Bob Truman, First Place Realty

Thank-you to Bob Truman and DailyStats.ca for providing accurate information on the housing market.  Your hard work speaks for itself!

It will be interesting how Ron Stanners and Lai Sing Louie spin this.  I have yet to hear them use the word 'speculation', when other realtor organizations have already identified this as being an issue.  This is one take on what 2008 might hold:

RE/MAX Housing Market Outlook 2008

1) Forecasts 0% growth for residential average prices in Calgary for 2008.

2) 11,000+ homes for sale in September 2007.

3) Speculation has been a factor in

the marketplace, with less experienced investors anxious to cash-out at the crest.

4) Residential unit sales are expected to fall six per cent to 31,500 units in 2008—on par with healthy levels reported in 2005.

5) Realization of sales targets will hinge on the first-time buyer.

http://www.remax-oa.com/MarketReports_PDF/Oct07_MarketOutlookRptPR/MarketOutlookRptPR2007_RPT.pdf

Anonymous; Human nature is a funny thing. We abdicate our responsibility to educate ourselves, and the consequences of that are to believe the media, or friends, or government. We then have someone to blame when things go wrong!

Any organization will promote themselves and try to cast themselves or their industry in the best light. Their members expect it and pay for it. The method employed to best do that is still up for debate. It seems to be a novel idea to do that by transparency and openness, which is what DailyStats is all about.

Bob

This will be an interesting month, thats for sure!

This is from the article that Anonymous posted. Interesting about inner city and condos.

Properties located within the coveted inner city continue to encounter solid demand and the occasional

multiple offer, given the limited amount of product

available for sale in the area.

Condominiums are also holding their own, a phenomenon best illustrated by the recent opening of a development in Eau Claire that saw virtually all 150 units, priced between $450,000 to $500,000, sold within a day. Condo conversions starting at $250,000 are also a popular choice, particularly with first-time buyers. The upper end of the market is reporting brisk sales—as much as 50 per cent ahead of last year’s levels. (end of copy from report)

I know I am biased being a condo lover myself. But my humble uneducated opinion is that condos are going to keep doing well especially inner city where all the revitalization of the surrounding downtown areas is blossoming. It's exciting to see all the green space upgrades and cafes and boutiques coming up.

Very exciting for us inner city dwellers.

It seems price are in soft landing stage. while inventory went down, sales to new listing ratio climbed up, we might see lights for the coming future.

Bob,

Thanks for the numbers. Much appreciated.

Anonymous,

The CREB release might focus on YTD increases, still reasonably healthy (although MoM and YoY trends suggest they will drop considerably by Jan '08). I suppose it could focus on the condo average (which presumably was influenced by the sale of some top-end places), but that would seem rather transparent after the recent switch to median-based reporting. Or it could emphasize the slight MoM inventory decrease (despite a YoY increase).

In any event, it seems prices are headed down for a while. Presumably this will drive the speculators from the market (most of what was bought it 2007 would likely be sold at a loss, continued drops are going to put 2006 purchases in jeopardy), and maybe we'll get back to normal in this province. Although I have no idea what "normal" actually is, of course :)

===================================================

Anonymous said:

5) Realization of sales targets will hinge on the first-time buyer.

====================================================

Thanks for the link Anon.

If sales targets hinge on the first-time buyer, with much more stringent mortgage scrutiny, how many potential entry level buyers can qualify for the average price of $4XX,000? I'm assuming that's why low end 500 sq ft condos priced at $2xx,000 are holding steady, that's all the first time buyers can afford.

Above are just my random thoughts, I'm sure there is a  gauge for quantifying the numbers of first time buyers against the overall number of buyers waiting in the sidelines to buy.

As for the inner city being in demand, what is the average profile of the buyer? what percentage are yuppie 2 income dinks settling in for the long haul Vs. speculating small  builders? I find the average small builder seems to always be the last to know of when the market is turning north or south.

