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Well, inventory continues to grow and sales continue to go down. I think the market is waiting, either for good news or bad. In the absence of good news soon, I would expect to see a more substantial drop in prices in the next few months. The question is, which month will be the first one to show a sharp decline in prices? Will in be this Spring or will it be in the Fall - September or October say.

Vlad; With a name such as yours, I would expect to see one of those infamous Five Year Plans!

Prices staying the same two months in a row, and almost the same as a year ago. After the turmoil we've been through in Calgary, this almost seems monotonous.

Hey Bob, is there a chart handy with the average or median price per sq ft for condos in Calgary going back say five years?

I'll be timing the market based on my lease expiry, and I want to ensure that I don't overpay.

Thanks!

Sol; Unfortunately, I don't have anything on my website that is similar to what you want. If you're working with a realtor, they should be happy to do it for you. -Bob

Well I have to agree with Bob on this one too, there will be some downward pressure on prices. However I think theres a lot of people out there that will be fine as many are still way ahead from 5 years ago. So a bit of reality of the current market is a wake up call for those that are not priced right.

As for our plans on buying , we have moved on and have given up as we just can't afford it. Even though we got approved from the bank. It just to risky , if we want to have a family a big monthly payment would be stressful!

Bob,

While the "average price" stayed pretty level, I'm hearing that there may be some downward movement in entry level housing. Do you see any truth in that?

Norm; Let's look at the numbers for combined single family home and condo sales under $300,000:  In April 2007, 16% of sales were under $300,000. In April 2008, 20% of sales were under $300,000. The answer to your question is yes if you are looking at percentages.

There is also a lot more to choose from. There are 1689 homes with a list price under $300,000. Last year in May, there were 715.

Good to hear from you. Sounds like Saskatoon is starting to come back down to earth. How much would a nice bungalow near the university cost? How much are the homes along the river that have a view of the Bessborough? I used to live on Clarence Ave when I went to the U of S.  -Bob

There seems to now be a consensus on here for the most part -- how can there not be -- that there's no reason to be really bullish on the r.e. market in Calgary now. Most would agree that the downward price pressure is going to lead to, well, lower prices.

So I for one have been turning my thoughts to the question of -- by how much? What median prices would support a market where prices would likely be steady.  I know it's extremely hard to say, but there are a lot of informed people on here, and I'd be interested in your views.  I haven't been around long enough to even venture a guess (lucky me, my wife and I bought our first piece of real estate in... March 2007 - ouch; an R2 view lot in Montgomery, with a wee house. Thankfully we're in for the long haul, though we had hoped to knock down and infill sooner than I now think would be wise... hope our kids, when they start coming, like sharing a small room! :) Until then we love it, and thankfully can afford it very comfortably).  

(PS. I know this exercise is like predicting the price of oil, but people still try!)

The Calgary Chamber of Commerce just released a report looking at the City's land development policies and regulations and the impact on Calgary housing affordability.

Interesting section on affordability starting on pages 11 - 21 of the PDF. The report has measures from 1980 - 2007.

www.calgarychamber.com

Bob, your topic yesterday was so prescient. All the points you raised were confirmed by the Herald's editorial board.

I think the unfortunate death of those 500 ducks may be the wake-up call which tells our politicians that worldwide public opinion matters to the economy of Alberta.

Bob, I think I know the answer to this, but it would be enlightening to all to get your response to this question posed on the bubble blog

"Do you think B.Truman would refuse a listing or sale from anyone realted to the Big Oil Companies?:)"

Carl; I'm very happy to answer that one. The question itself is predicated on an assumption that people have to be adversarial, and that's not me.

First off, I make it a point to never ask people when I meet them what they do for a living, but in the course of spending many days with a person, you usually end up discovering this information. It so happens that recently I was helping an O&G industry exec to buy a house. We talked a lot about environmental issues. Guess what book he was reading at the time?  The Weather Makers.

It's not a question of enviros vs. industry. The leaders of industry are simply trying to get the best return for their shareholders within the rules of engagement that the government(that's us, the people) gives them. It's up to the government(that's us) to make some strict rules and enforce them. It's the only way we can pass on a healthy planet to our kids.

