Preliminary numbers show it wasn't just the weather that was chilly this January in Edmonton; the Edmonton real estate market got off to a cool start this year. Sales of both condos and single family homes in Edmonton were below average:
January 2011 Edmonton Home Sales
January 2011 Edmonton Condo Sales
The average single family home sale price rose slightly from $358k in December to $361,229 and was almost equal to last January's $362k. The average condo sale price was $216,822 in January, down from $220k in December and $237k last January:
January 2011 Edmonton Average Price
Price per square foot followed a similar trend - single family homes rose from $246 in December to $248 in January while condos fell from $218 to $215/square foot:
January 2011 Edmonton Price Per Square foot
The list to sale price ratio rose for both condos and single family homes, showing that sellers got closer to their asking price in January than the did since last July:
January 2011 Edmonton Sale Ratio
As always we will post our final report on the real estate market for January 2011 when the REALTORS® Association of Edmonton releases the final numbers (probably tomorrow).
“The average single family home sale price rose slightly from $358k in December to $361,229 and was almost equal to last January’s $322k.”
Spelling mistake? Last january’s was $322k’s?
no, reading mistake
No sorry, I did make a typo and then corrected it. Thanks for pointing it out Tom.
Too much snow preventing people from house shopping.
Kudos for telling it like it is.
Maybe a few renters could not start their cars in -35 weather to make offers because they have no garages to protect vehicles. That would explain the lower sales… (sarcasm).
Looking at the graphs, sales and prices appear normal for the past few Januarys, exceptions being condo sales now. However a realtor that I personally know told me not to buy a condo now.
Why not? They are very cheap now.
In Calgary the prices getting stronger already.
I should offer an explanation: most newer or under construction condo buildings – especially the apartment types are typically 4 or 5 storey high, and are made of wood frame. No concrete or steel. Or very little… She can see these buildings’ frames that are a bit misaligned on their overall lengths!
No thank you.
http://www.edmontonjournal.com/business/Edmonton+area+average+home+prices+fell+December/4064407/story.html
It’s interesting reading the comments. Apparently, the posters (most likely home owners) are pretty pissed off that there property assessments are up, some by as much as 30%, meaning of course, they will pay more taxes, but they know their houses are not worth that much. As one poster said,
“Can the city buy my house then????”
They assess property value by postal code. No one goes to the house, walks through it, checks the renovations. It’s actually a giant scheme. Now the banks on the other hand will start doing real assessments, just like they are tightening their lax lending standards. Be prepared if you are thinking about selling.
This is the new reality that people face, more taxes, lower prices, and less artificial wealth. Doesn’t matter what a piece of paper says. No banker,real estate agent, nor a seller, has control over what is coming. Only buyers. And apparently, they are not putting out.
This is going to get ugly, despite how “affordable” people think Edmonton is.
I certainly will not buy a house this year, because I know they will be cheaper in the next couple years. Finally, new would be buyers have clued in. The ones that did drank the “I’m in huge debt for 35/40 years ” are the first to fall. How many are going to be confused and angry at an industry that told them to borrow above the threshold that they could pay back?
I personally know maybe 5-6 close friends that are now in a pickle. And these are only the ones that have mentioned it too me.
I love the comments that have “I PERSONALLY KNOW” in them. Its kind of like saying I have no real first hand experience and I believe I’m right so I’ll puff up my arguement by throwing in that I personally know some people, which I’m sure most people do. However I can say that not everyone who took out a 35 or 40 year mortgage will have it for that long and did so only to have a lower payment so they could add more to the principal and not all who did are in huge debt. This is not my friends experience but mine but it in and of itself is limited and not to be confused with the experience of the whole market.
Your right, I have no PERSONAL experience in a taking out a 35/40 year mortgage. But that’s not too say I was never pressured by both immediate family and friends. I didn’t.
Not saying EVERYONE that took out 35/40 mortgages are going to fall.
But let’s be serious..how many 25-35 year old couples are really in the mindset to pay of a mortgage FASTER than amort period ? If they did, then wouldn’t they have taken out a a shorter amort ? Seems pretty logical to me. But they didn’t. There are a few possible reasons:
1. They cannot afford the mortgage payments otherwise (they bought too much house, prices are just too high, etc..)
2. They assumed an asset will rise in value indefinitely, so why bother putting more effort into paying of the loan when equity will take care of the problem when the time comes.
3. They could be betting that they without a doubt will have more income in the future .In essence are betting on a better economy, better jobs, and that everything is gonna be hunky dory in the future. Responsible people take a mortgage that you can pay off with 1 salary, in case of emergency. From what I can see, life is getting more difficult with every generation. I think that is a fair assessment.
Edmonton Expat:
“The old 35/40 year mortgages….they are going to lose money? LOL! ”
Nice comment….. calculate the difference in interest paid between a 35 year mortgage and a 25 year mortgage. It’s nearly double, and that’s at current rates. Now that’s intelligence for you. If you think that it’s smart,then by all means, knock yourself out. You’ve only got a 2 more months, because the people that actually run the country have decided that it’s not so smart anymore. And perhaps, just maybe….they might be taking this seriously because it is, and maybe they know the scope of the problem. And if you’re over 40 years old and took out a 35/40, well, I’m sure you thought it would be a good idea at the time.