My opinion is rampant speculation is not afflicting only the Calgary market, but the entire Canadian housing market. Even little 'ol Saskatoon has rocketed from average of 190K in Dec '06 to a recent average of 340K.  Indeed  other industrialized nations seem to be undergoing a similar affordability crisis, home prices in Australia and UK recently were the highest in their respective histories. The result of massive cheap global liqudity.  Canada lags the US market by a few years, we're where the US was in 2005. In 2005 I couldn't fathom how a 500 sq ft. loft in Las Vegas was selling for $5xx,000 USD. It just did not make sense to me then. Now 2 years later whoever bought that 500 sq ft. loft is sitting on a easy 20% hair cut. I think In 2 years we'll be where the US is now. The average home price in Calgary will settle around the 350K area. For those who purchased in late 2005, that's still a decent appreciation of around 50%. But those who bought at the peak in mid 2007, thats a hefty 30% loss in home value. Personally I'm in the sidelines watching the small builders. I'll be there to give them a helping hand when they get stretched, only it'll be at my price. Not theirs.

Frank said "If sales targets hinge on the first-time buyer, with much more stringent mortgage scrutiny, how many potential entry level buyers can qualify for the average price of $4XX,000?"

Frank, I don't think entry level buyers are buying average priced homes. They are buying at the low end.

According to CREB 50% of condos sold below 300K and 20% of SFH sold be low 350K - I'd say thats where the first-time buyers are.

An engineer can make $60,000/year within the first year or two in Calgary, and (looking at mortgage calculators) can 'afford' almost $300K.

Now whether most fist time buyers are better or worse off then our 'engineer' will determine if the low end drops.

Frank said " I'm assuming that's why low end 500 sq ft condos priced at $2xx,000 are holding steady, that's all the first time buyers can afford."

Oops - I misread your post the first time, and pretty much just repeated what you said about first time buyers buying at the low end.

Frank said:

===================================================

Anonymous said:

5) Realization of sales targets will hinge on the first-time buyer.

====================================================

Thanks for the link Anon.

If sales targets hinge on the first-time buyer, with much more stringent mortgage scrutiny, how many potential entry level buyers can qualify for the average price of $4XX,000? I'm assuming that's why low end 500 sq ft condos priced at $2xx,000 are holding steady, that's all the first time buyers can afford.

Above are just my random thoughts, I'm sure there is a  gauge for quantifying the numbers of first time buyers against the overall number of buyers waiting in the sidelines to buy.

As for the inner city being in demand, what is the average profile of the buyer? what percentage are yuppie 2 income dinks settling in for the long haul Vs. speculating small  builders? I find the average small builder seems to always be the last to know of when the market is turning north or south.

My opinion is rampant speculation is not afflicting only the Calgary market, but the entire Canadian housing market. Even little 'ol Saskatoon has rocketed from average of 190K in Dec '06 to a recent average of 340K.  Indeed  other industrialized nations seem to be undergoing a similar affordability crisis, home prices in Australia and UK recently were the highest in their respective histories. The result of massive cheap global liqudity.  Canada lags the US market by a few years, we're where the US was in 2005. In 2005 I couldn't fathom how a 500 sq ft. loft in Las Vegas was selling for $5xx,000 USD. It just did not make sense to me then. Now 2 years later whoever bought that 500 sq ft. loft is sitting on a easy 20% hair cut. I think In 2 years we'll be where the US is now. The average home price in Calgary will settle around the 350K area. For those who purchased in late 2005, that's still a decent appreciation of around 50%. But those who bought at the peak in mid 2007, thats a hefty 30% loss in home value. Personally I'm in the sidelines watching the small builders. I'll be there to give them a helping hand when they get stretched, only it'll be at my price. Not theirs.

I agree with most of your comments Frank.  I've seen some of that Vegas crap cross my desk as well.  The $500k suites are probably going to drop by 50%, not 20%.  They're barely moving product though so the reductions will be a slow burn.

As far as saying that Canada lags the United States, I would disagree strongly.  There is no Canada market.  There is no US market.  Markets are LOCAL.  Calgary and Toronto are different, Las Vegas and Montreal are different, Miami and Boston are different.

