EdmontonRealEstateMarketUpdate
Here is our update on the Edmonton real estate market. (Previous week’s numbers are in brackets).
For the past 7 days:
New listings: 339 (370, 336, 270)
# Sales: 153 (132, 128,106)
Ratio: 45% (36%, 38%, 39%)
# Price changes: 121 (91, 90, 93)
# Expired/Off Market Listings: 102 (131, 100, 643)
Net loss/gain in listings this week: 84 (107, 108, -479)
Active single family home listings: 1906 (1880, 1825, 1776)
Active condo listings: 1344 (1275, 1234, 1185)
Homes 4-week running average: $363k ($364k, $354k, $354k)
Condos 4-week running average: $218k ($214k, 215k, $215k)
I just attended a terrific presentation by Benjamin Tal from CIBC - I can't even begin to summarize all the items he talked about (but I will try to put up another post about it). The key point he drove home with regards to Canadian real estate was that he sees the next 10 years as slow and steady growth and not nearly exciting as the last 10. I like slow and steady 
The other key item I learned from him today was that for there to be a bubble in our market today we would have to see a massive and quick rise in interest rates, and a major sub-prime lending practices. He does not see either of these factors in our market in the near or distant future. I know many of you are going to say we are currently lending sub-prime mortgages but he is talking about the kind of lending we saw in the U.S. in the years leading up to their bust. Our lending practices are growing more responsible as we speak.
Looking at our market in Edmonton... The REALTORS® Association of Edmonton is reporting only 590 sales so far this month, well behind the last few years. Interestingly, the weekly numbers for only Edmonton look quite normal compared to '09 and '10 - sales outside the city must be slow. We will see next week when I publish the monthly report.
Edmonton real estate listings and sales
Edmonton Average home prices
Have a great weekend!
I can make graphs too.
Here is one comparing Oil and Gas capital spending in relation to Edmonton Average real estate prices from 1962.
https://docs.google.com/viewer?a=v&pid=explorer&chrome=true&srcid=0BwOeUMTm26zxY2NhMjcxZWQtYmNiZS00ZjU0LThlODctZGYzMzA2NzdkMmE1&hl=en&authkey=COO21tUN
Looks like there is a correlation. LOL. Its amazing what you can make a graph show.
Added my sources and some axis names and gridlines.
https://docs.google.com/viewer?a=v&pid=explorer&chrome=true&srcid=0BwOeUMTm26zxYWEyZGQzYjctNWU2MC00MDRhLWEyMzgtNDc1MGIyMDliMjli&hl=en&authkey=CPrpoOkH
Wow, a bank “economist” pouring on the sunshine, who’d of thunk?
First of all, bank terms in the US are the same as amortization. 30 year amortization is a 30 year term. In canada, you can only get a reasonable rate on a 5 year or less. By this fact, ALL mortgages in Canada are subprime if you use the US definition.
That’s why you hear about “resets” and how they turn into foreclosures. Our mortgages ALL reset after 5 years or less.
Until you can get a 30 year term in Canada, our mortgages are inherently more risky than those of the US.
Notice how the banks have lobbied the gov’t to tighten mortgage rules – it is because their unsecured credit lines and HELOCs (not insured by cmhc) are at risk. I could almost guarantee that this year we will end down. The question is how much?
Good to see that prices are trending down softly though.
You can get 10 year terms in Canada.
yes, and your payments will be 50% higher. best you can get is first national at 5.19 if you fit their standards – you have to be perfect on paper.
most other institutions offer 10 years at 6 – 6.6%
If you think that is reasonable, go get one.
Wow. Who said he was gushing sunshine. Problem is you cant see through your own fog. One thing I know is you can’t guarantee anything. But trash talk is cheap isn’t it.
I said pouring – you said gushing.
Benjamin Tal said “next 10 years not as exciting…”
I say now, nothing is exciting about tears.
Every part I said about the length of terms is factual. Banks themselves had lobbied the gov’t to change, as it now affects their uninsured portfolio. that is a fact.
Could you be more specific on what part of my talk was trash and what part of Benny’s was not trash?
Realtor Love…. You may not get a 30 year term in Canada, but almost all lenders offer a 25 year.
Here’s RBC’s – 25 Year @ 8.250%
http://www.rbcroyalbank.com/products/mortgages/view_rates.html
Your dreams have been answered. No more risk. Cost you alot more, but no more risk.
did anyone see the word “reasonable” in my first post?
