Monday, December 31, 2007

2007 review

The MLS Rent vs. Buy calculator which had always advised to buy has been removed. See original post.

Edmonton Real Estate Board removes false information from their June 2007 press release without correction.

Confusing Comfree sales statistics sold to listings change to sales success and removed afterwards.

Calgary Real Estate Board spinning seasonality and changing graphs but nothing too overt.

Edmonton Journal uses quote from 2005 'Bubble Watch' study in 2007 article. The 2005 study referred to Edmonton not being a bubble before prices doubled. Small two line correction put into print afterwards but not online. See article and the study from 2 years earlier.

Alberta mortgage brokers encourage not reporting income as described by revenue Canada and setting up illegal basement suites to GIT-R-DONE.

CMHC encourages gambling.

Cheers! Have a safe and happy New Year!

Thursday, December 27, 2007

NEWSFLASH: It's not 1992

There is an article in the Edmonton Journal titled Buy sooner rather than later. The writer was bold enough to buy a townhouse in Edmonton for $55,000 in 1992 and uses this example to make the case for first time buyers to get on the property ladder.
Regardless of the boom and the city you live in, buying your first home is always tough.
However, In the 1990s buying a home in Edmonton was easier. And if you waited a year or so it was no big deal. Below is a chart of % after tax household income dedicated to mortgage payment from RBC Housing Affordability study. Note how all property types are currently less affordable now than at any other time in the chart range.

This number takes into account wages and interest rates so it is a good picture of relative difficulty of getting into the market. It assumes a 25% down payment which is much more difficult to get now because of the appreciation of the last few years. The author of the article was prudent enough to save $10,000 or 18% down payment in 1992 and gives the following advice:

Buy what you can afford: I know you might think it's tough in this market but don't push yourself to the limit.

Too many people are stretching amortization periods and putting down very small down payments.

The cheapest 2 bdrm townhouse in west Edmonton is currently about $200,000. An equivalent 18% down payment today is $36,000. How is it possible to buy sooner rather than later and save up that kind of money? To illustrate see the following average price chart for Edmonton showing both nominal and inflation adjusted prices. A certain percentage down payment will be proportional to the nominal amount and its relative size in terms of buying power would be proportional to the inflation adjust series.

Bottom line is the article is simply not applicable in 2007 Edmonton.

Wednesday, December 19, 2007

keep scrolling, you'll find them

Below is a table of median single family homes across the U.S. with some Albertan locations thrown in. No adjustment was required in currency. Alberta info from November MLS reports. US data from CNN.

Also interesting is Canadian interactive pricing map (These stats are averages and include condos).