Underpinning home ownership is clearly the wide availability of low cost debt.  Standards are different in Canada and the US. I don't believe that Canada is heading towards a subprime shock like America.  Canadian lenders are tighter and Canadian borrowers are more conservative.

My wife and I are first time buyers, and surprise were both engineers who decided to try save up the 25% down payment for a home starting in 2004 and watched the market rocket away from us. We'd be in a different place if we had bought then, but our crystal ball malfunctioned however we did learn how to wait and watch.

Im sure theres more than one first time buyer out there like us, who was frustrated by the rapid rise and perfectly content to watch from the sidelines a little longer. That said since we watch the market pretty closely and the stats daily(Thanks Bob) most professional first time buyers like us and we know a fair amount in the same situation are starting to land in and around the 400-460 range.

The biggest thing we've noticed in our own looking and we've done alot, is the number of sellers who are in dream land. Im not suggesting that the market is falling to hell, but that many of home sellers in the 400-500 range are overvaluing their homes roughly 20-30k compared to other similar homes with better pricing. That and the number of vacant homes, or vacant homes of obvious speculators can produce a few good laughs some day.

If we haven't found the right home for us in the next month I think the most interesting thing will be to watch what the vacant/speculated homes do over december when most the people who can choose not to be on the market will taper off.

Its going to be an interesting few months.

Kyle; Thanks for telling us about your experiences. I agree with you about the overpriced homes, but I've been seeing some pretty dramatic price reductions that are bringing homes more in line with the realities of the market. Just today I was showing a house in Valley Ridge that had a $35,000 reduction yesterday, and it was a very nice place. It is one of those homes that would have sold in one day back in the spring. We looked at eight homes in total, and at least six of them are still "out to lunch." Keep in touch.

By the way, for anyone looking at houses in Valley Ridge, pay close attention to the roof. Some of the homes have untreated pine shakes.

Bob

Hey Kyle,

Thanks for sharing your experience. I am in the same boat as you. I'm a first time buyer. I work in the financial industry and my suggestion is to wait. I will be also waiting. I am in no hurry as my downpayment gets bigger every month I save. I will wait to see what happens in the next 3-4 months before making a decision.

=====================================================

vultur said:  

As far as saying that Canada lags the United States, I would disagree strongly.  There is no Canada market.  There is no US market.  Markets are LOCAL.  Calgary and Toronto are different, Las Vegas and Montreal are different, Miami and Boston are different.

Underpinning home ownership is clearly the wide availability of low cost debt.  Standards are different in Canada and the US. I don't believe that Canada is heading towards a subprime shock like America.  Canadian lenders are tighter and Canadian borrowers are more conservative.

=====================================================

Vulture, I agree with your key points that Canadian mortgage standards are higher and real estate is always local, however I do think real esate is no longer as much a local affair as it once was.

Let me explain. The premise is we live in a global economy. So, if we break the income of the Engineer, some % of that salary pie chart depends on our largest economic partner, the US. Especially with AB economy so tied into the energy exports south of the border, we are extremely vulnerable to a slowdown in the American economy. Just ask our brothers in Southern Ontario. Everyday small companies in Southern Ontario  are shutting down shop. My friends in lumber make a similar comment. With New Orleans nearly built up and the American housing builders cutting back, lumber prices shifted lower ( factored in with supply caused by the BC beetle infestation ) effecting many Northern BC, ON and Quebec lumber communities. So, real estate is no longer as local as it used to be.

So, I ask, what do you think will happen if the US economy slows down? ( http://www.ft.com/cms/s/1ba245a8-88ac-11dc-84c9-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F1ba245a8-88ac-11dc-84c9-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.opalesque.com%2Fmain.php%3Fact%3Darchive%26and%3Dshow%26nr%3D1505%26anchor%3Dtopic39963

) American consumers stop driving as much. Will there be a slowdown in oil consumption? Add the Royalty factor in, how will that effect workers in Calgary? .

Even with oils close above $95+, the oil sand majors will have the same profit margin when oil was hovering at $40.00. With oil exports being pegged to the USD, the Americans have been stealthily exporting a good chunk of their domestic inflation into the AB economy ( and the global economy for that matter).  My opinion is when the US does sneeze, Canada will get pneumonia.