Letting industry operate as if this was the wild west will not be in their best interests ultimately, because, as we have seen with the 500 ducks, world opinion will shut them down.

I believe we can set an example through our own lives and words. Insulting and berating someone is not conducive to creating a constructive dialogue. The president of Syncrude is going to respond much better to a reasonable person engaging in constructive dialogue(and being shown that 500 dead ducks will cost him and his shareholders billions). It always comes down to $$$$ in the end.

Now, the flip-side of the question is, would the president of Syncrude come to me, knowing that I'm an environmentalist?

Back to the original question. I believe it was asked with a mocking attitude, suggesting that I will sacrifice my principals for money. It's a flippant way to treat a serious issue. I will let each and everyone of you decide that answer for yourselves, based on the evidence.

Bob

Just for fun, here's my guess Darco. It looks as though average prices have dropped about 6% from their 2007 peaks, both for condos and houses. I would guess that they have a ways to go before they go up again, but I don't foresee a catastrophic free-fall. My guess is we'll a drop of about 15% from the peak.

               Condo               House

           2008     2007     2008     2007

Feb 311,812  301,812 471,696  448,557

Jan 311,232  287,299 455,297  432,877

            2007     2006    2007     2006

Dec 304,719  280,637 444,769  405,352

Nov 312,710  282,781 462,134  408,696

Oct 331,617  290,487 452,254  423,870

Sep 321,614  292,796 470,888  426,622

Aug 320,790  283,547 485,914  429,855

Jul 318,582  276,463 505,920  418,998

Jun 323,269  281,176 496,890  424,585

May 332,237  273,407 487,523  415,815

Apr 329,429  255,937 474,250  388,585

Mar 312,280  236,549 479,914  381,571

Feb 301,812  217,212 448,557  360,917

Jan 287,299  209,484 432,877  339,095

Bob, your answer to the above question was handled brilliantly.  You could have flown off the handle at such a moronic question, but you held your calm steady ground as always.  Well done!  

I agree, that was a mean spirited, mocking type of question asked by someone who has nothing better to do than to try to sully the good reputation of a good man.

I don't think you should even be expected to respond to such a question, but being the upright good guy you are... you stood up and answered with the truth.

You have the respect of myself and likely 99% of the people who have ever come across this blogsite.

Al Bundy

Okay, so the CREB April stats package is out...

"The market is no longer bearing the prices that it did a year ago" says Ed Jensen.

Was that a tacit admission that prices are falling???

From the CREB????

Someone pinch me!

Oh, and check out the absorption rate graph...to infinity, and beyond! Lol.

Bob,

Thanks for the details.

"How much would a nice bungalow near the university cost?"

1,200 square feet would set you back $430-$480K depending on condition.

How much are the homes along the river that have a view of the Bessborough?

1700 square foot two-storey on a 25' lot for $690,000 or , we also have 3,400 square feet on a 60' lot for $1.7 million. If that one sells it will be a new record for Saskatoon.

Prices have been increasing through the first four months of the year but inventory is increasing every week. We're approaching 850 listings which is about four times what we had at this time last year. I'm actually looking forward to some stabilization.

Bob, that's indeed a surprising statistic about the average price of "pending" sales.  I'd be curious to know approximately how many "pending" sales are involved in this stat?  I'm wondering if it's a large enough sample to impact the overall average price "in the past 30 days" very much... as these "pendings" firm up.

Al; I checked this out and found there was a pending sale on a listing priced at $7,995,000. Without that listing, the average pending price was $515,000. Furthermore, the pending date was in August, so we'll be seeing it for a long time. -Bob

Question for anyone? Why does the CREB chart in their April report show the average price in July 07 to be $447,000, yet there July news letter states it was $505,000?

Wonder; The chart shows Total MLS whereas the $505,000 is single family homes only. -Bob

Bob,

Pending sales according to your colleague Mike is falling for now. Since yesterday, there were 310 pending sales which is down from the 350+ that we saw in the past months. Do you have any information regarding median prices for the pending sales? I believe that's more of a true statistic to look at.

An ~8 million dollar home sold here in Calgary. Maybe Dion Phaneuf and Elisha Cuthbert have decided to move in together?

