Bob Truman, First Place Realty

In my view, December is a busy month for people, buying gifts, attending parties, boxing day shopping and then the new year. Real estate activity will be rather slow in this month ( what is the history data for December like?). The result smaller base number of transations will not give realible statistics indications. Having said that, we will have to consider who are there selling their homes during Christmas. He who does so must be desperate, and will be rather weak in terms of negotiation. That will lead to a lowered average house price.

one more information I want to contribute.....I was at a Jayman show home yesterday. The sales lady said that a real estate agent is buying 6 lots at one time for her clients.

Thanks again Mr. Truman, for another interesting topic.  I have statistics from the past 7 years charted on an excel spreadsheet, and not once in those years has the number of new listings in December been greater than number of new listings in the November of that year.

And not once has the number of sales in December been greater than the number of sales in the November.

So my opinion is that we're only in the typical seasonal slowdown.  The activity we're seeing today in the Calgary real estate market is so typical of previous years.  The doom and gloom printed in the media is nothing more than some bored reporter trying to make a living by writing a story based on perhaps a week's worth of data.  The overall picture (if the reporters ever researched it) is pretty much crystal clear.

It stands to reason (it's purely logical) that by the end of December, there will certainly be fewer listings than today.  With Christmas in the air, why in the world would anybody list their home in December?  And those listings that are about to expire, won't re-list until January at the earliest.  I'd guess that inventory as listed on CREB's website will be somewhere in the area of 4500 at the end of December.

But as I pointed out in your last blog topic, just watch what happens January 2 in '07.  The number of new listings will skyrocket, and so will the number of sales.  The flurry of activity that will start Jan. 2 will be a mind blower (in my humble opinion).  One can almost feel it in the air.  There's still a lot of electricity in the air in Calgary and Edmonton.  Once the flurry starts up again, I believe the pace will once again become a frenzy almost overnight.  Although activity is very slow right now, it's only a seasonal thing, that has happened every year in Calgary for the past 800 years.

Like a huge ship on the ocean that has momentum, the real estate market in Calgary (all of Alberta for that matter), is not going to grind to a halt anytime soon.  Bob, I think your opinion of price hikes in '07 of 5%-10% is low, although I certainly respect your opinion. But I firmly believe prices in Calgary will be at least 15% higher on this day next year.  That's not my opinion based on 'hope', just my firm belief based on fundamentals, as I see and interpret them.  I could be totally out to lunch, but I doubt it.

Thanks again for setting up this blog.  It's super, and is going to gain a lot of momentum itself.

I think 15% or higher gain in 2007 is based on hope not fundamentals. Calgary has hit its peak in June. The number of listings jumped from 2000 to 6900 in couple months. The educated sellers realized that was the peak, and started selling. Lots of sellers still can't accept the reality (yet), and hoping the price will still go up and up. The price is driven by the market not hope. When people realize this is pretty much the peak, they will sell. Starting late Jan/ early Feb 2007, the active listings will skyrocket causing the price to stay the same or lower.

As I said, my guess of a 15% increase in prices in '07 is based on fundamentals, not hope.  I'm wondering what 'peak' Tom is referring to.  Prices didn't peak in June.  New listings didn't peak in June.  Sales didn't peak in June.  The only thing I can see that peaked in June was the rate of increase year over year.  That doesn't point out a "peak" in June.

The number of listings has fallen from 6900 to 5400 in a heartbeat.  This is only a seasonal phenomenon.  It's to be expected every December.  There's no mystery nor forcasting value in that fact.  The number of new listings will fall again this month as in every December.  Why in the world would a person list their home in December?  But December doesn't stop people from buying, with a planned move sometime after the new year.  People don't stop buying in December, but they stop listing in December.  That's why the sales/listings ratio is usually near 95% in December.

But Tom is right about the number of listings in the new year.  But he forgot about the number of sales that will take off like a rocket in the new year, as they do every year.  The active listings (inventory) will plummet, starting Jan. 2.  I'm sticking to my guns on this one.

I'll take the opinion of a guy named "Al Bundy" with a grain of salt.  The listings that fell were mostly ones that expired, i.e. speculators trying to get the last of the lemmings to cough up an unrealistic price for their shantis.  Agree that active listings will rise with the speculators coming back out to play ball in the spring but I predict that they will be joined by many others sensing that the "rising tide" is now going out and they don't want to be marooned on the shore.  The popularity of the 35 and 40 year mortgages is a sure sign that liquidity is drying up and as such, so will the prospective buyers.  I'm with Tom here, no increase in the cards for Calgary, and I'd bet that a 15-20% decrease is in order.  Amazing to see the activity on Bob's invaluable "Under List Price" stats!

For those who are doubting the Calgary resale market, have you not read recently how the experts, such as CMHC, are predicting a more modest increase in home values for 2007 of approx. 10%?  The articles are easily accessible right here on this website.  

Do you really think that the market will decrease with the following factors at play?:

*In-migration of 25,000/yr

*Salaries increasing

*Oil @ $60+

*No more land to build!! (until Calgary annex's more)

*Low interest rates (in fact, fed left rate alone today and hints that next year rates will drop to spur on economy as the forecast is dismal for the economy in '07)

*Longer amortizations available i.e. 30-40 yr mtgs thus bringing more buyers into the mix

What are we missing here?  The market will be healthy next year.  Not crazy like in '06, but defenitely not a downturn of 10-15% that some here are predicting.  Read the articles contained in the "What's New" section of this website written by the experts.  All of the answers are there.