And assuming I work at 7/11. That’s classy. I’ll just say I’m doing very well, as is my wife. I’ve already previously stated what my strategy is. I’m not going to post it again.
Let’s just say I have some exposure to the real life problems that people have with money, and I’ll leave it at that.
And yes, assessment are for tax purposes. I think I stated that already. It means someone (in this case a machine) is telling you how much your house is worth. Pay me this much money because of it. It doesn’t matter what it is really worth. They could raise your property taxes every single year because of it. In fact, I think they will raise property taxes 9% a year, whether real prices go down or not. And that’s real money going out the door, whether they shovel the snow , build a stadium, or public servants need a raise.
Itchy, I only post on this blog. That’s it. Edmonton is where I live. Everyone sees a national problem and Edmonton is not immune. Perhaps I keep posting because I’m tired of hearing professionals saying….it’s a balance market…prices will soften in the first quarter..but will rise 6% this year. I’m tired of every national newspaper posting misleading and conflicting information, based on whoever pays the most in advertising. I’m tired of CREA blowing sunshine up everyone’s *ss about how strengthening mortgage rules are is NEGATIVE and not a good thing.
I’m not attacking anyone on this board. Despite been attacked. Sheldon saying..”good luck on amateur night”..or whatnot..7/11 job..good one there. Is there something wrong with someone working at 7/11 anyhow??
I’m not going to stoop down. Stay classy.
I try respect other peoples comments. I see risk and danger, do you really have an issue if I express it on this blog? I’m obviously not changing peoples opinion on real estate here, so who cares?? Really? Do you Sheldon? You are not losing sales because of my comments. Does anyone else? If it is bothering people than I simply won’t comment. Just say the word (whoever runs this site).
Until then, WaitLonger!
you must have me confused with someone else. I have never said anything about 7/11 but I get where you are coming from. Why do you ask if I care…I do care that people have a place to talk real estate and challenge my thoughts and everyone elses. I’ve let you comment regularly eventhough you impune my intergrity and that of my profession and yet you say you “stay classy”. I appreciate your comments. I definitely don’t always agree but I have learned a thing or two from you so as far as I am concerned if I say something to you it is that was meant in sarcasm I can understand how you’d would interpret it one way while I interpret as “I’m being witty”.
A hat tip to you WaitLonger.
Doesn’t really matter what the 70% of the population owners say, they are in b*** deep and they have 0 control over what happens in the market. If they don’t sell, they have no influence. If they do sell, they add to inventory and make us right, if they are trapped, well, they’ve already lost. You and I control the market for 2011 and possibly the next 2 decades.
What do they lose, and we win? Well, the argument of course, and 30 years of affordable living, and more travelling around this wonderful, yet extremely divided world. Reason is my compass, let the weak followers fail.
“And the renters shall inherit the earth”
– Garth Turner’s quote
that’s the awesomest quote ever!!!
As for Garth’s quote. Not if renting is their only plan. I think you are dumbing down what he is really try to say. However there is nothing wrong with renting.
If we all rent. Who are the owners?
Government? Co-ops?
That spells communism. Are posters here communists?
Track record of famous communists: Kim Jong Il, Pol Pot, Joseph Stalin. Common denominator? Murderers.
Renters shall inherit the earth?????
Your call.
Sheldon, why most of the people disagree with your comments?
Sheldon, why most of the people disagree with your comments?
Good question BuBu. The ratings system on this blog really doesn’t mean anything. The bears will never give a thumbs up to any comment that is even slightly positive on Real estate. Plus there are more than a few who post here that seem to have a real hatred towards REALTORS®. Why? I don’t really know, but it seems that some just like to blame others for either their lives or their mistakes. Who knows? it’s actually strange and kinda scary.
PS: Watch how many thumbs down this comment gets. LOL.
PS: Watch how many thumbs down this comment gets. LOL.,/i>
See BuBu, not one thumbs down, all thumbs up and even by the bears….LOL Reverse Psychology works every time.
Dear WaitLonger:
1. The old 35/40 mortgages… they gonna lose money? LOL! Rent for that long of a period & tell me what’s YOUR equity.
2. Edmonton is “affordable”. I suspect that you work at a 7/11?
3. Property assessments are for taxes purposes only, not a resale or listing price.
4. If you know that many folks “in a pickle” mean they are stupid for not being able to budget long term. You are stupid by association.
Growing tired of you expat. You call a bear stupid and Sheldon let’s your comment stay on. That’s right Sheldon, why do you let the bulls get away with that tone, but you hold the bears to this impeccable standard?
Expat, you are completely insecure with your purchase, probably tapped to the max and you want some reassurance that it was the right thing to do. You just keep waiting, and we’ll see you next week.
Professor,
We really try to be fair. I have deleted many a bulls comments. If we miss the odd one from both sides, please forgive us.
Dear Professor,
I have posting here for a few years now. I sold my home in Edmonton back in 2008 and make a whack load of dineros. Unfortunately, I was moved by my company in Ottawa.