City State Median
Youngstown-Warren-Boardman OH - PA $81,600
Saginaw-Saginaw Township North MI $84,900
Decatur IL $85,900
Elmira NY $93,300
South Bend-Mishawaka IN $95,200
Ft. Wayne IN $101,300
Erie PA $103,800
Toledo OH $107,100
Cumberland WV $107,700
Buffalo-Niagara Falls NY $110,900
Springfield IL $111,200
Davenport-Moline-Rock Island IA - IL $114,600
Canton-Massillon OH $115,700
Waterloo/Cedar Falls IA $115,800
Topeka KS $117,100
Wichita KS $118,800
Binghamton NY $119,600
Dayton OH $121,400
Rochester NY $123,000
Amarillo TX $123,100
Charleston WV $123,400
Indianapolis IN $123,500
Akron OH $124,700
Syracuse NY $124,900
Rockford IL $125,100
Peoria IL $125,200
Springfield MO $127,000
Pittsburgh PA $127,700
Appleton WI $128,500
Grand Rapids MI $128,600
Beaumont-Port Arthur TX $129,100
Oklahoma City OK $130,000
Little Rock-N. Little Rock AR $131,600
Cleveland-Elyria-Mentor OH $132,700
Chattanooga TN - GA $133,200
Lansing-E.Lansing MI $133,700
Spartanburg SC $134,400
El Paso TX $135,800
Mobile AL $136,300
Lincoln NE $138,800
Shreveport-Bossier City LA $140,200
Corpus Christi TX $140,500
Memphis TN - MS - AR $141,300
Louisville KY - IN $141,900
Kankakee-Bradley IL $142,100
Champaign-Urbana IL $142,600
Omaha NE - IA $142,800
Detroit-Warren-Livonia MI $142,900
Gary-Hammond IN $144,300
Cincinnati-Middletown OH - KY - IN $145,300
Jackson MS $145,400
Fargo ND - MN $145,700
Dallas-Fort Worth-Arlington TX $146,800
Sioux Falls SD $147,100
Montgomery AL $148,400
Columbia SC $149,500
Lexington-Fayette KY $150,100
Saint Louis MO - IL $150,500
Columbus OH $151,600
Des Moines IA $153,900
San Antonio TX $154,700
Greensboro-High Point NC $155,500
Bloomington-Normal IL $155,800
Houston-Baytown-Sugar Land TX $155,800
Kansas City MO - KS $157,000
Knoxville TN $158,400
Gulfport-Biloxi MS $159,200
Greenville SC $159,600
New Orleans-Metairie-Kenner LA $160,200
Ocala FL $160,800
Bismarck ND $161,600
Green Bay WI $162,900
Reading PA $162,900
Yakima WA $163,200
Birmingham-Hoover AL $165,900
Pensacola-Ferry Pass-Brent FL $170,000
Glens Falls NY $170,700
Kennewick-Richland-Pasco WA $172,300
Tallahassee FL $174,300
Atlanta-Sandy Springs-Marietta GA $175,300
Baton Rouge LA $176,700
Palm Bay-Melbourne-Titusville FL $182,400
Durham NC $186,900
Austin-Round Rock TX $188,200
Jacksonville FL $189,200
Farmington NM $190,400
Deltona-Daytona Beach-Ormond Beach FL $195,000
Albany-Schenectady-Troy NY $204,500
Albuquerque NM $204,800
Gainesville FL $206,600
Spokane WA $206,800
Hagerstown-Martinsburg MD - WV $208,400
Boise City-Nampa ID $209,000
Charleston-North Charleston SC $212,300
Springfield MA $214,900
Pittsfield MA $215,300
Tampa-St.Petersburg-Clearwater FL $218,300
Dover DE $219,800
Charlotte-Gastonia-Concord NC - SC $220,100
Colordo Springs CO $222,400
Raleigh-Cary NC $229,500
Minneapolis-St. Paul-Bloomington MN - WI $229,600
Milwaukee-Waukesha-West Allis WI $231,100
Madison WI $234,500
Salem OR $235,400
Cape Coral-Fort Myers FL $236,700
Richmond VA $238,800
Eugene-Springfield OR $241,900
Philadelphia-Camden-Wilmington PA - NJ - DE $243,000
Tucson AZ $244,800
Portland-South Portland-Biddeford ME $245,900
Salt Lake City UT $246,700
Denver-Aurora CO $254,100
Virginia Beach-Norfolk-Newport News VA - NC $255,000
Phoenix-Mesa-Scottsdale AZ $255,500
Norwich-New London CT $266,000
Orlando FL $266,800
Kingston NY $269,500
Hartford-West Hartford-East Hartford CT $270,100
Allentown-Bethlehem-Easton PA - NJ $272,900
Atlantic City NJ $273,100
Worcester MA $282,800
Chicago-Naperville-Joliet IL $286,400
Sarasota-Bradenton-Venice FL $287,400
Providence-New Bedford-Fall River RI - MA $291,000
Baltimore-Towson MD $291,400
New Haven-Milford CT $292,400
Las Vegas-Paradise NV $295,500
Portland-Vancouver-Beaverton OE - WA $299,700
Reno-Sparks NV $317,300
Trenton-Ewing NJ $328,600
Sacramento--Arden-Arcade--Roseville CA $335,700
Miami-Fort Lauderdale-Miami Beach FL $346,800
Edmonton CMA AB $355,000
Boulder CO $367,500
Riverside-San Bernardino-Ontario CA $377,000
NY: Edison NJ $391,800
Seattle-Tacoma-Bellevue WA $394,700
Barnstable Town NA $400,600
Calgary City AB $407,500
Boston-Cambridge-Quincy** MA - NH $414,700
Washington-Arlington-Alexandria DC - VA - MD $438,000
NY: Newark-Union NJ - PA $459,700
NY: Nassau-Suffolk NY $470,000
New York-Northern New Jersey-Long Island NY - NJ - PA $476,100
Bridgeport-Stamford-Norwalk CT $491,100
New York-Wayne-White Plains NY - NJ $550,900
Los Angeles-Long Beach-Santa Ana CA $588,400
San Diego-Carlsbad-San Marcos CA $589,300
Fort McMurray (Average) AB $635,325
Honolulu HI $649,900
Anaheim-Santa Ana CA $700,700
San Francisco-Oakland-Fremont CA $825,400
San Jose-Sunnyvale-Santa Clara CA $852,500

