Another terrible article from the Calgary Herald. Resale market gathers strength.
Maybe it was the weather, maybe it was wanting to start the new year on an optimistic note, or maybe people were just being spontaneous.
Whatever the reason, as January moved along there seemed to be more open house signs popping up around the city -- and "for sale" signs with "sold" stickers slapped on them.
By the end of the month, January was slightly stronger for sales than December.
There is a predictable seasonal trend with real estate sales. Past years have followed this pattern where sales in January increase over December. Even in weakening markets, such as 2008, sales increase in January. Single family sales from Mike's stats:
The Calgary Real Estate Board says 550 single-detached homes inside the city limits changed hands in January, up from 449 in December.
As well, 225 condominiums were sold, 20 more than the previous month.
Outside the city in the rural communities, sales in January reached 148, up from 113 for December.
"Indeed, it is a tough market (for sellers), but I'm pleased to see sales picking up over December," says CREB president Bonnie Wegerich. "Although numbers are down from January 2008, we are seeing increased activity and more interest from buyers."
Ron Stanners, a past-president for the board and broker/owner of Max-Well South Star Realty, says activity among realtors in his office picked up in January by about 55 per cent from December.
"Sales are up, that's a good sign," he says.
Note that all the sales comparisons are made to last month.
"And the flow of listings has slowed. I think a large number of investors have sold or rented their properties, which is one of the issues that has been affecting the market."
The number of new single-detached resale home listings added to the market last month totalled 2,068, down from 3,023 for the same month a year ago--with the comparative month-end inventories almost unchanged at about 4,000.
The condo inventory also held steady at near 1,900.
"While there's still a good selection of homes to choose from, we are seeing a slow but steady decrease in our inventory," says Wegerich. "As the inventory is reduced, we will see a return to a more stable market."
It is disingenuous to compare sales to last month but inventory and listings to last year. New listings for single family homes from CREB are below showing a large but seasonal monthly increase this January.
Stanners has been in the business long enough to know there will always be ups and downs, particularly in the Calgary marketplace.
"This market is not that bad -- price declines were minimal from December," says Stanners.
For January, the board reports the average price at $413,049,down from$417,398 in December. The condo average slipped to $270,940, declining from $274,919.
Now we are back to monthly comparisons. Below are average prices from CREB (SFH/Condo)
Dec'07 444,769 / 304,719
Jan'08 455,297 / 311,232
Dec'08 417,398 / 274,919
Jan'09 413,049 / 270,940
But Stanners says that because 2006 and 2007 were so volatile, it's difficult to make comparisons.
He says that 2004 and 2005 were "good years" and compared to them, the 2008 market was only about 20 per cent off.
Here he is comparing the total sales in 2008 to previous years. Using this measure sales are down 27% from 2005 and only 13% from 2004. Source CMHC Housing Market Outlook.
However, it is worth noting that the market suffered a further deterioration in sales since fall of 2008. Sales this January are down 45% from 2005 levels (Source Mike Fotiou). Also it's not difficult to make comparisons to 2006 and 2007. Watch me. (SFH January sales)
Sales are down 62% from 2006 and 63% from 2007 levels.
From a financial aspect, Stanners also says buyers should be getting into the market sooner than later.
"If you bought a home today and the price dropped 10 per cent in the next year and mortgage rates went up one per cent, it would still cost you less to buy today -- and you'd have the home paid off a year earlier," he says.
This is false. Lets compare two buyers with 25 year amortizations.
Initial Balance $270,000
Initial Rate 4.5%
Initial Balance $240,000
Initial Rate 5.5%
For this example assume Buyer A buys immediately and takes out a 5-year fixed and Buyer B waits one year and then takes a 4-year fixed rate (for convenience inthis example). After 5 years both buyers will have similar financing options so we can focus on the outstanding mortgage balance after 5 years and the cost of payments. I will neglect the first year of payments as one buyer would be renting and the other owning and also assume buyer B did not save any additional funds for downpaymnet. The results are below after 5 years (using RBC mortgage calculator):
Total Payments: $71,730 (ignoring year 1)
Outstanding Balance: $237,050
Total Payments: $70,317 (ignoring year 1)
Outstanding Balance: $219,818The difference would even be greater if renting was cheaper than owning and if buyer B saved for a downpayment in the first year. After this term buyer B could potentially change the amortization time and pay off the mortgage sooner.
Update: Mike Fotiou had made a very similar mortgage comparison here.