I like your change in format for the stats Bob.......more info in the same space.

Carioca; Thanks. The format is more efficient, I think. I had coffee with another realtor from my company yesterday, and I'm hoping that he may do some of the daily numbers on his website.

Bob

"Buried" on page C4 in todays Herald is the following......

------------------------------------------------

Talisman cancels a $1 Billion project which was announced in August....due to the royalty changes. They are also cutting spending $500 million next year for the same reason.

Canadian Natural Resources will cut drilling between 30-50% next year......same reason.

Petro-Canada is not cutting it's oil sands involvement.....but expects costs to rise......

Imperial hasn't made a decision yet.

In 90-180 days you'll perhaps start to see the effects of these cuts. Are more to come ?

=====================================================

Sean M said:

Thanks for sharing your experience. I am in the same boat as you. I'm a first time buyer. I work in the financial industry and my suggestion is to wait. I will be also waiting. I am in no hurry as my downpayment gets bigger every month I save. I will wait to see what happens in the next 3-4 months before making a decision.

=====================================================

Were also likely waiting, I just leave the opportunity in there that we might buy if we find the perfect house. Convincing wives that they should wait a few more months when they fall in love with a home can be a tricky operation.

In the mean time like yours our downpayment continues to click away in a high interest account with monthly additions.

One thing that we've noticed that is interesting especially in areas like Tuscany is the number of sellers who have built and are taking possession of their new homes in the next 2-3 weeks. I think when these people start to pay the carrying costs on two homes it will get interesting, as several of them counted on selling their greatly appreciated home to finance their new one. We actually heard from one seller last week that the new home builder had offered him a 15k reduction on his purchase price if he would reduce his current listing by the same amount to hopefully get his current home sold and ensure he wouldn't walk away from his deposit.

Interesting comment about buyers taking possession of homes in Tuscany.  Do you have any more information (higher end homes being build or more of starter homes)?  There's already a tonne of listings in Tuscany, and some of the most aggressive price reductions that I've been seeing.  This will be interesting to see the effect.

Carioca

Carioca said Talisman cancels a $1 Billion project which was announced in August....

Newspaper said

Talisman Energy Inc. is pulling a $1-billion-plus package of natural gas pipeline and processing assets off the auction block after the province raised oil and gas royalty rates.

Carioca said

They are also cutting spending $500 million next year for the same reason.

The newspaper said

But the amount will likely be less than the $500 million Talisman had warned would be slashed under earlier royalty proposals, officials said.

Here's the link best read it yourself

http://www.canada.com/calgaryherald/news/calgarybusiness/story.html?id=5ce7f2c6-1235-4a1c-a240-08def1bcd1c4

Im guessing the comment 2 above is another kyle. My comment about Tuscany is about the number of Sellers in Tuscany who have built somewhere else in the city so they're selling their current home to move into their new built home in the next two to 3 weeks. We hit some of the Open houses there today since we were stopping by and of the 3 we hit all 3 were being sold by people who were about to take possession of their new homes.

If you want to see an area thats mostly new building but has heavy selling going on look at Panorama hills in the NW, or Cougar Ridge in the West. One home we saw in Cougar ridge that was new built and never occupied had been on the market since august and reducing in price the entire time. The guy hadn't even bothered to print up new sheets from his original price in the 515's, below it were about 7 price reductions all crossed off one by one until the current at 450.

bob,first thanks for the info you provide,it really helps. congrats on being ,in my opinion and many others, the leader in the RE market in calgary in providing information. on that my question would be.. Have you encountered any hard feelings or professional dispute with  CREB regarding statistics, since now they have to be more on their toes??

Basically what iam trying to say is that since your stats are up to date, accurate , and people turn to, you have kind of forced others to try and catch up, and keep up.

Kerry;  I have not broken any of the rules that I am required to adhere to in order to keep my realtor's licence so CREB has not said anything to me. If anything, there's probably grudging admiration because someone had the initiative to do something creative and helpful. It's most likely looked on as an inconvenience now that they have to be a little quicker with their stats at the end of the month.