FreeSpeech; The median price of SFH pendings today(Sunday May 4 at 9 a.m.) is $426,000 and the average price is now $530,000. There are 326 pending sales.  

Hi Bob,

The Absorbtion Rate in the published CREB data has changed. I am trying to figure out what has happened to make this change in providing data. It used to be between under 2 months to under 3.5 months for a balanced market. Now, nine months later, the new scale for a balance market has risen to ~2.3 to over 4 months?!?

I am sure you have noticed this too and was hoping you could help me understand this change?

thanks,

expat74

expat74; I don't know the answer to that one. Perhaps someone who has the time to investigate could give CREB a call and get their explanation, and fill us in. -Bob

FreeSpeech,

you didn't understand Bob. By the way Bob is the best experienced statistic man known in the city.

Bob is saying that

"The average price of SFH pending sales is now at $538,811. That's the highest it's ever been. The previous high was on July 30, 2007 at $533,591".

may be you guys should give us average people"non realestate pros" some credit for predicting the new stats by creb. prices will continue to decline, they have no where else to go but down, pending price is useless, i think. so if pending price is 550000 that means average price will become that. i think now. all indications are the market is taking a dive and will continue to.. and finally all the top brass at creb and that lou sing fling have admitted that the market is taking a turn. people are leaving calgary and alberta because they can't afford these nonsense prices.

newguy; It doesn't always hold true, but usually the pending sales will tell you where the prices are headed over the coming week. Let's see what happens. Today the average sales price for May is $462,467 and the median is $414,000. The pendings would indicate those will both rise in the coming week.  -Bob

There will not be a continued exodus of people from Alberta.  Theres a balancing point.  People have been leaving Alberta and returning to Saskatchewan and the East Coast.  Vacancy rates are rising in Calgary and rents are and will come down until landlords can fill their properties.  As housing prices continue to pullback and rents decrease, people will continue to come to Alberta to work and live.  Oil is hitting new highs daily.  You can make arguements that the benefits of high oil arent hitting all job sectors but when oil hits $150 and keeps climbing towards $200, are you telling me housing prices will continue to decline?

in response to newguy - does this mean we will be buying 3 bedroom houses for $29.95 anytime soon? does this also mean i will be the only person driving on Deerfoot in a few months when the market dives? ;)

unfortunately a house or condo construction has material, labour and administration costs, as well as profit margins for all of the above (and for each company/subtrade involved). so ultimately this commodity is worth something. and since not everyone is leaving town i would say that, yes the market is in decline - but the sky isnt falling and is unlikely to do so. at the same time - people looking to make money  should be investing elsewhere - the returns are much better :)

Obviously the market is going through a "correction" at the moment. That seems inevitable given a) the unbelievable growth in 2006 and 2007, and b) the crisis/recession in the US. However, overall, I see enormous potential in Calgary. I don't know if it will happen, but I would love to see Calgary expanding into a major research and development centre for other forms of energy: Nuclear, Solar, Wind, etc. Regardless, as others here have pointed out, the scarcity of oil worldwide will propel Calgary into an important city for the first half of the 21st century.

Not sure how many more jobs are created by oil rising.  As I mentioned in an earlier post we posted a MASSIVE Q1 profit and laid off over 50 employees in Calgary alone.  Encana also recently laid off employees for the first time in a very long time.

Perhaps the field work is increasing but the white collar jobs don't seem to be.

"You can make arguements that the benefits of high oil arent hitting all job sectors but when oil hits $150 and keeps climbing towards $200, are you telling me housing prices will continue to decline?"

I keep seeing this stated, but can't fathom how people get to this point.  New_user can you explain how higher heating costs, fuel costs, food costs, general merchandise costs, and overall cost of living increases are a benefit of 200$ bbl and how combined with that, causes house prices to increase?

One could argue more money to the province (through oil) means better highways, schools, healthcare, but on the flip side, means private/public transportation is more, etc as I previously stated.

I guess I'm seeing a disconnect here that doesn't play into my, or my friends/family, ideas of what "good" for us is.  