I visit Edmonton often, being there on vacation 3 times since last summer: I even was in attendance for the Oilers Skills Competition and I took the LRT!
Insecure with my purchase???????????????????????
I just pray to God every night that I can return to my hometown before 2012!
P.S. I intend to buy in Windermere.
Man I still can’t believe there are people out there that don’t understand how market value tax assessments are calculated. So for the mathematically challenged out there, here goes.
The city, using previous years comparable properties sold, calculate a fair market value for your property. Thus the assessed value on your tax notice. Then then calculate a mill rate for your portion of municipal tax they need. This mill rate changes every year depending on new assessment values, city council yearly property tax hikes, neighborhood improvements, etc etc. If, lets say, there was no neighborhood improvements or the city council didn’t vote in a tax increase (like that would ever happen). A $300,000 in 2009 with a 0.0110 mill rate would have a tax bill of $3,300. Now it’s one year later, 2010. The property is now worth $350.000. The mill rate would not be 0.0110, but be lowered to 0.0094 to make the tax bill $3,330. The same as 2009. But alas the city always needs more money so you tax bill goes up every year due to municipal tax hikes (usually between 5 and 10%).
The only other reason a property owner would pay more tax is if their neighborhood went through some major improvements, ie. $50 x $1,000,000 houses were built in their neighborhood of $300,000 properties. Those new 50 properties would increase the overall assessed value of the existing properties because the city uses fair market value.
I hope you are a very young man, because you will have to wait a very long time to see prices go deep down. If ever.
Maybe in Vancouver where they are approaching the $1,000,000 on average.(and stil growing)
Here in Edmonton you can buy a nice house between $288,000 – $345,000 in nice areas.
Remember, when we had low RE prices we earned low wages, like $10-12 an hour, but now the earnings are much higher.
Ideally, it would be nice to make a $100,000 a year and a house would cost $120-130,000 just like before.
I dont think it will ever happen.
But hearing every day that companies earn billions of profits, it’s a good idea to ask for some wage raise.
I would disagree that one can buy a nice house in a nice neighbourhood for 288-350K. My husband and I have been looking, but anything below 400 is pretty much a disgusting shack. Add the “nice neighbourhood” factor, and then we’re looking at 500K. And we are looking for small houses, 1000-1500sq. ft.
Everyone’s definition of nice is different. We have enough trouble trying to define “affordability” here so can you imagine people agreeing on what’s nice. Thanks for the comment btw.
Agreed AR. The wife and I have been keep our eyes peeled for something small, older but well kept. What have we been seeing for 260-280? Shoeboxes that haven’t been reno’d for 30 years and likely have walls filled with rat feces. For around 280-300K we can get a nicer new townhome out in the southend nose bleeds. The problem with this you ask? Built using popsicle sticks and white glue, lots of nice highly flammable plastic siding. Remember that fire in MacEwan a couple of years back? Don’t even talk to me about condos right now…The one we are in right now was built in 2006 and pieces are falling off the building.
Me picky? Maybe, but I’m not paying “The Bay” prices for “Walmart” quality. Wake me up when prices drop around 20 percent…
If they drop that much…If they don’t do we let you slumber?
Jeez Waitlonger…..don’t you get sick of playing the same tune? We get it. You’re not buying a house. I’ve been hearing from you real estate bears “this is going to get ugly” since 06/07. You just go from blog to blog saying the same things….doom to come, I have so many friends who are in trouble, and the real estate complex forced everybody into making bad decisions. Can you tell me why 5 or 6 of your friends are in trouble. Are they being forced to sell because they’re moving? It must take you an hour to go to bed at night……have to check all those closets and under your bed for real estate agents because they’re out to get us you know. Seems like all the bears friends bought in 07/08 because they’re all under water! I’de have more interest in what you’re saying if you’de just stop saying “it’s going to get ugly” and just tell me when.
Smart people weigh the pros and cons when making the decision to buy a house. They don’t scour newspapers for articles that only support their opinion. You’re selling yourself short if you do that. I’m neither a bear nor a bull on residential real estate. I think a lot of the forecasters have it right with fairly flat prices with mediocre sales. The reason I believe this is because the pros and cons are relatively balanced right now.
Pro side, good affordability for now, return to rapid expansion of oil sands, job growth, increasing drilling rig usage, and return to positive inflows of people to Alberta.
Con side, interest rates will start to rise over the next year reducing affordability, An economy that usually runs on 3 legs (traditional oil drilling, oil sands, and nat gas drilling) is running on 2 with nat gas drilling very weak and likely to be that way for some years.
Sheldon, any advice on what to do if we bought an average house 6 months ago for 385,000 now worth 350,000 and need to move to keep my job and we only have 30,000 in cash lying around?
Do I still have to pay the 13,000 in realtor fees? Can I get my CMHC premium of $10,000 back? Is there a penalty on my 5yr term fixed mortgage? Are there more legal fees?
Was i supposed to know all this before I bought?
Was it someones job to tell me, or is this the due diligence on my part that I missed?