Bob

A couple of people have commented that all real estate is priced locally.  Real estate is a function of household income, rental incomes, interest rates and local amenities.

Almost every zip code in the United States is experiencing downward real estate prices (except for New York).  So what is the underlying fundamental factor that is causing real estate prices to fall on a macro level?

An examination of prime interest rates in both our countries reveals that our monetary policy is closely tied together.

Low: Canada Prime Rate - September 2004 - 3.75%

Now: Canada Prime Rate - November 2007 - 6.25%

Low: US Prime Rate - June 2004 - 4.00%

Now: US Prime Rate - November 2007 - 7.50%

Both of our countries have had artificially low interest rates in mid-2004 and now have seen interest rates close to double since then.  To even the casual observer, our interest rates move in tandem with the United States. Long term averages are roughly 7ish%.  So, although interest rates are relatively high compared to only a few years ago, they are now in line with the average long term range.

So if you accept that real estate prices are a function of interest rates, and that interest rates in the United States and Canada closely follow each other.  The conclusion would be that Canada and United States have similar real estate pricing trends.

One way to examine the conclusion of this statement is to assume that the stock market is efficient and observe the growth rate of REIT index's in Canada vs. United States.

CDN S&P/TSX REIT Sector Index

http://finance.google.ca/finance?q=BGIIREIT

DOW JONES US REAL ESTATE INDEX

http://finance.google.ca/finance?q=INDEXDJX%3A.DJUSRE

If Canadian and American real estate were not related, then the Canadian S&P/TSX REIT index should continue to outperform the American counterpart.  However, this is not the case and both are down from the peaks earlier this year.

=======================================================

Anonymous said:

A couple of people have commented that all real estate is priced locally.  Real estate is a function of household income, rental incomes, interest rates and local amenities.

=======================================================

Well put. Today there is a wide divergence between the cost of carrying a new mortgage and renting the same house. Speculators  who bought multiple homes in the most recent years are now resorting to renting out the properties below their cost of carry. Today I can go out and rent a nice home at a cool 20% haircut from what it would cost me to buy it. This divergence is an indication the market is currently a little over priced. Either rental rates go higher, or the cost of carry comes down to reflect  market rental rates.

Bob, I posted the link to your website into an automotive club chat forum last year.  Low and behold when you changed your format this month someone immediately noticed.  Seems like your work is definitely being missed now.  

New home price in 2008 :

http://www.canada.com/calgaryherald/news/calgarybusiness/story.html?id=f19638f9-d70d-4efc-a3a4-19d3ffa42bd2

Heather, good sleuthing.  Carioca is pretty quick to blame others for their bias, but the irony of his charges are clearly lost on him.

I feel for natural gas and service companies like precision drilling, but the fact of the matter is that for the large diversified oil and gas companies, its business as usual, with some well overdue right-sizing of company staff levels.  The federal income tax cuts wipe away the negative affect of the royalty review.  And natural gas companies aren't being hit by the royalty review, they are hit by the seemingly ever depressed natural gas price.

I said this pre royalty review release, without being able to provide my sources, but everyone (aside from those who chose not to, obviously) can see the effects of the royalty review as is the reality, now.

Hi Bob,

I really like the information you provide on your site.  Thank you!

In fact I would visit your site many times a day to see if the stats were updated and to browse through some of your listings. I also belive the over/under stats are a crucial stat required for a savy house hunter!

With the change to weekly stats and the removal of the over/under I will likley only visit your site once a week.

Anyway I just thought I would let you know that the daily stats also provided a daily draw to your site.

Thanks

Stats.Junkie; I agree that the traffic to my website will be down without the daily updates, but I needed a chance to catch my breath. I've been going non-stop for the past eighteen months. I didn't realize what a monster I would create with this website! With such an effective traffic builder, I can't believe some other realtor hasn't done something similar.

Bob

YOUR WEBSITE IS SADLY OUT OF DATE BY A WHOLE YEAR!!

BB; I wonder whose site were you looking at?

