Edmonton Real Estate Market Update
Here is our update on the Edmonton real estate market. (Previous week’s numbers are in brackets). For the past 7 days:
New listings: 383 (438, 239, 69)
# Sales: 139 (109, 74, 91)
Ratio: 36% (25%, 31%, 132%)
# Price changes: 111 (125, 73, 29)
# Expired/Off Market Listings: 160 (143, 577, 105)
Net loss/gain in listings this week: 84 (186, -412, -127)
Active single family home listings: 2013 (1972, 1843, 2094)
Active condo listings: 1182 (1139, 1067, 1209)
Homes 4-week running average: $353k ($357k, $366k, $366k)
Condos 4-week running average: $211k ($220k, $223k, $231k)
The REALTORS® Association of Edmonton is reporting 424 sales so far this month for the Greater Edmonton area. The pace should pick up, but with only 11 days left in the month it looks like we will see below average sales for January. It's kind of hard to believe, because when we are trying to make appointments to show properties to buyers it's hard to find many that aren't pending. We've had a few clients miss out on properties they really liked this week while they were thinking about making an offer. If you're in an area where there are no for sale signs, and are thinking of selling, this may be the time. On the other hand, if you tried to sell last year and were unsuccessful, and are thinking of bringing your home back on the market at a higher price (we are seeing a lot of that, especially in St. Albert), prepare for more disappointment.
“….if you tried to sell last year and were unsuccessful, and are thinking of bringing your home back on the market at a higher price (we are seeing a lot of that, especially in St. Albert), prepare for more disappointment”.
Does it mean the sellers who put their properties for sale on the last year’s asking price will be disappointed? Does this mean that prices are not higher at this time than last year? or I am not getting your point?
If you were unsuccessful at selling at the same time last year, then you were probably asking to much then, so asking more now makes no sense. Prices on average are slightly higher than the same time last year, but if you were overpriced before, and you increase your price now, you will still be overpriced. Even worse… If you tried to sell when prices peaked last year (between May and September), and try now at the same or higher price you have an even lower chance of success, since prices on average are lower now than the peak last year. This of course does not take into consideration fluctuations in value, supply or demand on a neighbourhood, property type or price range basis.
Think about it, if you were buying a home, would you pay more for it now than you would have a few months ago, simply because the owner put it back on the market at a higher price?
How is the spruce grove market, i built brand new for 480,000 last feb, and have seen around 50 houses be built since then around me, Would it be fair to say my house would be worth around the same it was last Feb?
great post Sara!
HI Sara, as you mentioned about so many pending homes that it is hard to make appointments to show buyers and some buyers missing out because they wanted to take a couple of days to decide, is this in one or two particular areas or in one particular price range?. With so much inventory on the market it seems kind of odd that there would be these kind of problems in January.
I couldn’t say to be honest, this was discussed by our agents at our office meeting on Wednesday and I’m not sure what types of properties all our agents clients’ are looking for. A number of agents from other offices mentioned the same thing during a marketing committee meeting I attended at the Association on Thursday as well.
While there is a fair bit of inventory on the market for January, there seems to be a fair bit of activity from buyers (perhaps more like February or March). It is the best properties that are moving. It’s not surprising the best property in a particular price range and area for one buyer is the same property for other buyers as well.
I have noticed that a ton of new listings in the past 2 weeks were bought in 2007-2008 and they are ‘listing’ at a loss already (source:mlx)
Perhaps its as simple as 4-5 year mortgage terms up in 2012. Could see a lot of these listings this spring – height of the market buyers wanting out.
Just thought it was interesting enough to share.
Cheers
Dan
A lot of assumptions in there Dan. Some may be people may be moving out of province. Some may be getting divorced and splitting the marital assets. Some may be moving up or down in the same market, which means if they’re selling at a lower price they’re also buying at a lower price.
As far as the reason for selling is mortgages being up, why would someone sell their house that they were paying 5 or 6% on when they can renew for sub 3%?
It is an interesting theory… if they have wanted to sell for awhile now, they may have held off to avoid a large payout penalty on the mortgage (the interest differential makes these penalties quite large). If they do have to sell at a loss at least they don’t also have to pay to get out of their mortgage.
This just reminded me of something… for literally the past five years, most of the commenters on this blog have been going on and on about how all these people who bought at the peak would not be able to renew their mortgages when they came due because the rates would be too high blah blah blah… interesting the rates are actually lower now than at the peak. And don’t tell me they can’t renew because their homes are worth less now than they were at the peak… if they got their mortgage through a reputable lender they can renew their mortgage with the same lender even if their home is worth less now. The bank would much rather continue to collect payments than foreclose and lose money.
Also – in my opinion these height of the market listings will bring the prices down some, due to the fact that the owners just want out and will price to sell.