CMHC forecast changes

Here are some forecast changes by CMHC over 2007 in the following reports:

CMHC Housing Market Outlook Spring 2007
CMHC Housing Market Outlook Fall 2007
CMHC Rental Market Report 2007

CMHC has changed their forecast(s) for Edmonton a couple of times this year.

Vacancy and two bedroom rent:

This spring the outlook on vacancy was 0.7% the actual vacancy was 1.5%.

Spring 2007 Housing Outlook
2007(f) 0.7% $970
2008(f) 0.5% $1115

Fall 2007 Housing Outlook
2007(f) 1.0% $950
2008(f) 0.8% $1090

October 2007 survey
2007 1.5% $958

MLS Sales

The forecast for sales in 2007 was cut by almost 3,000 and may be lower after December's count.

Residential Sales

Spring 2007 Housing Outlook
2007(f) 24,000
2008(f) 22,600

Fall 2007 Housing Outlook
2007(f) 21,200
2008(f) 20,000

November EREB YTD sales 19,687, assuming 1000 sales in December:

The forecast change for listings increased from 28,000 to 38,000.

Sunday, December 9, 2007

EREB - Edmonton Average Price and Analysis

Below is a chart which takes a few quotes from the Edmonton Real Estate Board and places them on a Average price chart.

March - “There are lots of stories about the slowdown or reversal of certain American housing markets,” said Pratt. “But all markets are local and Edmonton is unique in that the fundamentals of low interest rates, strong demand, low inventory, steady in-migration and high consumer confidence are still driving our local economy.”

April - “Price increases may moderate slightly as the market returns to pre-boom levels but I do not anticipate that actual prices will decrease.”

May - “With the average price of a single family dwelling rising by over $400 a day, you need the latest market figures that only a REALTOR® can provide.”

June - “The fundamentals of the Edmonton market are still strong and should sustain steadily rising prices for all classes of property,”

August - “REALTORS® are optimistic and see any price dips as temporary and within the normal range for this market.”

November - “As the current listings become sold or are withdrawn the current inventory will drop. As we move into the spring with a more normal inventory, we expect that prices will again begin to rise slowly,"

Update (thanks rj):

Added another chart based on the quote found in the Edmonton Journal April 4, 2007.

In only the first three months of this year, average home prices have climbed 12.4 per cent, so Pratt has abandoned her earlier forecast of a 15 per cent increase for the full year.

"We're predicting that prices will continue to rise until August, at four to five per cent per month, then at two per cent per month," she said today.

This chart compares the prediction made by the EREB after March stats were released to what has actually happened.

Monday, December 3, 2007

Typical Spin

Typical season
slow down comes to the MLS(R) during the month of November 2007, according to figures released by the Calgary Real Estate Board (CREB(R))
Single family Calgary metro sales for November 2007 were 1,103, a decrease of 21 per cent from the 1,397 sales recorded in November 2006...

Sales in November 2007 21% less than November 2006.
Sales in November 2006 11% less than November 2005.
CREB Nov 2006

It's getting cold out there.

Thursday, November 29, 2007

Pent-up supply

It seems the recent "softening" of the Edmonton real estate market has been framed as a short term event as a result of hesitant buyers. This article in the Edmonton Sun quotes three REALTORS: Housing to heat up: Realtors

ReMax realtor Simon D. Hunt
"I don't think we'll continue to see much of a dip because there's still a lot of demand,"
"Peoples' perception is that the market has crashed, but that is skewed."