Realistically our net migration has been floating +/- 0 sometimes higher sometimes lower, but overall in the last 6 months is pretty much flatlined, so we're not exactly having a new influx of permanent people to this province, demand has obviously tappered given the level of inventory, so I'm not sure how prices can continue to float let alone increase coupled with my previous points.

But maybe I'm wrong, it's happened before ;)

The percentage of listings which are unoccupied is going down. Any thoughts on what this means? The speculator's homes are being taken off the market and rented out?

sabb,

Why did Alberta boom over the past few years?  The price of oil.  That oil has always been there but has been uneconomical to get out of the ground. When price were $10, $20, $30 or even $40 per barrel, the expense of getting the oil out of the ground was more than you can sell it for. When oil traded above $100, all of a sudden projects that were uneconomical at $50 oil now become economical.

If oil stays above $120 or continues upwards and hits $150 or even $200, there will be countless projects that will be ecnomical.  Companies will be producing low quality reservoirs all over the province.

I wont argue that there are those who benefit from the boom and those who dont. $200 might leave some more people behind but the effects on those who are positively touched by it will be huge on this city.  

(its another arguement whether thats good for the city as a whole as in recent times it seems for every designer boutique that opens, we could use another soup kitchen.)

In Calgary Sun said :

"The drop in numbers of sales, however, won't depress prices.

CREA's MLA residential average price forecast calls for 4.7% growth in Alberta for this year, with national prices growing 5.3%."

So buyers as you read this,it tells you if you still wait to buy, then you'll still be overpriced even if sales drop. So better is to buy earlier than later.

My smart friend buyer would say: It's better soon to have two bags in hand than one later. :)

Ok I have question for all of you ! I am first time buyer with excellent credit record ,have a down payment for average house (10%) ,have stable job! should I jump in and buy a house or just wait ?

I am not in hurry!

Vinny

You should have gone to the CIM Conference and Exhibition at the Shaw conference center.

http://www.cim.org/mainEn.cfm

Every company there was looking for white collar employee's or for that fact employee's period.  My neice's boyfriend and his friend said the strangest thing happened to them there, they were physically forced into a little room by a recruiter for the Albainsands and offered big bucks and all types of incentives to work up at Fort Mac. My neice's boyfriend is a Geo tech and his friend is finishing his engineering degree. So I don't think the demand for white collar employee's has dimished any in Alberta.

As far as Calgary goes, Encana is not the only employeer in Calgary, there are hundreds, if not thousands of smaller companies that are still desperate for white and blue collar workers. There just isn't enough white collar workers or even blue collar workers in Alberta to fill them all.

For the rest

If you want to know what is and what will happen to the price of oil.  You could start by reading from the following links

http://www.energybulletin.net/

http://www.theoildrum.com/

Take what you want from it, but the days of cheap oil or should I say cheap energy are over.  And this is great news for the environment because the effeciency of energy use will have to increase dramatically to keep demand in check.  

Neil,

I realize there are still tons of jobs out there AND Encana is not the only company out there but the market is definitely not what it used to be IF you do not have industry experience.  When I first came to Calgary over two years ago I got a job that asked for 5 years industry exp.  I had zero.  Now when i try to refer my friends for jobs that ask for two years industry experience they are immediately turned down because when the job asks for two years they can demand it now.  

However, my point about the layoffs was not to say that the economy has gone down the toilet because it has not.  I just wanted to point out that the high oil prices don't necessarily translate into more jobs (at least not office jobs)...as we saw in our own company and some of the other big ones in oil.

Something else shocked me today.  I have a friend who has been an architect for 10 years.  He has always told me how stable his field is as they are always putting up new buildings.  Today he told me that some of his friends at smaller firms are experiencing layoffs...this is something that has been unheard of in the last two years.

roks, you have to do what feels right for you.

This is not the beginning of the end; it's just the end of the Age of Ignorance, the end of the easy wins. Do your homework, shop about, there's lots to research and find out about. Research the amortization tables of the mortgages you're going to be perhaps looking at [http://www.ingdirect.ca/prepaycalc/en/prepayment1.jsp]. Make a spreadsheet comparison for various interest rates, so that you can compare between fixed and variable rates, and so that you can see and calculate how much, or how little, pain you would or could suffer with rising rates.