Who would want to pay 8.25 when you can go variable for 2%ish
Question: In 1980 was a 30 year fixed rate term a good deal? Or in 1990 was a 30 year fixed rate term a good deal?
I wonder why it is US Banks (and Canadian banks operating in the US) can offer a 30 year fixed at 4.6 and if we want low rates we are saddled with a 1-5 year term. The central bank rates are similiar, and I’d be all over a low long term fixed rate.
yes, it prevented bubbles, and kept the corrections mild.
i was talking to DaBull about deals.
Huh???? Seems to have worked very well for the US so far.
sorry about the other posts, Sheldon has me worked up a little.
Because Canadian mortgages are based on bond markets, you will always pay more for the very long terms, due to demands of bondholders to compensate for inflation. Interestingly, any inflation in the last couple of years is almost entirely due to the Bank of Canada overnight rates which are artificially low for “emergency” purposes. Overnight BofC rates become bank prime rates. These are rates that variable mortgages are based on.
BTW, Sheldon, if you’ve ever taken an introductory economics course, you would understand more about this fog that I have.
No problem. you are right. I am not an economist. I’m like many business people, I’m kind of an experience based economist and therefor clouded by my own perspectives which is why I’m open to posts from people who disagree with me. However I suppose Tal has taken an economics course or two and you don’t like him either so maybe its just people with different viewpoints you don’t like, but its nice to know you love REALTORS.
Thanks Sheldon,
Like any business person, you MUST put your own interests first. That’s one of the reasons I truly do admire your blog.
Getting a bank “economist” to tell the whole story, would be akin to a realtor (I love them) saying now is a bad time to buy (or sell) – that is career suicide.
Here are some economists that don’t have an interest in pumping real estate. I’m starting with Robert Shiller as in the Case-Shiller Index.
Robert Shiller- “The Canadian housing market could face a similar housing bust to the United States, particularly in more bubbly markets as Vancouver and Calgary”
Here’s a few more, definitely worth having a look at what
they say, but I won’t make a bunch of clutter on this post:
Dean Baker
Paul Krugman
David Rosenberg
Mike Shedlock
Don Coxe
Stephen Jarislowsky
Still love this blog.
Getting a bank “economist” to tell the whole story, would be akin to a realtor (I love them) saying now is a bad time to buy (or sell) – that is career suicide.
Or like a real estate bear saying “Things are gonna crash, and that’s a fact” (ie. Garth Turner, hoping , crossing his fingers and toes and holding his breath). Notice how I used the word “are”, which means that it’s absolutely going to happen. So Shiller writing the word “could” some in your mind becomes the word “will”, which again means it’s actually going to happen.
So lets put things into context; “Tomorrow, you could be hit by a meteor”. I’ m not saying you will, but it could happen, so it must be true. But the chances of that happening are almost nil, But hey, you never know %$%$ happens. So moving on to Shillers comment, If you had posted the whole paragraph, thus bring things into context, then maybe it would have some credence, but you didn’t. Why? Me thinks because if you did your argument wouldn’t hold water.
Strange how these commodity bubbles are like clockwork. A guy just sent me this IMF spreadsheet back to 1900 (below). Looks like peaks in 1920, 1951, 1980. Bizarre if 2011 turns out to be the next peak. Even stranger, check out how oil peaked in 1948, three years prior to the agricultural commodities – ring any bells? At least i’m hopeful 2011 sees the same peak pattern in global food prices with what’s happening today in Tunisia and Egypt.
http://imf.org/external/pubs/ft/weo/2009/01/c1/box1_5_1.csv
Updated chart – thanks for the input from a previous thread everyone. I’ve updated the Selling Price and Income chart using constant 2008 dollars for both sets of values, using the Consumer Price Index (CPI) provided by the StatsCan site.
The resulting chart:
https://picasaweb.google.com/lh/photo/caHkYPHiXHoRLO-JxB6sHA?feat=directlink
I’ve also included an afforability scale on the left. (it doesn’t match the Demographia affordability results exactly because these values use average price and income, not median).
M.
Good Chart finally.
Just shows how undervalued real estate was from 1983 to 2005 in Edmonton.
At what price to do you consider to be approximately fair market value for Edmonton then? 3.0? Serious question, just curious.
Cheers,
OB
3.5 for the current economic climate in Edmonton.
With the current ecomonics, Edmonton should be valued similiar, if not more, to Toronto, Calgary should be more. The World is now in the age of resources actually being worth their true value.