Great info Sara MacLennan ! I’m loving the nice drop in the inventory levels, but it’s discouraging that there isn’t a corresponding correlation in the rise in prices. If the drop in inventory levels isn’t going get prices to rise than what is? Jobs! Confidence in the market!
Banks have lowered interest rates (almost 3% 5-year fix) recently. Does this mean the banks are anticipating a slow down in housing market in near future so that buyers are encouraged to buy homes at record low interest rates OR if the market is stable and going towards hot in near future, then banks want to further make the housing market hot by lowering interest rates…….Your comments will be appreciated…………
Neither…. The 5 year fixed mortgage term is set by the bond market and right now the Canadian 5 year bond is 1.399%, the lowest it’s ever been. Currently the spread between the 5 year bond and 5 year fixed mortgage term is the highest it’s ever been, closing in on almost 1.75%. The banks are making nothing but money from this spread, over 100% on what it cost them to borrow. A pretty good return don’t you think.
Imran, it’s bond investors who are anticipating a slow down in our economy. In this environment falling interest rates equal falling house prices as money flows out of risky things like real estate and into safety of bonds. Someone had a graph explaining it well, i’ll try and find it.
A real world example:
Young guy bought a south side condo in 2007 for $280 000. Zero down 40 year mortgage, bad terms high rate. Was told by broker and agent it was a great time to invest.
Renewal coming up in February…
Owes $260 000 on the mortgage, property is worth $250 000 before selling costs. In order to get that killer 2.99 the bank will be looking for a fat down payment….oops.
Unit is presently rented for a net loss monthly.
So my questions are;
How many people are in the the same boat?
What should he do….hold on, bail and take the hit?
Oh, in case you missed it be sure to check the link in my comment about the upbeat CIBC report.
Would love to hear the bulls opinion on that one.
I don’t see the comment. Do you have a link for the report you’re talking about?
Ok for starters that guy didn’t invest, he speculated!!! Big difference. Wanna-be speculators are taken out all the time, this is nothing new. As far as other wanna-be speculators being in the same boat, (which I doubt very many still exist) they’re gonna get what’s coming, either bankruptcy or having to pay more up front to continue there losing propositions. These wanna-be speculators are like the guy who takes stock advice from their brothers uncle’s friend who over heard a sure thing from his twice removed retarded cousin’s sisters father in-law and then goes out at buys the stock with all his life savings on margin. They get what’s coming… and most of the time it’s not good.
The people who take real estate speculation advice from a mortgage broker or real estate agent aren’t the sharpest knifes in the drawer. So unlike speculation, with investing there is one very important procedure you follow called “due-dilegence” and you don’t get that from advisors, you do it yourself. So if things go south on you, you only have yourself to blame.
I’m in the same boat.
Bought a condo september 2007 at $276k, 5.79% 5 year fixed. Luckily 10% down and 25 year… so I think I’m barely above water now after 4.5 years of payments.
Now renting for a loss. Can’t wait to renew at 3%(?) so I’m losing less each month. But at this point.. I’ve decided to stay a landlord ride it out…. maybe make some money some day. Probably 5+ years before prices rise to what I paid!
This was NOT an speculative purchase.. just needed a place to live! Learned a hard lesson about real estate!
You just needed a place to live but your renting at a loss?
Curious as to what your plan was? Buy it, live in it for a year or two and sell for profit? How come your renting it now?
If you bought it as a long term place to live and still lived there this market really wouldn’t matter to you at all.
Plan was to live in it. Period. Life changed. Met my (now) wife who wanted to live elsewhere! Living in my bachelor condo was not an option. Only option was to rent it out at a loss to keep the wife happy. Ah well.. life is good and I’m still happily married.
Itchy – inspector gadget answered the selling question for you. No need for me to repeat it. And again, it was just a guess/theory. Although my mortgage broker at rbc agreed with me. And yes, I own a house.
Well he didn’t really. First of all the bank is unlikely to come looking for a cheque. If he stays with the same bank, and he’s been making his payments it’s unlikely that they’ll require an appraisal. I mean why would a bank foreclose on a person who is making his/her payments to hold a property on their books that is worth less than the outstanding loan and have the added cost of realtor fees to sell it in the same market. Banks don’t make money that way. They make money by lending money they acquired at 1% and lending it to you at 2%….and that only works if you’re paying.
He may not get 2.99%, but he may. Whatever rate he does get, I guarantee it’s a lot lower than what he got in 07/08. Maybe it makes the rental cash positive. Also was this just an investment property? I mean this guy has to be living somewhere right.
At any rate, considering the low rates and the fact that the rental market is tightening quickly, being a landlord is going to become much more lucrative than it has been the last 3 years.
