Tuesday, December 30, 2008

Ted Zaharko: Ridiculous Offers

From Financial post article Concern for North America house prices
Ted Zaharko, who owns Royal LePage Foothills Real Estate Services in Calgary, says Canadians are following the U.S. too closely and expecting the same market conditions to happen here.

While prices and sales continue to fall in Calgary, he figures the market has bottomed out in the city which surpassed Toronto as the second most expensive place to buy a home during this housing cycle.

"We have people putting ridiculous offers in on a home and nobody is selling. People are saying 'l'll wait for prices to drop.' It's not going to happen," says Mr. Zaharko. Prices were down 4.2% in Calgary in November from a year ago, according to CREA.

Ted Zaharko should lay off assertions like "it's not going to happen" considering some of his statements from 2008.

In the Calgary Herald article from Jan 5 Return to 'normal' predicted for 2008

The middle ground has been claimed by Royal LePage, which has forecast a four per cent climb in prices, setting the Calgary average at $429,000.

Despite the city's strong economy and population influx, 2008 will see moderated growth and more sustainable real estate market conditions, says Ted Zaharko, broker-owner of Royal LePage Foothills.

"The combination of less frenzied market conditions and increased supply in resource-rich Alberta are anticipated to grant first-time buyers -- many of whom were previously priced out -- entry into Calgary's resale market in the coming months," he says.

While prices are on their way up again, Zaharko sees a decline in sales through the Calgary Real Estate Board's MLS system for this year.

After setting a new record of more than 33,000 deals in 2007, the Royal LePage official is calling for a six per cent decline to 31,000 in 2008.

"Calgary's real estate market is healthy and is primed to continue like this in 2008," he says. "Calgary is going to return to being a normal market this year and that is the best kind of market to have."

There have been 23,151 total MLS sales between January and November 2008 this is down 27.2% from the 31,799 recorded for the same period last year.

November total MLS average price was $388,747, which is $40,000 off Ted's forecast. Decembers numbers look to be a further decline.

Ted Zaharko explains the price declines in the article Calgary home prices slide as Canada chalks up gains from July 18th.

By year's end, the average house price in Calgary is expected to remain unchanged from last year at $414,000, while the number of unit sales is forecast to decrease by 16.1 per cent to 27,000 units sold by the end of the year, said the report. In 2006, the average price was $346,675.

Nationally, the average prices increased by 5.6 per cent for a detached bungalow, to $351,587, 5.2 per cent for a standard two-storey home, to $418,943, and 3.9 per cent for a standard condominium, to $248,408.

The national average house price is forecast to rise by 3.5 per cent this year to $318,000, but sales are projected to decrease by 11.5 per cent to 461,000 unit sales by the end of 2008.

"While Calgary's residential real estate market remains strong, speculators are altering the resale market significantly by continually adding to inventory levels," said Ted Zaharko, broker/owner for Royal LePage Foothills in Calgary. "Considering the decreases in average year-over-year sale prices, speculators will likely continue undervaluing and selling their renovation and investment properties throughout the year, as many are now unwilling to hold onto multiple properties while the market continues to catch its breath."

What a display of desperate rationalization to explain the price decline! What about the speculators buying up properties in 2006 and 2007 wouldn't that be considered a market distortion as well?

Also consider another Calgary Herald article Luxury housing demand good sign for city from July 26th

"As my broker Ted Zaharko says, the inner city is very much like lakefront cottage properties," says Starnes. "There are only so many and they become more valuable in each passing year."

I think this is one of the biggest myths generated by the up cycle of this bubble. Identifying some positive aspect of a real estate investment, great weather, "downtown", beautiful rockies, Olympics then making some sort of definitive statement about appreciation. People neglect that at some point these characteristics become priced in and have little impact on ongoing appreciation.


RJT said...

All Realtors claim to be "economic experts". But very few are. All they know how to do is look at a small segment of data or information, and then claim that house prices will go up forever.

Little do they understand that supply and demand work in both the way up, AND the way down. Right now supply is greater than demand in Alberta for houses at current price levels. If this loser understood even the basics of economics, he would realize that the way a market clears is through the price mechanism, and that when supply is greater than demand at high prices, prices will over time drop until the market clears (ie supply = demand).

I know that this is very difficult for realtors to understand, but I suppose they shouldn't be asked for economic forecasts when they've only been through 3 weeks of "professional" training.

squidly77 said...

as always great post bear
those blowhards have been polluting alberta air for far to long now
anyhow heres some stats i thought that you might like
calgary stats 1986-99

edm sale prices 1962-2001

this time next year we are going to see a much more realistic housing situation..cheers and
all the best for the new year