This graph from Kevin’s bust blog show how undervalued Edmonton is compared to Toronto.
http://edmontonhousingbust.com/files/090331-1.jpg
Only in the last few years has that gap started to close. From the 1960′s to 1982 both were valued similiar, then after the collapse in oil prices in the early 80′s and the dreaded NEP came into effect, Toronto values took off compared to Alberta and stayed that way until recently.
Since around 1982 to 2002 both Edmonton and Calgary have been subsidizing land service costs for developers. This has finally coming to an end. Some may say land is cheap, it may be, but the cost to put the services and infrastructuer in place is not. Toronto or Vancouver never subsidized developers lto the extent that Alberta communities did, that’s one of the reasons why Alberta was so undervalued for so long.
Here is a graph going back to 1975. Ottawa is now almost comparable to Edmonton. Now that’s a shame.
https://docs.google.com/viewer?a=v&pid=explorer&chrome=true&srcid=0BwOeUMTm26zxNTQ1MDkyZWYtNTYyNy00NWMwLWIwYWEtMzhkOThmMGY0MWRj&hl=en&authkey=CMbIvKMC
Comparing Vancouver/Toronto to Edmonton/Calgary isn’t valid.
How many subdivisions are being built in Vancouver right now? The answer is none, same with Toronto. Most pricing we see for these markets is not for the associated Metro area but for the cities themselves. This makes the markets seem very pricey as loving in the city comes with a premium. Many people who work in Toronto live in places like Brantford, Hamilton, Ajax etc. where the average price is closer to 250-300K. Likewise around Vancouver you have markets like Maple Ridge. Both cities, including metro areas, are bigger then Edmonton and Calgary combined (in the case of Toronto more people then Alberta.
Geographically Vancouver is cut off by water and mountains and Toronto is cut off by the Grat lakes. Here in Edmonton we have ieasily developed, inexpensive farm land surrounding us on all sides. Given that land here doesn’t justify as high a premium as land in the other two cities.
Winnipeg would be a more valid comparasion to Edmonton both in terms of population and geography (and while it doesn’t have Oil it doesn boast lower unemployment figures then all 4 cities already mentioned).
actually 22 years of data is more indicative of fair value than the last 3. That graph ends in 2008, prices were about to correct, then emergency rates came in, delaying the correction and making the average price 10% higher leaving the eventual fall even harder, but later.
actually 22 years of data is more indicative of fair value than the last 3.
How can it be a fair value when it’s been subsidized for so long. Do you know those land development subsidizes where paid for by Municipal tax payers, you and me. I guess you don’t mind that your city tax payments go to subsidizing land developers? Well I don’t. Just like the resource market, the Alberta real estate market has finally return to it’s true value.
PS: If the city hadn’t subsidizing the land developers for so long then maybe they could afford to clear the streets.
What about the federal gov’t subsidizing housing with emergency interest rates? Renovation tax incentives?
Inflation will not take care of this.
How is lowering interest rate a subsidy? It actually increases the amount of money that people have because debt servicing costs are lowered.
The Renovation tax credit was a means to get people to spend, and it did. Ever heard of the term “Velocity of Money”. The renovation tax credit acted as the fuel to accelerate said velocity it worked, if only for a short period. That’s what the Governments job is during times like those.
Still say this is the best paragraph ever written about real estate.
2. Public policy has the greatest impact on prices in Calgary. When the National Energy Program (NEP) was announced in 1981 average house prices in Calgary residential market collapsed. They then languished for decades, so long in fact that some researchers even now believe those depressed prices should continue to be the norm for Calgary. Calgary prices did not start to recover from the NEP until 1997 and by 2006 they still had not fully recovered.
http://www.calgary.ca/docgallery/bu/finance/economics/policy_analysis/briefing_note_6_calgary_real_estate.pdf
Another good example of the velocity of money would be japan over the last 20 years.
Good one Sheldon. But it should be “Or lack thereof”..
Excellent chart Makoto. So in the past 35 years houses have never been so unaffordable. Incomes will either rise or house prices are going to fall which one will it be? hmmm Waiting for someone to try and sugarcoat this one.
Here is the scale:
5.1 and over – severely unaffordable
4.1-5.0 – seriously unaffordable
3.1-4.0 – moderately unaffordable
3.0 or less – affordable
Looking on the chart, price went over 3.0 around 2004.
M
Great chart Makoto Ohki, well done!
Brad, I don’t know about you, but I’m due for a 50,000 dollar raise…Guess that means everything will suddenly, finally become affordable for me…ALRIGHT!’
