Bob Truman, First Place Realty

Hi Bob,

I would agree that the median price is a good measure for home valuation as it does remove the extremes.

However, one should take a look at all the information available when they are planning to make one of the largest purchases of their life!

Should you just ignore a $50,000 (-10%)year over year loss in the average price of a single family home in Calgary.

I know I can't

I wasn't suggesting that at all. If you look at my previous topic, you will see that I went a step further and pointed out specific communities where the average price is down even more than 10%. - Bob

Follow the money.

Hi Bob,

Both buyer and seller want to unbiased information in order to make decisions.

We can not say July sale improve only based on median price increase 0.4% compare to June. Also, we can not say price decreased based on only average price/ft. all the factors should be considered, not only isolated one factor.

Based on my opinion, the July market does NOT improve. Average sale price down 4.2% compare to June, that number reconcile with the average price/sf down 5.9% also. The median price increase 0.4%. So for summary, even though there are less million dollars house sold, we had to admit that the price is down.  The number of sales down 10.7% in July compare to June, the list down 3%.  If we compare the July 2008 number with July 2007, we will see more down turn trend.

In short term (1-3 years), the trend of real estate market should be determined by demand and supply. Every one knows the situation of current Calgary market – the supply increase dramatically and sale down. The trend is more important than small fluctuation month by month, day by day. So I don’t care July sales down 10% compare to June. What I care about is the trend that everyone knows.

In middle term (3-5 years), the real estate price should be determined by household income. The average family income is around 90k in Calgary. If people can keep their income stable, that income will support 400k house.

In long term (5-10 years), the house price should be determined by the cost to build the house. If the company in the construction industry can enjoy 200% profit, that will attract more company join this industry and that would lower the profit finally. I am not sure the cost to build a house in Calgary, but I believe these companies at least enjoy more than 50% gross profit.  

I couldn't agree more with MZ.  While it is great for discussion, basing decisions on month to month moves in market indices is like driving down the road while looking through a straw.  Looking at the bigger picture based on overall economic fundamentals makes more sense to me.  A chart of any comodity or investemnt has ups and downs monthly, daily, even hourly.  Only speculators trying to time the market play that game.  The longer term investors look at the fundamentals to base their decisions.  To me a house purchase is a major investment and warrants a close look at the supply the demand the amount of new construction and so on.  The underlying factors that drive the Alberta/Calgary economy namely the gas market is still weak and I believe it will take at least a year from the time this industry turns around for the housing market to see any improvement. In the mean time I believe it will languish.  Best case scenario...one more year.

It seems to me almost predictably so - in the best of times or the worst of time that summer is when sales volumes drop - hence sales price drop for those who needed to sell. IMHO, "most" summers are still the best time for a buyer to make that decision. Spring March-May is predictably favourable on the seller side. So I won't lump the two scenarios together of "housing slowdown" and typical market situation.

As for Calgary family/household incomes - it should be median income. This is commendable because it takes the highs and lows and it is an impressively one of the highest if not the highest in Canada. Stats Can indicates 2006 Calgary (Couple/Household income at $90,700 - 2006 figures. Extrapolating that figure to 2008, it might be closer to $100+/- without knowing the publish data.

What a mishmash of stats we are seeing.  It is a time of confusion and Bob's crystal ball is rightly showing no clear picture.  Does it stand to reason that if less million+ homes are selling, then the price of the luxury homes will be coming down with the broader market as well?  This is really interesting, since the buyers who aren't buying the million$ homes have to "downgrade/accept" that they can only afford something smaller for the time being.  Can this have the effect of holding the average/median prices for your average home in Calgary "stable" as seen in the June-to-July comparison?

This may be the reason why historically prices of homes are sticky at the beginning of a longterm downtrend.  You have to account for the richer folk buying up smaller homes in ever increasing numbers, until those richer buyers are all done....then comes the next downward dog (couldn't resist the yoga reference).

My opinion is that there is more pain to be felt still, and unless one absolutely needs to buy a home to live in for the long term (and renting vs buying shows advantages with buying in one's current situation), then it is good to play the waiting game.  There is a mountain of inventory out there, decreasing net-immigration to Calgary, falling prices or plateauing prices, future oncoming new construction inventory, and increasingly negative media bandwagoning.

If you buy now for living, make sure you lowball like Radley did awhile back. Good deals can be had!  If you buy now for "flipping", you need a new financial advisor.

I thought you gave this topic a great headline! I get the feeling you can see through the agenda-driven blogs who were blaming the price increases earlier this year on "too many million dollar sales."

I agree with Worldclass that there is a mishmash of stats, but you know what? I'm glad they're available. Thanks for all the hard work.

Well said, worldclass. Prices are sticky on the way down because sellers always have a hard time adjusting to the new reality. In fact, you still have people out there with "one-hundred-thousanditis" - take whatever your house was worth last year, and add 100,000 to the sales price (I read that on another blog and thought it was funny).