Am I stupid?
Could you tally up what I would need in cash to walk away cleanly if I bought for 385,000 and now my house is 350,000?
got 5% down on a 35 yr.
Rent it out.
Make him an offer:)
Realtor Love,
Not only will you not get your CMHC fees back, and have to pay realtor fees, but you will have to pay legal fees and other costs too.
When you signed on with a realtor, you signed on with a sales person. Their job is to sell you houses or help you buy one. If you were a buyer, they would try to get you the best market price (if they’re good). That’s where the due dilligence ends. If you chose to buy a house in a declining market noone is going to be held accountable but yourself. And of course the canadian taxpayer who for your $10,000 fee will likely be on the hook for many tens of thousands more when you default in a year or two after renting it out in desperation (only to see prices fall).
Be a man, take responsibility for your own decisions, sell the home for the loss and work to pay off your debt.
Andy
Dear RealtorLove…..
You bought a house 6 months ago and now you have to sell?
Really?
“Need to move to keep my job”.
Seriously?
Don’t move then. Get another job.
Who told you your house was now worth 10% less?
I don’t believe for a second that your story is true.
Go on a car sales website and tell them that you need to sell your recently purchased, 6 month old car: wait & see what they tell you, dude.
How much cash does Love need to walk away and still be a man?
Let’s see:
385,000 purchase price
-19,250 (5% down)
365,750 mortgage amount before cmhc
+10,058 cmhc premium at 2.75%
+ 1,422 cmhc premium for extra 10 years of amort.
- 1,000 at the most in principle payments
376,230 subtotal
3,752 3 month interest penalty assuming interest rate of 4%
379,982 total mortgage obligation This is what you need.
This is what you think you have:
350,000 what you think your house is worth- maybe you’ll get it.
- 15,225 Realtor fees of 7% and 3% after first 100k + GST
- 1,000 legal fees with title insurance
333,775 What you hope you have
46,207 what you need to close
30,000 cash you have
16,207 This is your shortfall.
Maybe Gord M from FF can check these numbers.
If you have good credit, you should talk to your bank. You may be able to get an unsecured loan to help you get out. Gord M probably won’t be able to help you with this.
If you don’t have the 30,000 and/or a perfect credit rating, then dude – you’re screwed.
Best case scenario, you already lost 80,000 before mortgage payments. You’re still a man, but a broke man. I pity those who don’t have 30k and perfect credit but there can’t be anyone out there like that.
or can there……
So is now a good time to buy or sell?
Sure ain’t cheap being a man.
Waitlonger is not off the mark, he/she is bang on. 70% of Canadians now own a home and as any first year student of economics knows, a market needs both sellers and buyers.
Where will the sellers come from? That’s easy.
-Down sizing boomers looking to cash in.
-Those who will be squeezed over the next 5 years when they’re forced to renew their mortgages at higher rates.
-Speculators and flippers unable to carry their debt loads.
And plenty more if our fragile economic recovery hiccups.
Of course there are always houses on the market, but where are the buyers going to come from in a declining market? Sure there will be some, but when there aren’t enough to soak up the available supply prices will fall.
And thanks to Flaherty finally pulling his head outta his behind with those stupid 35/40 no money down sub prime loans he allowed but is finally discontinuing…those buyers are going to have less money to spend.
Sheldo and Sara, I beseech you both to start moderating the posts. All I read are angry nerds, either saying “you’re a loser if you don’t have a house” or “you’re a loser if you have a house”, it gets really old.
Thanks for commenting. Considering the fact that a number of blogs suggest we over moderate I’ll take this as a compliment. As far as we are concerned and people abide by our simple code and maintain civility then we let the comments stand. You’ll notice in abit some of the comments without that civility will be deleted. Unfortunately we work for a living and unlike some of our posters don’t have the capicity to answer every single comment or react to it immediately.
As realtorlove has just pointed out the danger of having so little down on a highly illiquid asset. The question is not the loss 30k+, it’s wether he can sell in this market. 2-6 months? If lucky.
Rent. Find a new job. Or bankruptcy. The bank will not let you sell until you pay). At least the bank cannot come after you for the balance after (I think… Can someone confirm?)
I feel for you. I really do.
There are other options. I’d recommend anyone in that situation to talk to their REALTOR on their specific circumstances but your conventional options are correct. Why would someone buy though if they are going to sell in 2- 6 months? As far as the bank coming after you is concerned that depends on the jurisdiction you got the mortgage and whether its conventional or unconventional. The best strategy is to dialogue with the lender and talk to a lawyer.
correct, if you include the foreclosure in a bankruptcy you may own again within a few years. But you will never own a house again unless you either
1. pay
2. don’t pay AND declare bankruptcy.
the law of property act of alberta limit’s liability of 10,000 on a foreclusure BUT only if you didn’t use CMHC. so Love won’t qualify.
Good luck Love.
Sheldon, 7/11 comment was not you. Neither was the stupid by association. That was expat.
I’m talking about past comments.
Anyhow, forget about it. I’m probably just uber sensitive.