OB
This blogs a waste of time, Edmontonians want prices to go down, and they will. But the writer of the blog wants prices to go up. They wont. So who’s the blog writer fighting here? Edmontonians who he’s trying to sell to?
I don’t think the roughly 70% of Edmontonians that are homeowners want prices to go down.
it’s not what the 70% want.. it’s what the other 15-20% want.. to pay or not the price….10-15% will never buy for different reasons. on top of that the 15-20% segment might want but it doesn’t mean they can buy… too many variables but for sure not in the owners favor now…
Then why post here?
I don’t think this is to benefit listing clients…while Makatos graphs show that in generally incomes have not risen in proportion to house prices I am sure if I were in a profession where my pay was based on a % of price I’d want to see house prices soar.
Though that logic backfires when people stop buying.
Once the foreclosure rate/delinquency rate peaks, we will be near the lows. Even though Sheldon isn’t an economist, I’m still gonna use S&S to get my house.
Yes, I agree that will be indicative of nearing the bottom. Personally I’m less interested in trying to predict the bottom (it’s a fun exercise, but impossible) than I am with simply making an optimal buy vs lease decision.
For the foreseeable future continuing to rent is a no-brainer, but I agree with you S&S would be among the good agents to use when the time comes. Realtors are marketers, so when you need one you should seek the best marketing skills.
I’m not sure what prompts S&S, and many realtors, to occasionally stray from their chosen profession and pretend to be something they’re not. Maybe they are just reacting to what the market for clients demands, similar to what you see with “financial advisors.” At the end of the day I suppose the onus is on the customer to filter out the noise and seek value.
one question for AR… do you think 70% of the people in Edmonton paid off their mortgages or HELOCs? you have a wrong view about ownership…
Absolutely correct with that statement. I OWN my home, mortgage free. How many people are renting from the bank with their 0/40s of 5/35s, soon to be 5/30s. Call it “owning” if you want.
Congrats on being mortgage free. Most people like you had a mortgage at some point.
Thanks. It took a lot of hard saving for a number of years to put 25% down. Unlike the “entitlement society” today that takes “sub-prime” CMHC insured mortgages to keep up with the Joneses.
I guess it depends on your definition of sub prime
In response to Sheldon’s “I guess it depends on your definition of sub prime.”
There’s no hard and fast definition, but banks hedge their risk by getting 20% upfront, as well as a few rule of thumb calculations to see if the buyer can afford the house they want. Any less than that and banks know that it’s not profitable to make that mortgage – it’s not worth the risk.
So in come CMHC, insuring that if a mortgage goes bad, the bank will be made whole. With CMHC there as the bank’s safety net, all the risk was removed for banks, and that laid the foundation for loans like the infamous 0% down 40 year amortization… with cash back!
Without the CMHC and rules to relax regulations, there’s no way prices could have rocketed as they did.
M.
Sub Prime to me are extremely risky loans. There a plenty of people who don’t have 25% down that make very good monthly incomes that I wouldn’t put into the sub prime category. Its estimated that Canada’s subprime market is as low as 4%. In addition even before changes to financial regulations in Canada our lending criteria was superior to that in the States.
If you look at the overall percentage of properties that sold Mid 2006 to Oct 2008 the percentage of properties is far lower. Plus the amount of strategic defaulting by borrowers is significantly lower here. Its a stretch for me to see that every mortgage with less than 20% down is subprime. Just my thoughts though.
Makoto is exactly right. Now add the fact that rates could be 2% higher in 5 years – you go from 3.5 to 5.5, and you wouldn’t have qualified for the house you are in at 5.5. Combine this with the fact that your house may not be worth as much when rates rise. This is why the sophisticated buyer will buy when interest rates are high, not low. Now in 5 years, the 0-5% downers will be in negative equity, and may walk away with a foreclosure, bringing more houses on the market, and being unable to buy a house until long after the bankruptcy. (forcing these buyers out of the market) Now prices slip lower, causing the same affect to the 5-10% downers and so on…..
Welcome to the age of de-leveraging/deflation. Anything leveraged like real estate will be forced down.
sure is fun on the way up though.
Don’t confuse real economics with “doomer talk”
Pumpers and bulls sound exactly the same as US circa 2005.
I don’t disagree with the de leveraging aspects especially in the States but don’t confuse assumptions for, forgone conclusions.
Sheldon, your understanding of so-called “subprime” loans is very poor. You’re a good realtor; I suggest you stick to being one.
I’m willing to listen to your perspective. If you go by the strict definition of it Canada has virtually no sub prime. If you go by a loose definition that refers to risky lending practises to low quality borrowers, we don’t have much of that either and the quality of has gone way up over the last two years. Just my two cents.