Personally, I think falling prices are actually good for most people, except for people cashing out and moving out of town, or flippers. If you're trying to move up in a market, rapidly rising prices are not your friend. For example, if all houses doubled in value, and you owned a $200,000 house and wanted to trade up to a $500,000 house, well if your house went up to $400,000, and the $500,000 went up to $1 million, you are actually losing ground! (The spread goes from $300,000 to $600,000).

One other thing I find interesting -- there is this impression that the rapidly rising market was good for real estate agents. Although I have no doubt that some cheered it on and a few made a great deal of money, I am not sure how it was good for real estate agents in general.

The agents I know have hated the last few years -- first they went from a situation where getting listings was virtually impossible (with many sellers choosing to sell on their own), and if you represented buyers, you always got stuck in ugly multiple bid situations where more often than not, someone else won the bid. Now, it's the exact opposite -- lots of listings available, but the buyers are few and far between. Not to mention, the hyper market seemed to attract about a million people to become real estate agents, so there was even more competition. IMO, a slow and steady growing market would have been better for 90% of agents in this city. Agreed - Bob

Of course, the bubbleheads will scream "BUT CREB CHEERED IT ON!!!"...what exactly do you expect CREB to say? "Now is a terrible time to buy a house! Put your money in RRSPs instead."??? LOL.

"Median prices are much more accurate because they remove the extremes at either end"

While that is an accurate textbook statement, in relation to housing it's somewhat misleading as there are really only extremes on the high end.

The median is $400k, and the lowest price is around $175k (which is $225k lower than the median).  If you add that $225k to the median, you get $625k, which I don't think anyone would call an "extreme" on the high end of the price list.

Average price and median price are really up too if you removed sales under $400k.

I don't think it's fair to pick apart data to show something that isn't really there. Why not remove homes that sold who had green painted front doors or 1 bedroom bungalows or SFH yards over 500 sq/m?

Data can easily be manipulated, lets resist the urge to do that.

Calgary Buyer, what are you afraid of? As a buyer, I would want every stat possible to help me make an informed decision. I feel quite confident that I can take what's relevant and useful, and discard the rest.

I look back three years ago when I bought my house and none of this was available. Bob, keep 'em coming. The more the better! These last two posts have been excellent.

"dvrvd your (sic) a moron."

The intelligent debate on the bubble blog continues. Apparently, someone called Brady didn't like my example in my earlier post. He points out that the person selling his 400,000 would have a 25% down payment when he sells his house that doubled in value to buy the million dollar home. However, he forgets to mention that the mortgage amount goes from 150K to 750K. Yup, you sure are ahead in that example!

Remember... no matter how loved or popular you are in life, the size of your funeral depends on the weather.

I have mentioned sale/sq ft before but I will mention it here from a different perspective.  In the past few months I said that it was going up because as more expensive 1mill+ houses sell, $/ft also go up because those houses really pull up that average.  now that these sales have declined so is your $/ft.  So it is really tough to determine if you are really selling bigger houses are whether you are getting more bang for the buck.  

Like median price, i think median $/ft would be a more accurate indicator.  Yes, I know some people already think we have too many stats.  On the other hand I also don't know if this would be quite a bit more work or not.

I see where you're going with that idea Vinny and I think you're right.  I think the median you're suggesting would probably be the very best indicator so far, because it removes the extremes so nicely. It would be even more steady and accurate than the median of home prices. Over time it would be very accurate indeed.

But I don't know how in the world that statistic could be researched for historic data or calculated on a steady basis.  We'd need historic numbers going way back to be able to see the true trend, but you really do have a good idea.  And I personally wouldn't ask BT to do it because let's face it, we're spoiled rotton with the stats he already offers us.

Thanks for those numbers Bob. When CREB posts the stats for July, we'll be able to compare the median price for SFH and for condos for this July, with those of July 2007.

The median $/s.f. is down 8.97% YOY when we look at the July numbers you provided.  It will be real interesting to see if the median prices for this July are down 9% from last July.  I wouldn't think they'd be down that much, but the ratio of change using these two methods should produce a nearly identical result.  We'll see in a day or two.

If it turns out that there's a glaring difference in the percentage of change in median price for a SFH, as compared to the change when comparing by using median $/s.f. data, that would suggest that the average size (or median size) of all SFH sold this July was smaller than last July.  And as I recall, a few months ago you reported that smaller homes were selling well.

So it appears vinny's idea was bang on the money.

For most people interested in stats, the median price of SFH compared to last year, or the median price of condos compared to condos of last year... would be a pretty accurate overall indicator of the state of affairs.

But by peeling another layer off the onion with vinny's method (to be known hereafter as the "Vindicator"), we'll definitely find an even more accurate stat.

Thanks again for posting those stats BT. It's very interesting.