Bob

Decline from $505K average price peak to today average price is VERY significant for future expectations. The demand is there, just not the free for all financing. Lack of securitization opportunities is putting a pretty significant dent in speculative buying. But that is stating the obvious.  

I really miss your weekly stats. They are an interesting predictive trend. I do understand that the updates are time consuming, so thanks for the hard work to date. Now we just have to settle for the monthlies. Thanks again.

Len; The stats will be updated weekly. Nov 8(which covers Nov 1-7) will be the first day for the weekly update.

Bob

Wow, finally something I know a little about. As a woman I gotta say that for these companies to finally want to get into Canada and to make Calgary their jump off point is HUGE.

"Louis Vuitton, Tiffany, Gucci and Apple" and more

It says a lot about us that these high end stores want to start here. Even the guys out there must recognize those names. Go Calgary Go.

From the herald today

Calgary's booming economy, a young population and high levels of disposable income have some international retailers looking at this marketplace -- some overlooking Toronto and Vancouver -- as their first entry point into Canada.

http://www.canada.com/calgaryherald/news/calgarybusiness/story.html?id=5dd5e36c-dd82-4d67-94a2-5d19d1402732&p=1

Interesting article in this month's MoneySense magazine (November 2007) on page 11.

Are Home Prices Peaking?

"...'Conditions from Manitoba eastward are not a cause for concern,' writes Derek Holt, RBC assistant chief economist, 'but conditions in Saskatchewan, Alberta and British Columbia warrant caution.'"

Then Mr. Holt goes on to say:

"...'In Calgary, there's tons of land that they can build on, so one would think that the price of building new housing would be a ceiling on how high prices can go. That's a market I would worry about.' ..."

The article proposes the following 3 indicators to help determine if local housing prices are "primed to pop":

1. Affordability

"Both cities underwent a significant erosion in affordability conditions across all housing types as house price gains continued to outstrip income gains. Affordability levels in Calgary are now comparable to levels reached in the late 1980s at the peak of the housing market bubble and this has sparked some concern about the sustainability of prices. In Edmonton, detached, two-storey and townhomes bore the brunt of the affordability squeeze, while the slide in condo affordability was relatively modest. Edmonton’s affordability levels had already surpassed peaks reached in the late 1980s in prior quarters. There is also concern that this market may be in unsustainable territory."

Source: http://www.rbc.com/economics/market/pdf/house.pdf

2. Price-to-rent Ratios

"While current conditions are still far more affordable than in neighbouring British Columbia, price-to-rent ratios show that valuations have accelerated at a pace comparable to Vancouver and Victoria. The chief distinction is that the acceleration was more concentrated in the last three years. With house prices sharply outpacing both rent and incomes for three consecutive years, there is now substantial evidence of an overvalued market. Fundamentals are still supportive of an overall healthy market going forward, particularly with oil breaking new highs, but the steep acceleration in the ratio is signalling a market ripe for moderation in the coming years."

Source: http://www.rbc.com/economics/market/hi_city.html

3. Sales-to-new-listings Ratios

"If sales drop to less than 40% of new listings, then it's a buyer's market and prices could drop." - from article

Calgary Sep 2007 - 36%

Calgary Oct 2007 - 42%

Source: Bob's stats (Thanks Bob!)

Just some food for thought.  Should be an interesting 2008!

Hi Bob......!!

I predict she will go with someone who "high balls" her, unfortunately for you (hope I am wrong).......sellers tend do this it seems, especially in falling markets........I get this all the time when people want to trade in their Porsche/MB/BMW whatever, or I am trying to buy it......they say things like "John at such and such car dealer said he'd give me $XXX,XXX"......to which I reply "Why are you here then....you should be at the bank cashing his cheque".......LOL !!

I'm gonna write a book some day.

Is the right time to buy a single house now in Calgary? The price is going down, should I wait for a couple of months?

What do you think?

MikeD; I'd start looking around and be ready to pull the trigger when the right opportunity comes along. It's not that easy to find the perfect house despite all the listings. I do expect the prices will continue to fall for at at least two more months, but I also expect there will be some incredibly good deals from sellers that absolutely have to sell. See my answer to David for more insight.

Bob