No problem
The blogger calling him self ex-pat is a troll. i’ve read similar comments on all the blogs that sound suspiciously common to the ones he leaves here, only with diffrenet names. A Calgary Realtor comes to mind.
Conspiracies everywhere, hey susan….
Susan is Ian and a host of other names. One thing for sure that doesn’t change is his/her appetite for spewing fear.
Susan, or should I say Ian you should not throw stones. Over time you have assumed multiple identities on here, even impersonating a few. We’ve blocked you at times but we aren’t ones to hold a grudge.
I hope you aren’t talking about me, I’m Ian and have been reading the blog for years, haven’t posted in months, maybe almost a year cause I just got tired of the sniping and nastiness. By the by I think this is one ot the best blogs out there info-wise and I’m not a bear, I’m not bullish right now, expecting a sideways market for a while into the near future and an upward trend probably 2 years out, so I personally think if it’s in the cards getting a good price on a house now will work out long term (I don’t recommend 6 mos holds at anytime in RE) . I also own several rental properties in the Edmonton area only underwater on one and positive CV on the others. So please don’t accuse me of fear-mongering, I have no expectations of ridiculously falling prices in alberta given it’s positive in-migration and with 100 dollar barrels of oil, and turmoil in the middle east I expect the oil sands to start churning soon especially with Total SA having their project approved. I figured Susan was Squidly so I’m mystified why anyone would think I was susan given I’ve always thought RE was a good thing to get into up, down or sideway since it’s about the only investment I know of that you can sell for less than you paid for and still make money on long term.
Thanks for commenting again! No we weren’t referring to you, there is another “Ian” Sheldon was talking about.
that is correct.
Wow, I think this blog will be getting more comments than Garth Turner’s soon. This is a great forum, and I appreciate how the comments are left as they are whenever possible. Seriously though people, Sheldon and Sara should not have to worry about moderating their blog all day while they are trying to go about their business. Let’s try to moderate ourselves before posting.
Thanks Spence. Honestly, I needed that
I believe you’ll find the comments are a sign of the times, when people get scared flight or fight kicks in, so the nasty comments are a form of fight. Maybe the comments should be allowed and we should consider them a form of therapy.
For such a frigid month, this thread sure heated up in a hurry…
January hard number from edmontonhousingbust blog.
Sales* = 735
Since two years ago = +0.7% (+5)
Since one year ago = -16.9% (-149)
Since last month = -6.3% (-49)
Active Listings = 5,633
Since two years ago = -14.3% (-940)
Since one year ago = +15.8% (+769)
Since last month = -1.5% (-88)
Single Family Homes Median* = $349,900
Since peak (May ’07) = -12.5% (-$50,100)
Since one year ago = -1.7% (-$6,100)
Since six months ago = -6.3% (-$10,100)
Since last month = +4.0% (+$13,400)
Condo Median* = $214,000
Since peak (July ’07) = -19.2% (-$51,000)
Since one year ago = -3.6% (-$8,000)
Since six months ago = -7.0% (-$16,000)
Since last month = -2.7% (-$6000)
Residential Median* = $307,000
Since peak (July ’07) = -10.6% (-$36,500)
Since one year ago = +0.7% (+$2,000)
Since six months ago = -1.9% (-$6,000)
Since last month = +2.3% (+$7,000)
Single Family Homes Average* = $356,276
Since peak (May ’07) = -16.1% (-$68,124)
Since one year ago = -3.1% (-$11,471)
Since six months ago = -6.0% (-$22,703)
Since last month = +0.3% (+$1,005)
Condo Average* = $220,994
Since peak (July ’07) = -19.5% (-$53,385)
Since one year ago = -7.5% (-$18,012)
Since six months ago = -8.1% (-$19,337)
Since last month = -1.1% (-$2,460)
Residential Average* = $310,766
Since peak (July ’07) = -12.7% (-$45,373)
Since one year ago = -1.4% (-$4,511)
Since six months ago = -5.8% (-$18,968)
Since last month = +0.7% (+$2,269)
* Preliminary data, subject to revision
So in summary, from the “housing bust” blog, we’re 12% down from the peak. Not 20%, 30%, 40% or 50%…. 12%. That’s some bust*. *sarcasm.
No offence….but tell that to Carolyn Pratt, who predicted Residential Average to be around $450,000 by end of 2007.
By her standards we are down around 32 % and now thats a bust …no pun intended
That’s a strawman argument. The point is regardless of what the Dim Sum Queens and the frothing-at-the-mouth specuvestors said, both the bull cheerleaders and bear doomsayers were wrong about the forecast short and mid-term. The correction thus far (3.5 yrs post peak) is 12% off peak and most of the correction happened immediately thereafter. There is no evidence of slow and steady price erosion. There were as many calling a bubble as there were predicting run down shacks would be worth over 1/2 a million thanks to $200 oil from “now on”. (Must be newcomers to Alberta who have not seen an oil boom before). Few people called a sideways run – it was either boom or bust which is the mentality here out west. People talk “about” stability and sustainable growth but nobody knows what that is, how to get it, or if they even want it.
