Tuesday, March 18, 2008


The drama is building in the Real Estate blogosphere. I want to add my $0.02

Dear Wanton Specuvesters and Ramens,

Not ever person is born a homeowner. Some people may not have been in a position to buy in 2005. Some people are in their 20s and rent to shelter themselves not because they hate the world. Saving up for a downpayment is not doom and gloom, instead it is being prudent and responsible. It has been demonstrated from the numbers that the Alberta real estate market got carried away in 2007 and caution was justified.

Don't be deluded about the value of your investment property. If you bought a home for $250K and are now having trouble selling it for $400K, you can lower the price. You are deluded if you think that buyers are collectively being irrational regarding your property. Try selling for $350K, or even $330K. consider the point of view of a first time buyer - that is still a lot of money.

Dear Jealous Bitter Renters,

There is a set of people out there that are buying properties they like and can afford. I don't know what that percentage is but they do exist. They may lose paper money in the future but they may not. I do not know for certain.

Re-evaluate your situation without pre-judging that buying is terrible. Be sure to consider actual market rents to buying. Your current rent may be under marginal market rents as many landlords limit their increases to keep good tenants and to avoid conflict. Its good to be aware of what market rents are anyway so that you can prepare for any increases and will understand what is reasonable. House prices may not crash- consider this possibility when planning for your future. Consider alternatives to a brand new house on a huge lot if home ownership is a serious goal. This could be a duplex or townhouse, or a home with a basement suite. It could be a further drive. Determine seriously what debt level and home you will be happy with and make a plan to get there (that does not necessarily mean to buy now).

Tuesday, March 11, 2008

Saskatoon Thought Experiment

Just wanted to comment on the following from The StarPhoenix in Saskatoon

Housing starts keep building

"The longer people wait the more it's going to cost them in the future through both interest costs and purchase price," he said. "If they want to act, they have to act soon before they price themselves out of today's market."

For the anxious first time buyers in Saskatoon do the following thought experiment. Assume while saving for a down payment the assertions in the article become a reality. At some point in the future you become priced out as interest rates and prices increase. Consider this hypothetical future seriously. The new market will reach equilibrium with a balance of buyers and sellers, higher interest rates, higher prices and you being priced out. For this to occur there will have to be a set of buyers that will be able to (and choose to) support these higher prices and higher interest rates. They will have to be in numbers to match the increased residential construction. Since you have saved up while waiting these new buyers will have to either have a higher income and/or a larger down payment to leave you behind.

Where will they work and where will they come from? Will there be enough of them to absorb the new construction? Is this scenario likely?

This thought experiment is similar to a proof by contradiction. Assume the statements to be true then attempt to identify a contradiction. This is not a formal proof - just something to think about. Who knows - Saskatoon may end up getting the 2014 winter Olympics and become the next Vancouver. I may think that is unlikely but I definitely did not disprove it!

Also the StarPhoenix is part of CanWest's empire.
See: CanWest holdings

Monday, March 10, 2008

Quote of the Day

From Edmonton site WorkingTogether:

Most of the major analysts agree that within the next 3-4 years we will see a repeat of 2006 in terms of amazing shortfall of inventory. We can expect prices to see dramatic increases again at that time. Wouldn’t it be nice to be positioned to take advantage of those gains? And not have to fight in it to get a piece of property once it starts?

This is the first time I have heard this forecast from any analyst. Because of this I doubt it being agreed to by "most of the major analysts". When will we get back to selling homes on their own merits and not in preparation of some imagined economic shock?

Tuesday, March 4, 2008

February Real Estate Meta-Analysis

In the press release for February the Realtors association of Edmonton commented on sales falling 32% from last year and the increase in inventory:

“We predicted that sales would be on par with the last ‘normal’ year that we had in 2005. So far the market is behaving as we anticipated.” The number of available residential properties listed on the MLS® at the end of February was up 12.7% from the previous month at 8,284 properties. In February 2007 the inventory had just 2,120 properties.