The link is in the comment section….I just checked…it is there.
By the way my example above is not made up, it is a real decision a friend of mine must make soon.
Thanks for explaining my point a little better Sarah. That was all I was suggesting. Everybody and their dog has opinions on the market, and that was the one I came up with – after putting a little bit of research into it over the past couple weeks. I think Mr itchy needs to take a chill pill, or perhaps buy some gold bond to fix the itch.
Cheers
Dan
You are both correct, the option to stay with the present lender exists, but the lender is a smaller, kind if sketchy and not even close to the 2.99 that RBC is promoting. The kind that gladly gave loans with zero down payments at high rates with bad back in 07.
Even at a new lower rate the property will still be cash flow negative. It has been very negative for the last 5 years.
So again I ask what would your advice to him be?
There’s a big time lesson in there. Go with a recognized major lender or don’t go. I remember a story a couple of years back about a Calgary couple who were paying they’re mortgage, but their lender was one of those U.S. companies that came up here and got toasted in the U.S. housing fiasco and nobody would lend to them here because of negative equity. Result, foreclosure. It’s sad, but live and learn I guess.
As for your friend, you said the place is rented out. I guess it would help to know what he’s living in now. I mean is he renting where he’s living now or is he paying a mortgage on the place he’s in now? If he’s renting now, then why not move into his property that’s the trouble? Find a condo-mate and charge them 5 or 6 hundred a month. Is that an option?
On another note, I finally found your link to the CIBC report. I thought it was on this thread and spent the last few minutes thinking I was going blind because I couldn’t find it! At any rate, it just goes to show you that a forecast is only as good as the assumptions you make. If you miss, tanking commodities, a world wide recession, population exodus, and rampant speculation in the housing market, you’re going to have egg on your face. These guys had a whole omelet haha.
They can renew their mortgage, but, perhaps they just want to cut their losses and move on. As the saying goes, fish or cut bait. Let’s see how the spring market goes.
To move the mortgage and get the best rate requires a downpayment.
The issue is not the ability to renew or foreclosure, it is having to cut a big cheque to get a decent rate.
My last point regarding mortgage renewals. RBC has Approx 80 billion in mortgages up for renewal in 2012. So like Sarah said, luckily the interest rates are a lot lower then they were in 07/08.
Isn’t this a five year deal to? Mr. Spec and Mr. Flip don’t like those rules either.
Don’t be too harsh fellow readers this was a younger person that was given poor advice from nemerus friends family and professionals.
Yet another problem is though this person is renting where they live they don’t want to live in said condo…..
Itchy, yes the rental market is getting tight and it’s going to get a little tighter. Let’s not forget the apartment building that just burned down on the south side. 92 people out of a place to live – and 87 units gone so they are going to be looking at another rental unit somewhere or buying lower priced apartment condos. I think some of these units were owned and some were rented – but not sure on the ownership %.
Hey everyone,
New to Edmonton, came to this board looking for info on housing. Came from Eastern Canada.
I’m wondering where your getting this “yes the rental market is getting tight and it’s going to get a little tighter.” From? The wifey and I have been looking around for places to rent and have found no shortage!
We’ve been lookin at a bunch of condos with the thought of buyin, but we found we could rent the same type of place for way less than buyin it.
payin 1200 a month for a nice two bedroom in the south. we worked our payments plus condo fees and taxes at 1600+.
Maybe house rentals are a bit tighter to come by? we looked at some places, but weren’t too crazy about em’.
Stay warm!
From CMHC’s rental market report: http://edmontonrealestateblog.com/2011/12/vacancy-rates-decline-in-edmonton.html
That rental report does not include condos up for rent by individuals.
Yes it does, but participation in the survey is voluntary and a smaller percentage of individual owners participate.
I know everybody on this board only likes to read up up and up but this is an interesting read with charts and graphs.
http://www.doctorhousingbubble.com/canada-housing-bubble-ripe-for-popping-vancouver-housing-bubble-2012-pop-real-estate-canada/
Almost the same wording they have used the last 4 years, at least it saves them from writing new articles I guess.
Vancouver will keep going up, its not north american money that’s fuelling it, but it is the #1 location of choice for wealthy asian family’s.
To have a housing bubble you also need unemployment and job issues, we don’t have that in Alberta. Look at states like North Dakota, between 2005-2011 there housing prices are up 7.5%. The drop in the rest of the US never affected them, same reason, they never had employment issues, think the last I saw they peaked at 5% unemployment and are at around 3.5% again.
If you have jobs there’s nothing to burst
thanks for the source!
Does that include private rentals or just appartments units?
Im not sure how you could rent for a loss.