Cheers,
E-town
According to Susan even 1% would be a bust: she needs to be legitimized as a renter…
Condo’s are down 20% from peak and its in a slow melt….. Don’t worry the bust will show eventually….again no pun intended
http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/rate-hikes-could-spark-house-price-collapse-economist-warns/article1893062/
More of the same stuff.
Some numbers to think about.
Historical Etown Prices from 1962-present:
http://tinyurl.com/62s987c
(source: http://www.chrisdavies.ca)
Edmonton Housing Prices
1970…..$21,446
1980…..$84,367
1990…$101,014
2000…$124,203
2010…$320,392
1970-1980: 300% increase, 15% YOY Avg.
1980-1990: 20% increase, 2% YOY Avg.
1990-2000: 20% increase, 2% YOY Avg.
2000-2010: 158% increase, 10% YOY Avg.
Now look at historical oil price data and relate to above
http://tinyurl.com/au6qc
Fact: Prices went up 4x from 70-80. Look at oil prices. There was a boom.
Fact: Until recently, the crash in 1980 was considered the worst financial crisis for homeowners since the dirty thirties. But despite this fact, prices only went down 14% between 80 and 85, and still managed an average 2% YOY growth over the 10 year perdiod from 80 to 90. Still, many lost homes in 1980 due to being completely under water due to the oil bust.
Fact: Prices from 1980 to 1990 had a average 2% YOY growth from 90 to 2000, which is now a 2% YOY for twenty straight years.
Fact: In 2000, many realtors predicted that Etown was undervalued and said so
Fact: Realtors and those who trusted them bought houses like pancakes in 2000-2003.
Fact: Others balked at housing prices from 2000-2007 when they went from $125k to over $300k… they predicted a crash was eminent. The “Alberta. Prices in these 7 years saw a 15% YOY jump – a number not seen since the last oil boom in the 70′s. This crash has yet to happen.
Fact: Many speculators predicted that the average sell price for a 3 bedroom Millwoods house in mediocre condition would go from $350k to $500k because we have oil, oil was supposed to go to $200/barrel and of course, China needs oil. This did not happen yet either.
Fact: look at oil prices again. $140/barrel peak and an economic crisis after the price dropped like a rock due to over-speculation. Many analysts blame the spike in oil prices followed by the over-correction to be the catalyst for the recession we’re still recovering from now.
So, looking at the facts, I predict that *IF* the economic recovery continues at a slow and steady pace and *IF* OPEC keeps a handle on oil prices by controlling production housing prices will have a shoddy YOY growth for the next 10 or even 15 to 20 years.
But, as a former bear, I can tell you that *IF* this happens and there is only a 2% YOY avg growth, I will be within 5 or 10 years of owning my home. Had I rented, I would have nothing. I bought in late summer of 2009 just after prices dropped a bit. They started going back up in the fall of 2009.
Why did I buy?
a) The information above played a part
b) The fact I had good credit and a good down payment.
c) Interest rates were low
d) Renting was hardly cheaper than monthly ownership costs.
e) Rents went up 1.5 to almost 2X for some during the boom
f) Rents have not gone down to pre-boom levels and likely won’t
g) I had kids in 2007 and a big 1300 Sq ft 3bdrm apt was now small
h) The nice lady across the hall moved and drug dealers moved in
i) I was really sick of dealing with “rhymes with Shmoardwalk”.
j) IF there was going to be the “perfect storm” and another crash…
I would be screwed either way. At least this way, if there IS no crash I will come out ahead even if housing prices follow historical “post boom trends”.
I am sure there were those who balked at housing prices in 80. There was a crash. People were underwater and literally handing the house keys back to the bank. Calgary office towers that were previously full of life were abandoned. So people probably said “Housing prices quadrupled. They’re going to crash now too”.
Well, they didn’t. They went down 14% from 80 to 85. That’s about a -3% YOY avg. for just five years. Even then, an average price increase of 2% YOY was seen from 80 to 90. From 85 to 90, prices did very well, increasing at a rate of 7.5% YOY Avg. from 85 to 90.
But then the slow crawl at 2% YOY from 1990 to 2000. Something wasn’t right – this was too low considering economic conditions. And when news of oil prices going up was about, and Fort McMurray projects were all on the table, wise realtors saw the next housing price jump coming a mile away.
I was a bear. I missed out. I am kicking myself. I could have bought for $150K but I waited and bought for $350K. Yes, I am betting there won’t be a bust. My company has been busy almost throughout the boom though. There are signs we WILL recover.
Those hoping for an all-out crash so they can feel good about renting, well, I don’t just hope you’re wrong because I bought a house. I hope you’re wrong because of the far greater ramifications of this slow recovery becoming derailed.
I think we should ALL pray this recovery keeps chugging along.
Rent or buy, whatever you decide, I hope you make the right decision for you and your family. So far, I am pretty happy having really nice working class non-criminal neighbors I have something in common with. Win, lose or draw, I finally feel like I am fully living and choosing how I live, with nobody knocking on my door telling me what I can and cannot do. And my kids are not breathing in pot smoke from the suite next door, and my mail is not being stolen. And dirty water from the dishwasher that broke down upstairs is not leaking down onto my dishes and foodstuffs. For me, this has a lot of value too – value that housing price charts don’t necessarily portray.