Find an area of town that meets your current and future expected needs. etc etc. Bob's got a first-time buyer's guide on the website; I'm sure that there are lots of sites the world over that provide wisdom for free (bubbleinfo.com is one of them).

Keep this in mind --> if you're not in Calgary to work hard and make big bucks, you may wish to examine your options.

Remember when evaluating historical norms (prices & incomes), the important thing to note is not average prices year by year, but rather mortgage payment as a percentage of household income year by year. This is dependent on:

- house prices

- amortization periods

- interest rates

- incomes

There's a lot to analyze.

If it's any consolation, I think I'm going to buy this summer when my lease is up. I don't think this will be the bottom of the market, but I also don't think it'll go much lower, and I've had horrible 'luck' trying to time other markets.

If you're not here to make the big bucks, I'd honestly leave. Unless you're in oil and gas, most other jobs can be done at different companies in places where the grass seems greener.

I'd also strongly recommend an article by Pimco over the past year that correlates housing markets with interest rates. Paradoxically, housing markets tend to fall in periods of falling rates, and rise in periods of rising rates, with 6 to 9 month lags, primarily due to psychology. Keep in mind that inflation can mask real decreasing markets as nominal increasing markets (inflation @ 3%, housing up @ 1% for example). You're going to have to find the article by yourself, and read it several times, but it truly is amazing and insightful (which is why Pimco is Pimco).

Good luck with your research and analysis.

roks,

I would recommend to you to buy the house sooner as possible. Because now prices are temporary low for buyers but soon and next year they are going up as CREA said.

roks said: Ok I have question for all of you ! I am first time buyer with excellent credit record ,have a down payment for average house (10%) ,have stable job! should I jump in and buy a house or just wait ?

I am not in hurry!

From Mike's stats, we can see that May numbers are up, and from Bob's pending sales prices it looks like they will soon be even higher.

The crash theory should finally be laid to rest.

Month after month(or is it year after year now?) we hear that Calgary's housing market is on the verge of imploding. Well folks, let me tell ya something: It ain't gonna happen here. Sure, prices may fall a little bit in order to get some of this inventory sold, but all that will do is bring more people into the market, driving prices back up.

Newt;

I'll be happy to post your comments when you remove the insults. Telling people they have "no clue" is saying more about you than it is about anyone who posts courteous and polite comments.

Don't forget our motto here: You can disagree without being disagreeable.

Bob

Bob, about that house that conditionally sold right away - that must have been the one in Silver Springs that's on your web site, right? I saw that one yesterday and right away I thought, wow, that's a really nice place and seems like a great deal. Is that representative of what can be had in Silver Springs?

Vlad; This is coincidental, but another half duplex sold in Silver Springs  yesterday also. It was listed at exactly the same price, but was on the market for 65 days. A house in this price range that is in nice condition, in such a good location, is still a sought after property. There's nothing else comparable listed in Silver Springs right now. It was interesting to note that there were 220 auto-searches that matched my listing.

My West Springs listing has just been reduced from $459,900 to $429,900 and it is a similar good value that should sell to someone who recognizes good value. -Bob

Bob,

as we talk about West Springs area. My friend bought house there a month ago. He said that for him West Springs is excellent area close to everything (downtown,shopping centers,etc.). Another my friend who bought house in Aspen Woods also said that he'd like to move to West Park estate area of the West Springs for bigger house.Specially,he likes West Park because it is very close to new Co-op, shoppings and new schools and is very close to downtown as well. He said that for him West Park area is much better than Aspen Woods. He said that from there everything is near and close to him and easy way to downtown.

I like his advice, so I'm also looking to buy nice house in West Park/West Springs area.

Bob, you mention the word "quality" when you speak of homes on the market.

We've looked at countless in homes in our seach for a new home this spring.  We've seen many homes that I would call "low quality" - small or bad layout, no updates or renos, poor lot characteristics,and just needing a lot of work in general. Some of the owners of these "low quality" homes are asking prices that are comparable to the "high quality" homes in that same area or even the same block.

Are these people receiving bad advice in terms of setting their listing price?  Are they stubborn and refurse to believe the state of the current market?  

