper over the next 6-12 months?
Define ‘know’ please…
Read Sheldon and Sara’s post above.
You express your ignorance with the dynamics of housing prices,
Housing prices follow the basic “supply/demand” principles.
As inter-provincial migration kicks in again with the high capital projects kick-in again, the demand wil increase and hence the real estate will appreciate. Real estate will also be driven by investors looking for cash flow on their rentals which they can get fair price with transient workers making good money.
Any one who thinks that the house prices in Edmonton will fall will be VERY Disappointed:
- The prices in Edmonton and Alberta have been lagging compared to the rest of the country in the last 2 years.
- We are in the cusp of major construction projects: Northwest upgrading, a very promising drilling season, Also the Fort Hills project will come back.
Looking at the stock market, March 2009 will not come back, we had some lulls but the stock market is coming back. The same pattern will go for the real estate market.
Those points are all simply long term speculation.
Projecting out prices using simple recursive linear regression with MOI gives us 7-11% price declines by next January.
The average household income in Edmonton is 90K, higher than Vancouver.
With the economic recovery taking hold (remember Alberta is still lagging), I can only see the house prices going up.
90k per year minus minimum 40% taxes leaves people with 54k per year, and you want them to spend $388k on a house. Now that interest rates are rising it will be even more difficult for people to get the loans required to finance this purchase. Why would they purchase when rents have been dropping in the capital region. Rents drop, interest rates rise, house prices therefore must drop. Time will tell.
Interesting that an income of 90k/year would allow a person to qualify for a mortgage of almost exactly 390k at 5.7% over a 25 year amortization.
Maybe Edmonton average income and average resale price are finally in line.
Sorry, I meant at 6%…not that it makes a big difference.
“Remember an opinion should be the result of thought, not a substitute for it.”
LOL Spud. Have you been eating fortune cookies again?
“As inter-provincial migration kicks in again with the high capital projects kick-in again, the demand wil increase and hence the real estate will appreciate. Real estate will also be driven by investors looking for cash flow on their rentals which they can get fair price with transient workers making good money.”
I have to agree with Mike that it is certainly not all doom and gloom out there. This is a vibrant city and the potential for economic growth is certainly there. That is why I have only been calling for a 25% drop in prices. A 25% drop in prices would be great for this city. Think about all of the people who would benefit from the savings. Think about all of the happy new homeowners…..think about how many more investors would be able to attain the dream of having a rental chalk full of transients. Man, I just get all warm and fuzzy when I think about it.
I also ask for a 25% drop in price at Walmart and Superstore. Imagine all the happy shoppers. How about 25% drop in price at the gas station? Spud, your mom wants you to cut the grass, you spend too much time on the internet, or she will cut your wireless.
To the tune of “Dragging the line”
Ignoring the supply and the rates, and the downward line,
Hide the decline…hide the decline
The housing market was pretty weak,
Interest rate outlook very bleak,
The economy’s bad and the houses are priced for fine…
Hide the decline, hide the decline, hide the decline…
Simplifying is like generalizing; only the likelihood of up pr down trends can be preidcted with some certainty and it is never 100% having said that given ONLY the info up to date the trend is lower and this is hindsight since the market has declined already.
The real question is how low will it go? and in what time?
Both impossible for the creators and most visitors here to predict!
According to the graph we see support at $350K that is 13.5% from the latest high.
Things change constantly and the public opinion can be influenced easily. RE will be flat within 5% for the next few years unless oil goes to $100 and up.
Why are the monthly average reported prices so much higher than the weekly numbers?
Week of 30th, Single Family Homes were $370 K avg.
Week of 23rd, Single Family were $371 K avg.
Week of 16th, $370K
Week of 9th…no prices given
Month average is $389K?
Something doesn’t add up here.
Hide the decline, hide the decline….
The weekly average price shows the greater Edmonton area, the numbers I posted yesterday showed only Edmonton. Why do you still think we are trying to hide something? We’ve been posting the numbers as is for 5 years.
they have no reason to lie. Plus the divergence in numbers would just show up in the monthly reports.
Appreciate the statistics but just wanted to point out that technically speaking the mean price may not be the best way of reporting trends in housing prices. Not to get too technical but unless housing prices are normally distributed the median would be more appropriate. In fact, I would go a step further and say that the mean is not correct Housing prices are not normally distributed. In other words there are many more houses at the lower compared to the higher end of the curve. The median would be less influenced by a few sales at the upper end of the scale. Have you considered reporting this instead?
Yes we’ve talked about this on the blog in the past. Unfortunately getting the median is not easy with the access I have to the data. When the official numbers are released I will report the median. Thanks for your feedback and for visiting our blog.
People who are in the market need to be buying a place to live in. If they are doing it as a ‘short-term investment’, they’ll likely lose out. Be patient, buy when you’re ready simply put.
I suppose this is just wishful thinking but are there any stats about how many first time home buyers are buying?
Average prices matter more to first time home buyers, people buying spec or rentals properties than people trading up/down/location within Edmonton.
I think one of the reason numbers are so hard to read as there are many different reasons why people buy and sell. So there could be multiple trends going in different directions.
If there is no correction due….then why are all my friends under water with their mortgages…why do I see more For Sale signs than ever before, and why are prices already dropping. If you bought in the last 3 years…your toast. Forget about your down-payment..it’s gone…and this correction will take 15 years to come back.
Sorry..but it’s happening if you like it or not. People have finally figured out that a home is not an investment but a only a place to live. If they don’t realize it now, they will when they get their new property assessment.
“I want to a new kitchen…but I don’t know what to do”…So sick of hearing those stupid ads on the radio. Thank god the game is almost up. Home equity loans are just a vehicle for uneducated to part with an asset that they ASSUMED would go up in value. Just ask our friends down south how this will play out. Those companies in a few years will soon have most toxic deb…I mean real estate assets, however deflated they will be.
“But we don’t have sub-prime mortgages in Canada”.
If you need your mortgage insured by CMHC..then it’s subprime, it’s just sugar coated.
Just rent for now and in 2 years go buy a house that IS 30% cheaper than today….maybe more. Save…save…save.
Are you serious? I feel better now though because someone on here said it would take 20 years yesterday so things must be improving quicker than I thought. But if its going to take 15 years why only rent for 2 years? Thanks for the insightful analysis and good luck on amateur night.
Sorry, made post the other day but it didn’t go through. Let’s assume 500K house is worth 350K in 2 years because of the correction. Rent for 2 years, but when it’s 350K, then buy. Then it will take 15 years for the prices to go back up to 500K……was that not clear in my post?