ReMax realtor Len T. Wong
"There's no urgency out there to buy at this time of year," he said.
"But the spring markets will be a lot more stable."

Jon Hall of the Edmonton Real Estate Board
"There's just been so much steam in (the house market) that the top is loose and the steam is getting out a bit,"

However, their are also people waiting for the spring "bounce" to relist. And consider the quote from John hall in this article

He noted that one builder has built 100 basements, but has now capped them waiting for things to improve.
"He's just going to wait for the market to turn," said Hall

To me this does not make sense especially considering that the recent downturn is small compared to the boom as pointed out in the article:

Hall said prices had dropped 6.5 per cent over the last five months after a 74 per cent hike over the previous 17 months.

So after a combined 60-70% increase is it reasonable to hold out for more? Are sellers reasonable to wait until spring to sell after such an incredible long term run-up? Is the spring going to be a market of pent-up demand or pent-up supply?

Saturday, November 24, 2007

An Alberta Real Estate Story

This is a story of a client that gets their home appraised by a REALTOR A. REALTOR A tells REALTOR B of the same firm all the juicy details of this new listing including the sellers motivation (Family illness) and their minimum price. This REALTOR fails to informs the sellers of the value increasing zoning of the property.

REALTOR B submits an offer to the seller with another company he owns using this confidential information. REALTOR B sells the property one week after taking possession to developers for a profit of $55,000.

Almost 5 years later REALTOR B is required to pay a fine of $10,000 plus costs of $7,000. Net profit $38,000.

Real Estate Council of Alberta - Decision

Morale of the Story: Avoid being caught in shady deals because you might need to pay a fractional amount of your ill-gotten gains.

Real Estate Council of Alberta Other Decisions

Real Estate Council of Alberta - News Releases

*Picture of Wolves inspired by shadow company REALTOR B used to buy the property "Wolf Willow".

Friday, November 23, 2007

Conflict of Interest

Global Edmonton aired a story of a local REALTOR that sold a property to one of his clients without disclosing he was the owner or problems of the buildings condition. He sold this property after owning for 6 months at a substantial profit. Also interesting to note the $40,000 'cash-back' deal involved on the buyer's part.

Global Troubleshooter story BUYER BEWARE


Wednesday, November 21, 2007

Fort McMurray: triple REIC filtered for your enjoyment

I am having trouble finding MLS stats for Fort McMurray. I suspect year over year sales are down but I can only find information heavily filtered by the Real Estate Industrial Complex.

The Edmonton Journal qualifies any downward indications with quotes from a local REALTOR.

'Seasonal slowdown' for home prices in Fort McMurray

"It's a seasonal slowdown, which is normal before Christmas," Milly Quark, president of the Fort McMurray Real Estate Board, said Wednesday.

Prices in this northern Alberta centre also dropped slightly in October 2006 -- then rose for 11 consecutive months. "Canada Mortgage and Housing Corporation is predicting a price increase next year," Quark said.

On the supply side, "land is at a premium," Quark said.

Building lots are selling for $345,000.

"I understand they are going quickly," she said.

Then there was another news item linking to some real estate investment site:

News Release
Capital appreciation is currently very high at around 20% pa meaning investors are faced with a wholly positive real estate outlook. Investing now will allow them to ride the wave of success that Ft. McMurray is enjoying and should guarantee very significant returns.
Executive Suites
Gross yields up to 26%
1-bed Apt (56sqm) = C$ 350,000 (~£176,768)
With average prices for SFH at $625K is it still reasonable to assume that the 20% yearly appreciation will continue? Is there an equilibrium price even with fast-paced oils sands development or do prices continue upwards?

Based on the price for this investment the gross yield is extreme. With a price of $350K the rent would need to be over $7500/month or $250/day for the stated 26% yield. Rents and even hotels rooms are far below under these amounts.