Sheldon:
http://www.youtube.com/watch?v=fEkWH8DB7b0
At least he can put a nail in his master bedroom – unlike you renter who has to call the owner and ask if he can hang his kids picture on a wall…If 70% people dont want to sell their house – the renters who want to own will have to buy a brand new house caz the people in those houses wont move until they get a better deal unless they are stuck financially….
are you sure everybody is in a position to not move/sell? wait for higher interest rates… events happens also in some families… there are way more things to think when you make this statement….
bubu, who can ever be sure? who knows, there may be earthquack tomorrow and everyone dies….Or who knows interest rates go so high that noone can afford? But I guess the most important thing is probability of such events occuring. Do you think interest rates are going to be over 6% anytime soon? – Do you think there will be a major event (i.e. earthquack) which may cause people to die? – its possible but I doubt??
yes, I think the interest rates will go over 6% in the next 5 years. in 5 years you pay less than 10% of your mortgages.. do your calculations…
btw, do you think the owners in US wanted to see their real estate going down?
Sir, What language are you speaking?
talking to Al
Actually, the selling prices in the US declined many months before the subprimers got stuck. It was because rates had been held so low after 9/11. Demand had been pulled forward because of the ‘get in now before you’re priced out forever’ mentality. Eventually there was nobody to sell to. the would be buyers of tomorrow bought yesterday as their rates would be low for 30 or 40 years. That’s why I’m making such a big deal of our term financing. At most, people will only get these ultra low rates for 5 years. Regardless, a rise in interest rates isn’t necessary to cause a long term crash. Demand has been pulled forward to record home ownership of 70%. Who are you going to sell it to now? That is where the downward pressure is coming from.
Demand had been pulled forward because of the ‘get in now before you’re priced out forever’ mentality
What? Demand being pulled forward had nothing to do with it. Giving money to any Tom, Dick or Jane with a pulse had everything to do with it. Not only that but Tom, Dick and Jane didn’t need to prove income or even credit worthiness. As an example, my brother bought a $650,000 4200 sq/ft abode with pool and white picket fence in 2005. The American dream. His lender didn’t even ask if he had a job, just gave him the money. He was quite surprised being from Canada and all. For the record he owns a Medical Pharmaceutical company in Missouri which has sales of around 15 million and even during the recession has grown at %50 a year. so he can more than afford his current American dream abode, he is in no way a subprime borrower.
Anyway, the US housing meltdown was caused by “GREED”, nothing more. Bond rating agencies, who were suppose to be independent, were being paid by banks that need buyers for their mortgage backed securities(MBS), (ie. derivatives). Even though these MBS contained what amounts to crap, they were rated as triple A. Everyone was happy, they were making money, but like any ponzi scheme, sooner or later it has to end. And it did. That’s what caused the US housing meltdown, not demand being pulled forward.
Hi, anyone has the data about..
“real estate price vs. year for specific neighborhood?”
i am curious about the neighborhood development around existing and future LRT stations.
Scooby. Are you and shaggy REIN members?
No. I thing Scooby’s shagging REIN members.
DABULL
You need to read more. Stop looking at just one sentence.
You use the term “velocity of money” like you know what it means, yet you can’t understand how an unnaturally low interest rate is a subsidy for homeowners.
You can spell stimulus, yet you are blind to the long term effects. (pushing on a string)
You pull out a chart from the city of Calgary, and treat it like gospel. Do you really think prices are going to stay high, or go higher in Calgary?
You have concluded that it was the NEP that killed real estate for 20 years.
You complain that I haven’t clogged up the blog with a full analysis of a real economist, and write a knee-jerk reactive phrase without even googling those names.
The truth is everywhere, and I gave it to you on a silver platter, but you rely on the catch phrases and one sided opinions of realtors and bankers to “educate” yourself.
On top of that, you come back and give every one of your comments 3 thumbs up, and 3 thumbs down for me.
***comment was edited***
Hit a nerve, did we……;-)
Does it look like who bought a condo in January 2010 is already under $20k? I’m wondering what was the “professional” advice those “owners” got last January from their realtor… Buy now or you will be priced out, right?
Prices will rebound.
yes Charlie, they will.. in 15 or 20 years for sure… Nobody will say they will not in this period. In the mean time expect another 20k down in January 2012.
I hope you slept well last night.. your message posted at 1:37am was a nice dream:)…
Good Charting, and THANKS for showing undervalued real estate in Edmonton.