Marc Perras - Spinning like Clockwork

From the latest round of radio ads on the REALTORS Association of Edmonton's site:

August Market Facts - Prices Up
August Market Facts - Sales Up

First off a comment on the titles. Sales were down compared to July and up compared to last year. Prices were down both to last month and last year. Anyway I had the misfortune of listening to these...

Just like the swallows return to Capistrano every year after winter the buyers return to the Edmonton real estate market after summer.
It happens every year like clockwork and we expect it to happen again - Marc Perras

This is simply a fabrication by Marc Perras and is not supported by reality based arguments.

Look at this sales chart again from the Edmonton Real Estate Blog. Compare June, July and August numbers with those of September, October and November. With a few exceptions fall tend to be slower than summer. The only thing happening like clockwork is desperate spinning from the REALTORS Association of Edmonton.


*Chart From Edmonton Real Estate Blog

There is more...

But we usually see softer prices in August because people have so much on the go. That pattern held true this August as the average residential price dipped by about 1.8% from the previous month.
So prices fell slightly as expected...

He then goes on to say how prices are expected to rise in the fall. Using their own numbers I determined the % month price changes for August and September going back to 1990 (from REALTOR Association stats).

	Aug % change	Sep % change
1990	1.37%	-2.61%
1991	0.44%	-1.61%
1992	1.46%	-1.31%
1993	-1.03%	-3.22%
1994	2.70%	-1.80%
1995	-3.85%	-2.04%
1996	2.79%	-2.03%
1997	-0.92%	-0.69%
1998	-0.85%	-0.94%
1999	-4.41%	2.72%
2000	2.07%	-3.43%
2001	-5.72%	2.51%
2002	-1.26%	-0.62%
2003	-0.40%	1.19%
2004	0.79%	-0.92%
2005	0.12%	-2.77%
2006	5.56%	2.95%
2007	-2.80%	-0.15%
Average	-0.22%	-0.82%

Generally September has had higher price drops than August. And the drop of 1.8%, while not devastating, is worse than average.

Also remember when the price drops were supposed to only occur in the second quarter? This statement I covered in a previous post.

Q: Should I buy now or wait?

Perras: "I think it's a great time to buy now. If we're going to see any softening in prices, it's going to be in the second quarter, which is right now. This kind of inventory is going to thin out as we get into the fall."

Marc Perras, May 6, 2008.

I don't mind bullish arguments and would expect them from REALTORs. But when they totally make stuff up that is not supported by the numbers they need to be called on it.

Spotlight: Gregory Klump

From the Calgary Herald: Calgary home sales take 32 per cent slide

Despite the decline in sales for the first six months of this year, "on a month-over-month basis sales have increased in Calgary in the last two months," said Gregory Klump, the real estate association's chief economist

Looking at the data sales have increased in Calgary from Mike's Stats:

Month SFH Condo Total
March - 1418 - 565 - 1983
April - 1363 - 581 - 1944
May - 1368 - 577 - 1945
June - 1439 - 556 - 1995

So one more property sold in May than April. Then forty more in June. How would Gregory Klump, CREA chief economist, interpret this?

But Klump said the trend has been for increasing sales in Calgary on a monthly basis.

"It's clear looking at the data that I'm looking at, that in terms of the prices, they've stabilized," he said. "Anyone expecting a continued decline in average price will be surprised and disappointed."

How is it clear Calgary prices have stabilized?!? From Mike's Stats

Month SFH Condo (000s)
March - 420 - 293
April - 420 - 290
May - 419 - 285
June - 408 - 293

Words stabilize, and balance seems to come up frequently now. Remember when the CREB said sales were stable in January? What makes Gregory an expert worthy of a print space? He did not anticipate any price decrease so how can he be so bold now? What did Gregory say April 2007?

"The resale housing market continues to be a story that features the West and the rest," said CREA chief economist Gregory Klump.

"Tight markets make for sizeable price gains, and nowhere is that more true than in Calgary, Edmonton and Saskatoon, where year-over-year increases remain lofty. In keeping with that trend, CREA forecasts that price increases in 2007 and 2008 will be biggest in the Prairie Provinces and British Columbia."

Dear potential home buyers - Mr. Gregory is not your friend.

Paid obfuscators

Obfuscated definition:
Darkened or cast in the shadow or background; obscured by withholding proper light or emphasis; hence, confused, bewildered or lost sight of.

Obfuscation refers to the concept of concealing the meaning of communication by making it more confusing and harder to interpret.

Lets look at the Calgary Herald:

MLS sale price falls first time in 12 years

Market eyes stability amid higher listing

...average price increases peaked for the province in close to mid-2006 and they've become smaller ever since." The province is following a general trend being experienced in Calgary as well with falling sales, stabilized prices and increasing listings

Lai Sing Louie, senior market obfuscater in Calgary for Canada Mortgage and Housing Corp.

Reality:
Average price increases have become smaller, then reached zero and are now negative.

___________________________________________________________

"The reason you've got a month-over-month decline (in Alberta average prices) is that the sales price in April last year was extraordinarily high, It has come back just a little bit but it has stabilized."

Gregory Klump, CREA's chief market obfuscater

Reality:
People paid too much for houses last April in Alberta.

___________________________________________________________

But... but.. look at Fort McMurray!

"The one market where there's still a lot of price strength is in Fort McMurray (Wood Buffalo region). If you look up there, that real estate market still seems to be rising there,"

I also have a comment on the increasing prices in Fort McMurray. I can only present theory and conjecture but I still think it is useful. Here me out:

Even if the Fort McMurray's economy continues to boom, which many expect it too, it is still possible for real estate to stabilize or fall. Consider a $420,000 mobile home for a moment. Even a price of $320,000 would require an insane economy and more importantly insane rents. So even if you are sure the boom will last "at least another 10 years" there is an equilibrium price for a mobile home - and its not infinity. Look to Edmonton which has demonstrated a strong economy and falling prices.

I also want to hear from fort McMurray locals. I see "offer pending" on many questionable listings and I presume its some REALTOR method of creating hype and drama. What is a pending offer?

See previous post on Relaxing Housing Prices

Relaxing housing prices

Below are some interesting ways to describe falling real estate values in Alberta:

"Relaxing House Prices"
Edmonton Journal, May 07, 2008

"Softening In Prices"
Edmonton Journal quoting Marc Perras, May 06 2008

"The market is no longer bearing the prices that it did a year ago"
Ed Jensen, CREB, May 1, 2008

MLS® housing sales and prices remain stable in April
Realtors Association of Edmonton, May 5, 2008

Feel free to add your own.

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.

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.