Still looking for monthly stats i stumble upon more advice
An Important Note for Fort Mcmurray Real Estate Buyers

Many times Fort Mcmurray Real Estate buyers avoid using the services of a REALTOR under the mistaken belief that it costs them money - or that they will be able to negotiate a better deal directly with the seller or seller's real estate Broker. This can be an expensive mistake when buying a home.
Are there any Fort McMurray stats published online? Just numbers.

Update: Thanks Laura for the link

Thursday, November 15, 2007

Consider the source

(Not my video but enjoy the tunes.)
LRT boosts house prices, says study

The Sun cites Don Campbell from the Alberta Real Estate Investment Network.
Network president Don Campbell says research from across Canada shows the value of residential property rises from 10% to 20% when it's located near transportation-improvement projects.
Don Campbell is a real estate guru and leads hordes of speculators throughout Alberta.

Consider that prices already have increased above and beyond any transportation effect.
Consider that it is not normal to look at any development in the city with the real estate lens. These include the ring road, LRT or several bitumen upgraders in Edmonton.

This is not the first time the mainstream press has given Don Campbell free advertising:

Transit effect a boon to homeowners
Ron Chalmers, The Edmonton Journal
Published: Wednesday, November 14

Campbell said he expects Edmonton home prices generally to rise nine per cent in 2008 and 12 per cent in 2009. Homes that benefit from transportation improvements will outperform the market by an additional 10 to 20 per cent, he said.
What subprime crisis?
Don Campbell, Financial Post
Published: Saturday, September 08, 2007

Consider the source.

Saturday, November 10, 2007

The Magestic Loan Goddess of Calgary

The mysterious and powerful loan goddess summons the power of credit to help shelter mortals. We read from the passage of testimonials:

"Thank you Rae for all your wonderful help! You made the process of obtaining our first mortgage a delight. We can now afford our dream home."
Where in the past mortals used "documented incomes" to afford homes, this can now be conjured by the loan goddess.

For entrepreneurial Canadians like freelancers, consultants, commission sales professionals or business owners, keeping taxable income low is just plain smart. And that means your T4 should not be an indicator of your ability to carry a mortgage.

With good credit, we’ll qualify you based on the income you tell us you make. This accessible mortgage approval process works for those who worry about proving exactly how much they earn.

Thursday, November 8, 2007

Edmonton Comfree Sales

Comfree recorded 146 sales for the month of October in Edmonton. There is currently 21 months of inventory on Comfree with 3108 active listings at current sales rate.

21 months.

Compared with September's total of 201 sales are down 27%.
Compared with last October's total of 354 sales are down nearly 60%.

Comfree moved less than half the homes as they did the same month last year.

October Report

With current inventory at 3108 Comfree has over a BILLION dollars of inventory and 52 million dollars of sales in October.

Note that they do not include the mystery stats
"sold to listing" or "sales success".

Sunday, November 4, 2007

Oil Detour

There is an article from Calgary's Real Estate News site discussing the impact of the royalty review.
At the end of the day, it doesn’t matter how you look at any news scare. Real estate prices have and will be increasing in the future for a simple reason; supply and demand.

The day when I am writing this article oil prices are sitting at $90 which is considered to be quite cheap according to many economists. Obviously Alberta has the second largest oil reserve in the world and that creates a lot of excitement among oil companies, especially when other sources become unstable due to political reasons and when global demand is growing twice as fast as supplies can keep up.
Alberta produces many types of oil and Nov 2nd prices range from $52 for bitumen @ Hardisty up to $91 for Edmonton sweet synthetic. Link - prices converted using 6.29 barrels per cubic meter.

Also, it is a recent development to include Alberta bitumen as proven reserves. Usually only convention crude is included in this report. From Wikipedia:

The addition of 174 gigabarrels of the vast Alberta oil sands deposits, mostly in the Athabasca Oil Sands, to proven reserves by the Alberta Energy and Utilities Board (AEUB),[4] was controversial at the time because oil sands contain a semisolid form of oil referred to as bitumen by Canadian government authorities, rather than conventional crude oil.[4]. The existence of the deposits (historically referred to as "tar sands") has been known for centuries since major rivers cut through the sands to reveal the bitumen in the river banks, but their development had to wait for high prices and the invention of new technology. In recent years technological breakthroughs have overcome the challenges of producing it and most Alberta oil is now non-conventional production from oil sands rather than conventional oil fields. The AEUB estimates that by 2016 Alberta oil sands production will triple to amount to 86% of the province's total oil production, and Alberta will by then be one of the largest oil producers in the world.[4]

The difference between crude bitumen and crude oil is somewhat arbitrary since bitumen is really just an unusually thick and viscous grade of crude oil, and many U.S. oil refineries have been modified to handle it in recent years as domestic U.S. oil production declines. The main problem is that it must be heated or diluted with solvents before it will flow through pipelines.

