Sunday, November 30, 2008

Truman Prediction Follow-up

This post will do a follow-up on one of Truman's predictions followed by a random but awesome 80s music video.

Back in January he made a predictions that prices would stay within +/-5% and a statement on the strength of the Calgary real estate market. He has followed up a few times on this throughout the year.
Jan 30
It speaks to the amazing strength of the Calgary economy that in spite of decreased sales and increased inventory, the price is remaining stable, or even rising slightly. If prices stay where they are now, and I fully expect them to, within a +/- 5% range, the buyers will appear. People have been waiting to see what would happen in January and now they know. My phone is busy, and many other realtors I've talked with, report plenty of interest. Sales will be down considerably this year compared to the frenzied activity of 2006 and 2007, but it seems to be a non-issue. When you compare this year's sales to the years when we had a normal balanced market, we're right on the average.

Posted: June 4, 2008
On Jan 31, 2008 I predicted the median price would fluctuate between $389,500 and $430,500 for the remainder of the year. Do you think this is accurate?(To May 31, the 30-day median price has risen as high as $428,000 and has fallen as low as $410,000. The median price on May 31 was $419,000)

October 30th
From the previous topic a reader has posed this probing question. He said "Why would you, a realtor that works at commission, not an economist, not a market analyst but bob Truman the salesman knows better than all the pros?"

After predicting the prices with uncanny accuracy in 2007, it would be a feat of unimaginable insight and clairvoyance to do it two years in a row, in these turbulent markets, so let's see how this year's prediction turned out:

In January 2008, I predicted the 30-day median price would rise as high as $430,500 and fall as low as $389,500 this year. So far, the price has been as high as $428,000(Feb), and the low is $390,000(today).

In the Calgary Herald yesterday, it said "Much attention, understandably so, is being paid to economic experts and what they have to say..." It goes on to say, "They get it right only 40 per cent of the time."

Now to answer your question of why I know better than the pros. I don't really consider it a part of my job description to predict the future. I take no credit for an accurate and lucky guess, but I do operate at a different level of consciousness than they do. They are entrenched in the structures of existing institutions which imprison the mind, and they continue to perpetuate the dysfunction in their work.
November numbers are now available from Mike Fotiou. The median fell below $389,500 or 5%. I also compared the other price measures to January and all except one fall outside the 5% range predicted.

SFH January Novemeber %Change
Average $455,297 $435,471 -4.4%
Median $410,000 $387,300 -5.5%
$/SF $302 $281 -7.0%

Condo January November %Change
Average $311,232 $285,820 -8.2%
Median $290,000 $251,800 -13.2%
$/SF $313 $281 -10.2%

Failed predictions are not hard come by but the gloating by Truman in October makes this post-worthy.

...Anyway i'm in good spirits despite all the political and economic turmoil so one that note here is Herbie Hancock and "rockit" from 1985. Enjoy.

Monday, November 24, 2008

First Place Edmonton

After the failed draw, the south side townhomes from the First Place Edmonton are now on the MLS.

I compared this to another townhouse listed on the MLS.

First Place Summerside
List $267,918.00 $249,000.00
bdrms 2 3
baths 1.5 1.5
size 905sqft 1291sqft
parking outdoor double attached garage
yard unfenced shared decorative fenced
year 2008 2003

The Edmonton Journal had previously said the First Place townhouses were being sold at a "cut rate" in a shameful display of collusion between the media, the city and developers to soak some remaining first time buyers.

Thursday, November 20, 2008

Marc Perras Radio Ad

Some more radio ads from Marc Perras of the REALTORS Association of Edmonton

October Ad 1
While average residential price was down in October the average price of single family homes was up.
Really so where is the decrease?
Condos. Condo sales prices had the biggest single month drop of the year. Down by 5.8%.
So single family homes are up condos are down.
Average price of single family home increased by 0.3% from $362,097 to $363,274. Median price decreased 0.8% from $345,500 to $342,750.

October Ad 2

Global unrest, economic uncertainty most major markets are feeling the effect of fnancial instability....

Unlike most major markets there is still a high degree of consumer confidence in Edmonton and thats being reflected in the housing market

So we are maintaining an even keel?

As compared to a typical fall, absolutely.