Do you see many or any people who bought homes during the frenzied days of the last couple of years and did not get a home inspection or do any due dilligence in their purchase and now are in 'low quality" homes?

As a professional, how do you deal with buyers you represent who are looking at and may be interested in an overprices "low quality" home? (ie. what approach do you take towards the seller?)

And how do you represent a seller who believes their home is worth significantly more than you believe it is in your professional opinion?

Anyone else wish to share their opinion as either a buyer or seller in this market today?

New; When I see the condition of some of these homes, it really makes me wonder how serious the sellers are. With all the information available on sales prices and market conditions, I think most overpriced homes are just unrealistic expectations on the part of the seller. I have not encountered any situations where people bought without a home inspection, and inherited a problem.

I have turned down a lot of listings where the seller wanted way more than the house was worth. If I don't see any hope of selling, it's a waste of everyone's time. -Bob

Sorry Bob,

I wasn't trying to be a jerk.  I guess my frustration with the way people are (what I feel) brainwashed into thinking that real estate is an "investment" got the best of me.  Let me try this again...

I am very skeptical about the information that I see from CREB - I feel that most of it is an attempt to stimulate a stagnant market or add fire to an already burning one.  To me, listening to CREB is like listening to an oil company explain why they should do things a certain way in Alberta.  The only difference is that there are lots of organizations speaking up against our oil and gas producers, and no (not that I have found anyway) organizations that show an opposite side to the whole real estate game that CREB plays.  I do think that CREB does a great job at what they are trying to do - keep Calgary’s realtors employed and happy - or is that wrong, are they really trying to help is buyers by giving us honest reports and statements.  Is it really a good investment to buy real estate?

I have been actively searching for a home for about a year, and was convinced that it was a GREAT time to buy one.  My details are, $50K down, and looking in the $300K - $400K range.  I was quick (and lucky) to have my face slapped by a bunch of old bears claiming that us "young" people are too easily convinced to dive head first into something without doing some background and financial research.  I think that this was a god-send.  Financially, it would have been a huge mistake for me to buy a home.  Running the economics on it, buying a $350k home with $50k down on a mortgage rate of 5.75 over 25 years is only worthwhile if that house is of value of 850k+ dollars at the end of 25 years - and that is assuming that you dump no money into the home at all for fixes and renos over that time.  To make sure that we are all clear, on the investment side, I subtracted rent at $1000/month (everything included).  I also added  property taxes at 120/month, utilities average at 200 month (including phone, i-net, etc) to the home value.

From a financial point, it is a highly risky investment.  I would still like to own my own home, but I honestly believe that it is naive to think that Calgary home prices will not drop sometime in the next few years.  I think that if you are not in the "need" to purchase, this is a good time to sit back, rent a place and watch the market.  I think things are going to, at the very least, fairly flat for a while.

What do you think Bob, if I buy a home will it almost triple in home value in the next 25 years… if it does, where will the money to buy it come from?  Maybe the next thing on the plate is a 50 or 60 year mortgage.

Is there any opostion to the CREB out there?

Anyway, sorry about the original post – I should have worded it differently.  My comment to potential buyers like myself... please look around and do some simple economics before you dive into a "steal of a deal" $350k home - as that $350k over a 25 year mortgage is closer to $700k - or invested properly, close to $800k.  Don't feel pressured to buy, buy a place only because you have/want to.  Real estate should not be an investment, but more a lifestyle choice.

Newt

Newt; Thank you for re-wording that. -Bob

http://www.canada.com/calgaryherald/news/story.html?id=1afda6d4-6500-4885-ab41-b1470bb29b5c

Thanks for the link Jimmy.  It certainly casts a pall over the market doesn't it?

But to try to keep things is perspective, maybe we can look back at the past 8 years and see if we are seeing similar patterns today.

Since 2000 to 2008 (inclusive), the number of new listings hitting the market have peaked in either April or May, usually May.  The only aberation came in 2006 when new listings peaked in May but then they spiked even higher the following Sept.  I think that spike was due to the fact that the market was so darned hot back then that many people decided to cash in and listed, when they otherwise might have not.  Remember, 2006 was crazy a sellers' market and this is a crazy buyers' market.  Emotions run high when we reach extremes.