I guess I can admit that when I was renting, I was always worried and never really that happy. It was convenient, lower cost and “low risk”, but there were sacrifices too. Quite a lot of them when I think about it.
Cheers,
E-town
(Nervous Objectivist & Recovering Real-Estate Bear)
somebody who both 2 years ago and likes the house doesn’t come to write a “book” of justifications on this real estate blog… there 2 situations.. you are a realtor – speculator or you have a problem with your “budget” becasue you bought that house… this is a place for bulls or bears.. you are a home owner who is looking to raise his kids in that home so you should not care about this subject.. but it looks like it’s “hot” for you also… why? we know, you don’t have to justify again.
So you’re saying I am a Bull-in-cognito realtor/specuvestor hey BuBu? And that this forum is only intended for extremist bulls and bears? And that now that I am a ‘homeower’ I should not care about property values, interest rates and the real estate market? And you think I need to justify my decision to myself or someone else? You’re ultimately right – I’m in this for the long haul, and *hopefully* in the long haul I will come out ahead. My kids will have won simply by virtue of living in a better neighbourhood around children that I think are going to be far less of a negative influence than those where I lived before.
I simply wrote, in detail, why I stopped being a bear and made a decision and the premises that I based my decision on. The logic of people buying for the long haul has really not changed as much as my viewpoints on things have.
Say – so why is this subject so hot for *YOU* then? I made my call and placed my bet and bought a house. We know which side of the fence you are on, so where is YOUR money? What’s your real-estate forecast for the next 1/3/5 years? Big bubble going to pop? Just how bullish are you, and – if you don’t mind – just what are you basing that on?
Cheers,
E-town
P.S. I am not much into the “you’re a realtor” vs. “you’re a bitter renter” mud slinging contests these days. So, go ahead and throw mud. It affects me no more than it impresses me.
Ok… your decision.. It took me a 5 year mortgage to buy my first condo.. then another 3 1/2 to save money and buy cash the house. But it was the right price.. it doesn’t mean you have to buy something if you afford to do it. even if I can buy every year a BMW it doesn’t mean I should.. this is just to explain why I don’t agree with your approach. who cares if a mortgage is 10 or 20% of my income.. if the house is not the right price I don’t buy. Would you buy a KIA for $100k just because you pay $300 over 30 years? No.. why? It’s the same as for houses. On top of that if you have an open view ( I mean you lived in other countries, work or also traveled) you will know what is the value of a house in Edmonton. As you can see we live in a global economy and at the end of the day this is what is going to happen… a smaller and smaller difference between west and east wages, prices for properties and so on…
You try again to justify why you are interested on prices and real estate…. that means to me it is very important for you.. let me tell you when I bought my house I didn’t care about what is happening after I did… and this is because I bought at the right price unless you. I’m interested in prices because I want to park some money for the next 10 -15 years not even to speculate.. just to balance my investment because I’m not invested in real estate.. I don’t include my house in my money/budget so don’t count on it. Let me tell you it doesn’t make any sense to invest… and believe me even if I put the money in a savings account where you get almost nothing now, I’ll make more money than to buy a house/condo and rent it. Remember.. I wanted only to preserve my capital not make money in real estate. If it doesn’t make sense for me it should not make sense for the buyer also.
1970…..$21,446
1980…..$84,367
1990…$101,014
2000…$124,203
2010…$320,392
Interesting stats. Can anyone run the same avg. family income stats for those periods to compare housing prices with income levels?
WaitLonger – The chart in the link should do the trick.
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 right. (it doesn’t match the Demographia affordability results exactly because these values use average price and income, not median).
Here is the affordability ranges:
5.1 and over – severely unaffordable
4.1-5.0 – seriously unaffordable
3.1-4.0 – moderately unaffordable
3.0 or less – affordable
M.
Thanks for the effort you put into that chart.
@ Makoto.
Nice chart! But we need to be careful here. Affordability index is a calculation based on quite a few averages. REAL affordability has nothing to DO with averages but each invdividual prospective buyer. These include things like:
a) 1st time or 2nd time buyer?
b) Job stable? Recession proof or boom-bust?
c) Credit worthiness? Fico score?
d) Current level of debt?
e) Can afford ALL housing costs and still maintain “the lifestyle”?
Let’s compare two prospective first time buyers.
Joe has been responsible with credit. He’s a non-drinker and non-smoker and doesn’t gamble much except for the odd “Full house lottery” and Lotto 649 ticket. He goes to the park a lot in the summer and likes cross-country skiing in the winter. He does not make a tonne of money but he has ridden out this recession with no layoff. He’s got some money saved, and has a great lending score. Him and his wife drive older but well-maintained reliable “gas friendly” import vehicles and both are paid for. Aside from some small amount of credit card debt and one payment on some furnishings / home entertainment stuff (the Leons do not pay thing got them one weeked) they have relatively little debt. He’s paying $2000/mo. renting a house (including utilities) for him and his wife and kids and that amount is not breaking his bank because his wife works too and she’s been doing okay through the recession too. He’s wondering why they are still renting and calls Sheldon for an appointment…
Joe thinks houses are affordable because he can afford one.