Sales generally slow at this time of the year and we have seen that predictable slowdown. Its safe to say that the stronger sales in the third quarter of the year contributed to reduced demand in October?

Which is normal?

It is. This October's resale figures were lower than last year but well with the norm. We're also seeing inventory levels continuing to decrease, heading back towards normal levels.

So all in all the Edmonton market remains stable.

More than most major markets in these strange economic times. I'm not going to use the 'R" word.

Unless you mean REALTOR

Instead of being 'well within the normal range' sales are lower than each of the the previous five years for October.

Notice that there was no mention that the decrease in inventory is also part of a regular seasonal pattern just like sales.

The sales to listing ratio dropped from 55% in September to 40% in October which indicates a deterioration in the market independent of seasonality.

Tuesday, November 18, 2008

Inventory of Spec Homes in Edmonton

Some suspect information came out from the Edmonton Real Estate Blog regarding inventory of spec homes:
Some interesting tidbits out recently:
• Increase of 15,000 full time jobs in Alberta for October putting employment at an all-time high in Alberta
Decrease of almost 5000 spec homes compared to last year in comparable inventory.
I found an article from the Edmonton Journal discussing spec homes. Inventory of spec homes has increased over the last year. These homes are also described by CMHC as completed and not absorbed.

There were 1,047 spec and show homes at the end of this October, up from 662 at October 2007, but that's on a downward trend from an August peak of 1,090 units.

"That number peaked in August and moved lower in September and October as absorptions have outpaced completions," Goatcher said. "It gives us some comfort that single-detached activity should start to turn the corner as we go forward because their inventory numbers are now moving in the right direction."

There were 524 multiple-family new, completed units at the end of October, compared to 338 at the same time last year as units started months ago before a slowdown are completed.

Friday, November 14, 2008

BS Detector

The globe and mail article "Real Estate get the Obama boost" is an example of desperation in Toronto.

One quote set of the BS detector

She recently helped one client buy a house listed for $695,000. The client pays about $2,200 a month in mortgage costs but collects $3,000 a month in rent.

"They have someone else paying off their mortgage."

Wow! No consideration of the downpayment used, the other expenses such as taxes, maintenance or vacancy. For $695,000 how did they arrive at the $2200 payment? Here is one scenerio I came up with:

Purchase Price: $695,000
Down payment: $320,000
Mortgage: $375,000
Interest Rate: 5%
Amortization: 25 years
Monthly Payment: $2192.22

Really, any property can have a mortgage less than rent with a large enough down payment.

Update: Mike Fotiou, a Calgary REALTOR, has an excellent post about this article on his blog.

Saturday, November 8, 2008

Calgary: statistics causing fear

Re: "Cutting home prices key to sales success," Nov. 4.

The above article contained numerous statistics used in comparing the Calgary real estate market in 2007 and today. While this comparison may be interesting to some, it continues to put fear into Calgarians' minds. I am a mortgage associate, and 2007 was a great year for me, and recognized by all in my industry as an anomaly year. To give a much more rounded and useful comparison, redo the statistics in the article and compare 2006 to 2008. 2006 was also a great year for me and I am on track to do better in 2008 than in 2006. My sky is not falling, nor is it for most Calgarians. Yes, I will not do as well in 2008 as in 2007, but 2007 was not a normal year. Please stop the fearmongering and compare what is happening in the Calgary real estate market today to a more realistic 2006 year.


Well, just go to the Alberta Bubble blog. They put the numbers in context by comparing with many past years, including 2006.
Sales Volume (old criteria of combined SFH and Condo, from BT’s site)

Oct 2001: 1821
Oct 2002: 1930
Oct 2003: 2021
Oct 2004: 2135
Oct 2005: 2584
Oct 2006: 2122
Oct 2007: 1944
Oct 2008: 1442
Also I don't see how the article is fear mongering. In most cases 2006 was a better than 2007 in the statistics used. Consider the title where it is a continuation of the theme that the slowdown is a result of the deliberate decision of potential buyers to wait on the sidelines.
Cutting home prices key to sales success
Buyers waiting for deals in cooling market
Maybe he is referring to a REALTOR suggesting to sell an infill at 625K if the competition is at 700K. Oh, the humanity!