In-migration will slow because people can't afford to live here any longer.  We need blue collar workers - how are they going to afford Calgary pricing?

There is plenty of land if you consider how low density this city really is, and plenty of supply of new houses.  14,000 housing starts this year for 25,000 people coming to the city.

Salaries are not increasing across the board at the same rate as the cost of living.  The affordability index has dropped and the irrational exuberance index has risen.  

Oil @ $60 today does not mean Oil at $60 tomorrow - with an economic downturn in the US consumption, and prices, may just drop despite what OPEC does.  Where is natural gas at again?

Ask yourself why 30-40 yr mortgages are on the scene and then ask yourself if you would get into one, or choose somewhere else to live where your marginal income might be higher.

Trusting CREB or CMHC with recommendations on the housing market is like trusting Ford or Chevy on the car market.  Of course things will be good next year, it's their bread and butter!  Oh, and did they have any idea that the price increases in Calgary would be as large as it is has come to be?  Consider that answer along with their ability to see the coming downturn.

I agree with rationalnational. I don't know why Al Bundy didn't know the house price was at the peak back in June? It was pretty obvious for those watch the market closely. You can buy a similar house that was sold back in June for 10-15% less now. Maybe Bob can comment on that. 6900 to 5400 listings was mostly due to expired listings, not that they were sold.

When the oil @$60+, Calgary will still be good. But, it doesn't mean the house price will go up by 10-15% again. When the housing market was crazy in mid 2006, the oil price was around $78. If the oil is over $80, sure the house price will go up again in 2007, but not when it's still $60.

Yes, salaries have increased so as the inflation. The spending for grocery, transportation, daycare, restaurant, etc increase every month. Paying the same mortgage is actually taugher than before.

LOL ... the Ford analogy is funny but so true. What would you say if you were the CREB president? When the active listing is low, "the market is very strong". When the active listing is very high, "the market is very strong". When the average price has dropped $20k, "the market is still very strong". In the U.S., the real estate board has spent hundreds of thousands of dollars to put commercials to tell people this is the time to buy.

OK.  So everyone that publishes an opinion is dead wrong?  What about economists that don't have a vested interest in how the market does?  I'm sure you've read some of the same reports that I have which they state that the Calgary market has so many great factors going for it that they can predict an increase in resale value of appox 10%.  

RE: 25,000 per year.  People will continue to flock here as the jobs and incomes will be plentiful, and mtg options will also make it attractive (see 40 yr mtg).  Also, interest rates are predicted to at worst remain steady and likely decrease.  guess what this means?

Also, did you ever consider that CMHC would put out 30-40 year mtgs because they also realize that prices are escalating and affortability may be an issue for some, so they can attract more buyers and thus high insurance premiums?  

Consider this point of view:  If CMHC predicts that prices will go down, they win because more people will step up to buy next year, thus more insurance premiums.   If they predict prices will go up, they still win because people will take on the 40 yr mtg or buy because soon they will be "priced out of the market".  Same goes for the likes of REMAX, who predicted a 10% (approx) increase in resale next year.  The buzz is created both ways, and both ways the "Ford's" win.  Not so sure why this is LOL.

"There probably are isolated instances of comparable homes selling for 10% less in Nov compared to June. "

Exactly - they are isolated, just like the instances of hefty price increases since June.  It means very little.

I've been noticing some of the "bears" suggesting that we disregard the median and average price statistics in favor of some anecdotal stories of dramatic price drops in Calgary.  This is nonsense.

Well, the bulls and bears will have much to discuss in the coming months.  The prevailing theme amongst most bulls is that the market will continue to go up based on recent advances and that the market will simply "be more expensive next year".  In my opinion, the temporal influences on the market that fuel this opinion (supply shortage, excess capital due to more disposable cash, easier access to debt financing, high oil prices etc.) were not, are not, and will not result in long term stability or continued upward pressure on the market and that a correction is starting, and will continue to advance.

Actually rationalnational, the prevailing theme amongst the "bulls" that the market will go up is more than just based on recent advances and that it will "be more expensive this year".  Give us some credit.....we've put a lot more thought into it than that!

BTW, as you've probably seen by now in the city's major newspaper today, some are indeed calling for a shortage of housing supply well into 2007, and activity to pick up again in 2007.

You mean the comment by Ted Zaharko, broker/owner of Royal LePage Foothills Real Estate? This is like trusting Ford or Chevy on the car market analogy that "rationalnational" mentioned. Is there any comment on the newspapers made by someone who has NO conflict of interest?

Hmm ... I think the market might go up again since there are quite a few people who really believe it will. It will be interesting to see their intension if there is a poll for counting:

A: You think the market will go up, and you own more than one property

B: You think the market will go up, and you own one or none property

C: You think the market will go down, and you own more than one property

D: You think the market will go down, and you own one or none property

Good commentary here from a moderately independent source:

http://www.td.com/economics/special/ca0906_home_prices.pdf

A quick quote: "the recent pace of price gains in these (Calgary, Edmonton) have been completely unsustainable and will eventually come back to earth...."  

The question is, when, and how quickly.