Bob is renting the house next to Joe. He made more than Joe during the boom, but lost his job is tied directly to oil and construction and he had to take a lower paying job in town when the project he was working on got scrapped in 2008. During the boom, Bob got himself a $65,000 truck on a 5-year car loan with every available option – and he ate a lot of Sawmill steak and ran up some impressive bar tabs. He flies to vegas in the winter and likes to gamble – and in the summer, he has a cabin at the lake where he plays with his boat, lake toys and throws lavish ‘steak and booze’ lake parties for him and his friends. His wife, who recently had to go back to work, ran up a lot of credit card debt on pedicures/manicures and top-shelf fashion and they’re also making payments on her (now three year old) Mercedes SUV. She also had some debt and credit problems before she met Bob.
Bob thinks houses are not affordable because he can’t qualify for one whether or not he can handle the payments. Bob’s wife said she won’t live in a house worth less than $500K with no granite counter tops and would rather rent said house than live in something they could afford.
I think affordability depends on whether you are a Joe or a Bob and whether or not you have a wife like Joe’s or like Bob’s.
Just putting it out there…
Cheers,
E-town
“…we need to be careful here. Affordability index is a calculation based on quite a few averages.”
No it’s not, if you read the methodology used, it’s median house price/median household income (Google: “7th Annual Demographia International Housing Affordability Survey”). Pretty straight forward and proven to be a reliable indicator.
Of course there anecdotal examples of outliers and a wide variation between households, but to get a snapshot across a given area – it’s averages and medians all the way. For the same reasons, banks don’t just screen you with house/income, they take into consideration many other factors.
M
Sorry, bad word usage. Median is not “average”.
However, I was trying to explain why some say homes are not affordable despite the value gernerated by this method saying otherwise. Of course, not everyone makes the median income, nor does everyone think “40% of gross” is a realistic chunk out of ones monthy budget. (This is more than half of net, and that does not leave someone making the median wage a lot to live on.) Even someone making the median wage and looking for a median priced house may not deem this to be affordable in todays economy and job market.
It’s a valuable metric but of course it cannot account for individual values, beliefs and level of risk tolerance.
Which is why we will always see polarized viewpoints here!
Cheers,
E-town
Anyone who bought based on what they needed should be okay, assuming you bought the home for a place to live long term. Anyone who bought based on the maximum the bank would lend them will be in trouble when they renew. I can’t fathom why people choose to bind themselves to a 35 year mortgage. That’s just crazy.
@Sheldon:
When our mortgage specialist was “running numbers” with the % of gross income for housing costs on her mortgage calculator set to FORTY PERCENT I laughed, and then I got scared. There is no way, with two kids, me and my wife could make things float after giving away 40% of gross on housing. We insisted on a 25% down mortgage and no more than 25% of gross for housing costs. Then SHE laughed, until she saw that I was dead serious. We ended up finding a nice home that met our needs. It was a good value for US because it had older appliances and no flashy hardwood or granite countertops but due to those facts it was priced well for the neighbourhood, which was a better neighbourhood than other houses in the same range. We picked neighbourhood and location over “bling” in lesser neighbourhoods. Being parents, I am proud of our choice.
Admittedly, we could have used a BIT more space than a 1200Sq.ft. split, (1400 or 1600 would be better) but paying 20% of gross (30% of net) on housing has given us certain “comforts” as well! We held firm on our budget and what WE DEFINED as being affordable for US. We can now afford so save for retirement and our kids college funds, something few friends who have recently purchased seem to be doing. There are some house-poor people out there, and that’s not untrue at all.
We’re also finding that storing things we don’t need is a big waste of space and have downsized. I have less “stuff” that I not using than I did when I lived in a 3 bedroom apartment. I say don’t mortgage a storage space – clean house before you buy and don’t delegate an entire floor of the home into storage space. That’s my advice. Buy as LITTLE house as you can, not as MUCH house as you can. I think those who bought into the “40% rule”, bought as MUCH house as the bank would let them, and racked up a big HELOC might be in trouble in coming years of higher interest rates. People as frugal as me and my wife will (hopefully) be fine. We’re happy as frugal people though, and not everyone wants to buy “less” home, and that’s not a slight against them. Everyone has different priorities and values. I think my parents are INSANELY frugal and they think we’re “big spenders”. It’s all about ones perspective I guess.
Cheers,
E-town
EXCELLENT advice!
A couple nice posts from you. I like the 2 different lifestyles from the last one, because quite frankly, I see these young bucks with the 70k supped up pickups and start to laugh. Its funny, then I get pissed when they tailgate me on the icy roads. Then I smile again when I know they will lose their truck eventually. No more screeching around corners nearly killing people in the Safeway parking lot for those morons. Unfortunately, it’s going to be an expensive lesson for some people. And I think Edmonton has been more receptive to accumulating personal debt than most places. That’s the problem with a boom mentality. But we all know it’s payback time coming.