If it is possible for Canada to add significantly to proven reserves in one year due to new technology and higher prices is it possible for other sources to develop in the future? Venezuela has a similar tar sand deposit to Alberta but it is not included as proven oil reserves. Why would a REALTOR look at the narrow view as energy being from the two reported sources - convention crude and Alberta tar sands?

Venezuela tar sands
Coal to Oil in China
Oil Shale
Ethanol Fuel in Brazil

CMHC Market Outlook

I am puzzled by CMHC's Alberta reseale price forecasts released in the latest Housing Maket Outlook. They list several downward pressures yet forecast appreciation of 6.8% for Alberta in 2008.
A strong first half of 2007 will push existing home sales in Alberta toward last year's record, totalling 74,000 transactions. In the summer, a surge in listings has slowed the rate of price growth considerably and buyers have become increasingly resistant to the recent run up in prices. Consequently, sales are now on a downward trend. In the face of weaker migration, this trend will continue in 2008 with sales falling five per cent to 70,000 units. Following a 24 per cent gain in average price in 2007, a flurry of listings and weaker sales will limit price growth in Alberta to seven per cent in 2008, the weakest annual gain in four years.
CMHC appears to use a downward sloping supply curve in their models where higher prices will lead to less supply:
In Alberta, weaker migration, higher resale selection, and rapid price growth will lead to a slower rate of new home construction this year and next.
Note that the CMHC had the same price appreciation forecast for Alberta in the forth quarter in 2005. Up to $235,000 in 2006! This is with "oil price at nearly $70 US a barrel" and "$70
billion in oil sands spending is planned in the Wood Buffalo-Athabasca region over the next decade" factored in.

CMHC Q4 2005 Housing Market Outlook
2004 194,769 6.5%
2005(F) 220,00 13.0%
2006(F) 235,000 6.8%

CMHC Q4 2006 Housing Market Outlook
2005 218,266 12.1%
2006(F) 282,500 29.4%
2007(F) 318,000 12.6%

CMHC Q4 2007 Housing Market Outlook (Prairies)
2006 285,383 30.7%
2007(F) 355,000 24.4%
2008(F) 379,000 6.8%

Friday, November 2, 2007

CREB: The glass is full

The Calgary Real Estate Board reports on October sales. Their interpretation of the monthly 4.3% increase is quite the stretch.
“As we move through the fourth quarter of 2007, we are seeing a normal amount of market activity. The good news is that our October sales have increased somewhat over September sales, showing consumer confidence in the real estate market as well as in Calgary’s over all strong economy,” remarked CREB® President Ron Stanners. “This is also a reflection of Albertan’s belief in the strength of our energy industry. With the broad selection of properties available today, buyers can select their dream home through the MLS®. Home owners, by pricing their homes competitively with the guidance of their REALTOR®, can anticipate a quicker sale,” Stanners continued.
However sales are down 9.1% when compared to last October. Those October 2006 sales were down 19.7% when compared to 2005.

Here is the data:

Oct 2007
SFH: 1113
Condo: 501
Total: 1614
MOM: 4.3%
YOY: -9.1%

Sept 2007
SFH: 1064
Condo: 483
Total: 1547

Oct 2006
SFH: 1241*
Condo: 535*
Total: 1776
YOY: -19.7%

Oct 2005
SFH: 1512
Condo: 699
Total: 2211

*These number in the October 2006 under 'City' report were 1245 and 537. The 2005 stats are from this report as well.

Update: The Balanced Market label is still outside the range as covered in an earlier post.