So we likely won't see the end of new listings this year until at least the end of May, but at that time new listings will very likely start to dry up.

At the same time, March, April and May have historically been the best months for sales (highest number of sales, and peak price for the year).

So I don't see this year being any different (so far) as the past 8 years as far as trends is concerned... other than that we're at an extreme.  The pendulum has indeed swung very far.  It must start to swing the other direction again, and past history suggests that could begin to happen soon... perhaps the end of this month.

Who knows for sure?  But I have a lot of faith in patterns that repeat year after year, so its still my view that we'll probably have to endure the status quo until at least this fall.  The number of new listings is likely nearing its peak, but so is the number of sales likely nearing its peak.  The summer should be slow as usual.  Who here is going on a vacation or going to spend summer with the kids, or going golfing or fishing?

It will be a very interesting fall. I dare say it will be quite a different market as we near Christmas, but until then....

Al Bundy

"The poll said... 10 per cent of Calgarians already own an investment condo - the highest percentage among the six major Canadian cities polled (Greater Vancouver, Calgary, Greater Toronto Area, the Montreal Metropolitan Community, Halifax and Ottawa)." - Calgary Herald, May 7

I was surprised by that number.  10% seems like a very large number to me.  It would be interesting to know if they distinguish investment from recreational (the article did say 'purely for investment'), and whether 10% is based on households or individuals.  At any rate, when you put that together with some other facts, you get a picture that makes you really wonder how this is all going to play out:

- as of the end of January we had 8200 condos in construction, 30 months of supply according to CMHC (Calgary Herald, March 8).  

- Since the beginning of the year we have had 4300 new multifamily starts (Calgary Herald May 8).  

- Right now we have over 3300 condos in inventory while sales are running at a little less then 600 a month(Daily Stats)  

And we have 10% of the population with an investment condo?  Even if only half of those are investments in Calgary condos, a downturn in the condo market, which given the supply mentioned above seems very possible, would seem to be a recipe for a lot of wealth destruction in the city.

My apologies, I forget to mention a critical point in my last post.  I said that so far I don't see how this year's pattern is much different than the past 8 years "as far as trends are concerned".  And that's true, the patterns are very similar... except for one point...

The actual number of sales this spring has been dismal compared with the past years as everybody is aware.  And a lot of people may be surprised by this, but the number of new listings this year is actually lower than last year.  The only reason the inventory has skyrocketed is because the buyers have all gone into hiding for now. Its not because there have been an outrageous number of listings.

So where are the buyers?  They're right here in our midst, fully capable of buying.  It's just a waiting game and I'll say it again... it will be a very interesting fall.  I don't think we've seen the end of the fireworks just yet.  Next fall possibly... next spring probably!

Bob,

As you mentioned before the average price was going to head up because of the higher average of pending sales.  It has indeed crept up a bit.  However after a big cleanup of pending sales yesterday we are back to the roughly 300 conditional sales again.  Sales seem to be slightly up this month from that blip of conditional sales.  Do you think this might have been that domino effect where as one seller's deal closes it closed several other deals?

Al,

Your analysis's have been pretty good and we all love hearing your take on the market as you've been around this for quite some time now. However I just wanted to clarify something because I might be interpretating this incorrectly.  You said that the listings were actually less this year than last year.

According to Bob's website Jan-Apr, the number of listings have been higher each month in 2008 than 2007

Month   2007    2008

Jan     2325    3023

Feb     2206    2981

Mar     3131    3493

Apr     3100    3377

Another thing you mentioned is that listings peaked out around May.  Last year the peak was Sept 5562.  Now did you mean number of new listings hitting the market or the number of listings on the market?

Here is something that I think hasn't been mentioned much so far.  The number of condos hitting the market are coming on at a furious pace (this has been mentioned).  Even more so than last spring and the vacants are really shooting up too.  If this continues as per the several thousand in construction this can only mean the price has to drop for condos at some point (for some reason they haven't been).  If/when they do, at what point will they pull sfh pricing down? Or would they?

Hi Vinny,

This turned out to be a long post and I apologize to everyone in advance, but Vinny asked some very good questions, and I felt it my duty to explain exactly what I was talking about.