Sunday, November 2, 2008

Upgraders: blast from the past

Lets go back a year and consider the story of upgraders. First from the August 2007 article City's housing market going through a correction, not a crash
Realtors say they wouldn't be surprised if average prices fall by six or seven per cent from their July peak, before levelling off in early 2008. If so, that would take the average single-detached home price down to $388,000.
Roughly a dozen upgraders are slated for the Edmonton region. Thousands of new jobs will be created.
This was a very loaded statement. "Roughly a dozen" was actually nine. The term "upgraders"was applied to a brand new sites, expansions or converting existing plants. The use of "are slated" actually meant some were under construction, some were approved to be build and some had filed applications. So if you were shopping for a house at the time and thought this meant 12 new upgraders in the Edmonton area you were wrong.

Here is another article from the Edmonton sun also from August 2007. Hold off on selling the house.
Even with huge slowdowns, at least half those projects will happen. The bitumen upgraders in Strathcona and Sturgeon counties are just starting. Nine proposed upgraders are listed on that website.
House prices will go nowhere but up.
The list of upgraders can be found here in the Alberta Industrial Heartland section. There has been some recent developments regarding these project and I have done my best to consolidate them in a list.

Shell Scotford Upgrader Expansion 1
under construction*

Shell Scotford Upgrader Expansion 2

Strathcona Refinery
under construction*

Sturgeon County upgrader
"considering deferral of any decision to construct the upgrader."

BA Energy Alberta Heartland Upgrader
construction halted

North West Upgrader
"waiting to further finance"

Synenco Energy Northern Lights Upgrader
From what I can figure out it doesn't look good*

Statoil North American Upgrader
delayed two years

Total Upgrader
delayed two years?

*Total Energy may have bought this, not sure of the status of the project.

The two in this list under construction were started before the above article were written so they do not represent new projects. Any clarification to this list by reader would be welcome .

Saturday, November 1, 2008

CMHC forecast update

This post will shows how CMHC forecasts have changed over time.

CMHC resale price forecast for Edmonton 2008
Q2 2007 $374,000
Q4 2008 $334,000

CMHC resale price forecast for Edmonton 2009
Q1 2008 $375,000
Q4 2009 $335,000

CMHC resale price forecast for Calgary 2008

Q2 2007 $473,000
Q4 2008 $405,000

CMHC resale price forecast for Calgary 2009
Q1 2008 $450,000
Q4 2009 $406,000

The change in a single quarter for Vancouver 2009 is more stunning:
CHMC resale price forecast for Vancouver 2009
Q3 2008 $645,000
Q4 2008 $535,000

Data is from CMHC Housing Market Outlook

See previous posts here and here

Living on the Hill

I'm looking out of my window at an incredibly blue and sunny Alberta sky that does not appear to be falling. Despite rumours to the contrary, life in the big city goes on and we should all be thankful to be living here and enjoying tremendous blessings compared to so many people in other parts of this crazy world.
I wanted to comment on the Calgary Herald article "Living on the Hill". It starts out with anecdotal examples of the economy not collapsing followed by a desperate sales pitch for individual properties.
We are constantly bombarded with negatives telling us that we should be tightening our belts and avoid spending. But fortunately our economy is fairly stable today, thanks to people who are still buying. I was with a car dealer last week whose sales chart showed that he'd sold four cars already that day.
Retails sales have fallen in Alberta, by 0.4% in August. This is notable when you consider inflation and increased retail space under construction.
Calgary. It's clear that many are still positive about the future -- although perhaps a little wary of the immediate future -- and realize that this is a good time to buy real estate.
It is arrogant to say that people 'realize' it is a good time to buy real estate. This implies that it is not even an opinion or a possibility but an indisputable fact.
I was thinking of real estate sales while driving north up Crowchild Trail and noticing a splendid new house under construction on the brow of the hill of St. Andrews Heights. There's confidence for you -- and a good response to the killjoys.
Ignoring the anecdote, the actual numbers for housing starts are down 59% in Septemeber. Anyway the article continues with desperately trying to sell individual properties.
The mature, ideal location and quality of many of the homes demand high prices. A 1,800-square-foot Rosedale bungalow backing onto the park on 9th Street is listed at $1,699,900 -- but what a beauty.
Does the Calgary Herald not have enough real estate ads?