Compare this to their forecast released less than 2 month ago:

The current inventory of residential properties is now 7,094 homes. The inventory will decrease through the year but the wide choice of properties will have a dampening effect on prices offsetting increased demand from in-migration and economic growth. Condominiums are expected to become a stronger option (especially for first time buyers) because of the lower price point.

The total number of residential sales in 2008 will probably drop slightly from 2007 levels. Perras expects that 19,100 residential properties will sell through the MLS® in 2008. There were 20,544 sales in 2007.


From Edmonton Weekly Stats on Working Together

The “sales to listing ratio” remains healthy, which is what really matters for the Edmonton real estate market.

Sales to listing for the week was 239/601=39.8% which is on the line balanced and buyers market. For every 4 people that bought 10 people listed - It is a stretch to label that healthy.

No real shock to anyone, the number of new listings in Edmonton is much higher than it was for the same week last year, and the number of property sales is much lower. But last year wasn’t a typical real estate market, and we all have to stop measuring against it.
Last year the high level of sales was seen as soley being attributed to Alberta's boom. Some did predict that price increases would moderate, but did not questions the legitimacy of the demand during this time. Comparing current demand to last year illustrates that some of this demand may not have been justified.
Based on the last 3 months worth of sales, we have 6.62 months of Edmonton housing inventory for sale. That puts us into a very balanced market, as 6 months of inventory is considered to be a perfectly balanced market, and anything over 8 months is a buyers’ market. We aren’t even over 7 months yet, so I don’t think you have to panic.
On the same page there is a graphic:

more than six months is considered a buyer's market.
Less than six months is considered a seller's market

Andrew Kyle, a Calgary Realtor defines a buyer's market over 3.5 months of inventory. The CREB had defined it a similar way until adjusting charts.


Consider the title of the Calgary Real Estate Board Statistics:


Single family Calgary metro properties changing hands in February 2008 were 1,252, an increase of 15.6 per cent over the 1,083 sales reported in January 2008 but showing a decrease of 35.5 from the same period last year, when the sales were 1,942.

Sunday, March 2, 2008

Spotlight Calgary Herald

From the Calgary Herald March 1, 2008
Calgary resale market seen as 'self cleaning'

"International investors are definitely buying. Calgary and Edmonton real estate is hot in Europe and the U.S., more than I've ever seen before in all my years involved in real estate. The top banks in Ireland, for instance, are buying here. They see it as safe, secure and good for the long-term, compared to other options."

I am skeptical of this quote from Don Campbell. Have Americans really been taking their losses in Real Estate, limited access to credit, weaker dollar and purchasing more expensive Real Estate here? In record numbers? What are the names (plural) of these "top Irish banks" and what have they bought here? I really want to know. This surge in international investment is not supported by recent sales numbers.

From the Calgary Herald March 1, 2008
'Breather' for market

It is already happening, says Tim Crough, a realtor with Prudential Toole Peet. "We're starting to see the starter home market pick up, predominantly in condos, but also lower-end singles."

So the starter market has been picking up as well as activity among international investors? This contradicts recent numbers indicating Calgary condo sales are down 37% this February compared to 2007.

From the Calgary Herald March 1, 2008
Hot properties

When you're considering a price under $300,000, it's hard to believe there'll be wood floors and traditional wainscoting.

Those architectural details are usually present in higher-end homes, but this little charmer in Falconridge, priced at $299,998, sports several nice touches.

The 950-sq.-ft. bi-level home has one bedroom on the main floor and two more in the developed basement, along with a bathroom, laundry and furnace rooms and a recreation room -- perfect for the teenagers in the family.

The dining room is set off by wall-to-wall smoked mirrors and patio doors that lead to a large backyard deck.

(followed by MLS listing number)

This article is showcasing individual properties listed on the MLS (complete with listing numbers). This is not an advertisement, which they have many in several different inserts. Life at Home, New Homes, New Condos.