The reason for the discrepancy is because Bob's stats (that you're looking at) are for single family homes inventory as well as new listings added, whereas my stats are based on "residential combined", "new listings" only.  I still have to get that info from Bob's stats because the method of reporting that CREB uses now doesn't furnish those stats anymore.

The fact that "new" listings aren't really out of line compared with last year, but that "sales" have plummeted... is the reason for the high inventory. So I haven't charted inventory up to this point in time, because from my point of view, if new listings are rising, when sales are plummeting, the natural result will be an increase in inventory.

I just haven't kept track of inventory other than that on a casual basis, I've been interested in (but haven't charted) the amount of weeks worth of inventory on the market.  At the peak of the frenzy (I think it was in perhaps May of '06), there was only 16 days worth of inventory available.  Today that number is over 21 weeks worth.

The "residential combined" stats for "new" listings are basically as follows:

Month   2007    2008

Jan     4010    4429

Feb     3731    4225

Mar     5195    5042

Apr     5118    4870

May     6058     ?

You may find some minor discrepancies because nowadays the only way I can get data on res. combined is to manually add up the single family new listings with the new condo listings.  But that's why Bob's stats and my stats appear to be different.  We're not quite reporting the same thing.

When I said listings spiked one time other than May, I was referring to the fact that "new listing" spiked again in September of '06 (after a May spike).  Again I was referring to new listings, whereas what you were looking at was Bob's report about net inventory of single family only.

Those are excellent points Vinny.  We must always be very careful about statistics because they can always be manipulated and skewn any way the media wants to skew them.  Bob and I both report "just the facts ma'am".  Both are accurate :-), but Bob's giving one accurate statistic and I'm giving another.  Both are related, but we're looking at things from slightly different perspectives.

You mentioned the incredible number of condos hitting the market.  Bob's stats show that as well, but under the separate category of "Condo Monthly Summaries".  The stats I've been talking about today is a combination of both single family and condos.

My son continually argues with me, and correctly so, that this massive influx of inventory has to, HAS TO, result in falling prices.  The law of supply and demand dictates that he is right.  Yet we simply are not seeing prices fall much year over year.  In fact, single family home prices for April of this year are up 3.47% over April of '07, and condos are only down 4.4% over the same time frame.

I would say that the current number of condos on the market will have no effect on influencing the prices of single family homes.  But the condos currently under construction... that is a different matter. Most of them will hit the market at (or higher than) the current average price for condos, so if anything I think the builders are in for a very rough ride as these units near completion.  One would think this should force the average price of the condos currently on the market downwards, but so far... it isn't happening.

Again, the only thing way out of the ordinary about today's market is this incredible inventory which is only gonna rise, especially on the condo end.  And yet prices aren't crashing.  Calgary homeowners are clearly a determined and stubborn bunch.  I think they're gonna ride out the storm until the inventory dries up somewhat, but will all the new condos under construction, when will that be?  The number of "new listings" always starts to dry up after May... so lets see what happens later this year.  Keep in mind that none of my stats have ever taken into account, the amount of homes under construction, but heither has Creb's stats, nor Bob's stats.  Nonetheless, it's clearly an important factor.

One final point, although the number of new listings always falls right about this time of year, so do sales.  The net result shows up in the sales/listing ratio which is ALWAYS at a peak at the end of December.  Then that ratio does a 180 and drops hard every January as new listings start to appear once again and buyers come out in droves... and we're off to the races once more.

The next 12 months will be extremely interesting to watch unfold.

Back on May 6, when the pending sales were at $515,000 Newguy(also known as squidly) said:

"pending price is useless, i think"

Well, squidly, in the past five days, the average price went from 462,000 to $483,000.

The median went from $414,000 to $421,000.

It looks like pending sales are a good indication of the direction that prices are heading.

Squidly keeps hoping that this blog will disappear. He sure is afraid of truthful data. I wonder why he feels so threatened.

Squid and his fellow rage-aholics like to put a certain spin on the real estate numbers, so they hate anyone who gives the actual facts. The more they open their mouths, the more they discredit themselves.  

Maybe I'm not too great at math but I don't see how pending sales CAN'T influence the average and median..at least short term.  If there isn't a more direct influence what is?