Say I have a property with a mortgage payment of $1500 a month, and I had to rent it out for $1200 a month, to you that may seem like a loss, in my opinion it means that I’m buying property for 20 percent, with someone else paying the other 80 percent. Long term your gaining equity each month. I fail to see the loss in this arrangement.
Lot’s of comments with no basis (as usual).
Have a bunch of rentals (some bought near the peak) all mortgages have been renewed at better rates! no problem, no appraisal, etc.
All have positive cash flow (i.e. rent covers full mortgage + tax + insurance).
Not a single month went by without a renter.
Are some lower than what I bought them for? maybe, I don’t know but I know I have paid $50k or more on each mortgage over the past 4-5 years.
So my “loss” has been paid for by others “rent” . So keep renting.
Common Guy, you must be some kind of housing genious or have the inside track on distressed properties to be cash flow positive after buying at the peak. Many, many people are still running cash flow and equity negative after five full years of mortage payments.
As for no basis, the situation I described above is the situation of a friend, and it is very, very real.
Aggregate, in your expenses you need to include:
Mortgage
Taxes
Strata or building maintanance fees
Upkeep and improvements
Taxes on rent (somewhat offset by mortage interest deduction)
Cost of purchase and eventual and unavoidable cost to sell
A small percentage for vacant times (which can and do happen, to everyone, eventually)
Some would also argue the opportunity cost of capital or opportunity cost of the credit you are risking. Certainly the capital makes sense.
Really it comes down to PE or ROI calculations. Many of the landlords who think they are getting rich have no idea how to figure out how much they are really making (or losing) on their “no brainer” rentals.
It is all just a matter of opinion about whether breaking even by a hair, or renting at a loss makes it worthwhile to have someone else pay off your mortgage. Of course, as a rental play matures it becomes cash flow positive by a larger and larger margin. The problem in that lies in the fact that you are now actually playing with your own money!
Here is a link to a ROI calculator to play with. If you are a landlord be prepared, it is pretty sobering. Plug in some real numbers and realistic expectaions and see what happens after 20 years:
http://www.calcxml.com/do/inv04
Interesting stuff this discussion.
What I think is food for thought is why we care about 3%-5% rates when we need to renew. It should be a no brainer.
Even if you get a rate of 6% because you have less equity and need to cut a small cheque. Who cares….should have planned for that. It should be nothing.
If they are in that situation, there’s most likely a few reasons.
1. They bought too much house
2. They didn’t put enough down payment
3. They did something stupid with a line of credit or credit cards.
According to all the housing experts, Alberta is the place to be. Lowest unemployment in the country. Great salaries. Lots of people moving here.
So for someone to suggest that there’s issues with divorces, emigration, people unable to lock in 10 + years etc…I don’t buy it. There’s other factors at play.
All of which leads to the discussion that too many people bought houses that shouldn’t have during the boom. It’s called sub prime lending. And despite what everyone says..it exists in Canada. They should have never lowered the down payment requirements. The people that are in trouble now didn’t put down 20%.
The question I have is that if there is a rash of short sales and foreclosures, how will react.
But the avg house in North Dakota is slighty higher than 2 x income, big difference vs AB.
Ya, but the bakken is roughly equally split between N. Dakota, Montana, and Sask., so mostly the area from Minot west is the area affected by higher prices/incomes etc. In Williston, centre of Bakken activity, the median house price divided by median income, is roughly 4, and the chart of median home prices looks suspiciously like Edmonton’s 5-10 years ago. ttp://www.city-data.com/housing/houses-Williston-North-Dakota.html
The only market I really care about is Edmonton and for the third time in the news recently Edmonton is considered the most affordable based on median income. With the latest interest rate wars between the banks, I can’t think that it is going to get any more affordable.
I don’t know who the bloggers are that keep harping on bubble bubble bubble . When the boom hit, Edmonton was due for a correction as our real estate was way low. Now that nothing much has happened since then as far as prices, I don’t see any other direction but up. Whoever is waiting for a bust must be a shark waiting to grab up cheap properties or people living in the day when a bottle of pop was 35 cents and waiting for real estate to get back to the olden days prior to 2006. Keep waiting……….
This may cause some attack comments and I am not going to respond to any of them.
The report cited in the Edmonton Journal states that Edmonton,Calgary and Ottawa-Gatineau were designated as “Moderately Unaffordable” and within this group Edmonton was deemed the most “affordable”.
Edmonton the most affordable of the “moderately unaffordable” is the same as saying that Edmonton is the “Best of the Mostly Bad”.
I am amazed at the RE’s industry’s ability to spin this stuff.
Don’t forget to mention the headline indicating house prices in Canada have fallen for the first time in a year or the very comprehensive article in Canadian Business regarding the fall of real estate in 2012.
Reality check.