Bob Truman, First Place Realty

Hi Bob,

In my opinion, it will not be any significant change in prices either way, they will be about the same for awhile give or take $5,000.

If one wants to settle down and enjoy the comfort of a family home, should go right ahead and buy one.

Low interest rates are here to stay as the government do not want to kill the economy even as we will go out of the recession and there are not very many bankruptcies in Alberta.

Unemployment relatively low, probably we'll not reach even the 5%.

In the meantime, in-migration to Alberta has increased a bit again, that helps to get rid of the high inventory and stabilize the market, but not to the point as prices will skyrocket.

The way that I look at these stats is that the market is going to contuine to come down in price. THe economy is shriking and things arent getting better anytime soon maybe next year and thats being optmistic. I would tell your buyers to wait. If they need to move then yeah buy but they will kicking them self in the butt a year from now when they could of bought at a cheaper price and yeah interest rates might come up but Carney(Bank of Canada Govenor) today said things wont really change until next year msybe!!!!!

If they are moving here because someone got transfered then they have to buy. If they are moving because they want to, I think they should wait until the market has bottomed out. You could say that things are getting better but every year at this time things kinda look better but they wont be this year just because the economy is in such bad shape.

I know sales have increased only slightly 825 feb to 1086 mar but normal its like a 400-600 increse and has price? NO it went up 5000g's, normally its an increase of like 15-20 g's. Prices will come down, they arent affordable right now. WHen you read things that are talking about consumer products and Calgary is second in the nation for not paying there bills then thats a problem and just give it time you will start to see more price reductions.

Hi Bob.  Sorry for being off topic but was wondering if new listings stat also includes properties that expire and relisted again as a new number. Thanks!

Yes. Yesterday, there were 53 new SFH listings of which 14 were re-lists, so for all practical purposes, there were really only 39 new listings. -Bob

To be honest I don't think any of the above stats mean much of anything.

The ones that your buyer *should* be looking at are...

* the price of natural gas

http://www.wtrg.com/daily/gasprice.html

* the weekly rig count numbers

http://www.caodc.ca/rigcounts.htm#wkwestdrill

* layoffs

http://www.inews880.com/Channels/Reg/LocalNews/story.aspx?ID=1074628

http://news.google.ca/news?pz=1&ned=ca&hl=en&q=unemployment+alberta

* the fact that we are 21 months into our housing dip, while the U.S. is a good 40 months in with no signs of slowing down.

* the fact that Calgary had the 8th largest real estate bubble from 2000-2008 in all of North America (median price increased by 165%).  

That's a bigger bubble than Phoenix (123%), Tampa , San Diego (140%), Las Vegas (130%), Sacramento (162%),   Sarasota (162%), or Washington DC (146%).

How are these bubble cities faring now?  Well the average "drop from peak" of the cities mentioned above is 40%, with the smallest being Washington DC, down only 30%.

Calgary?  We're down 17%.  This ride ain't over yet, folks.  The U.S.A. is the lead car on the roller coaster, and we're in the back getting ready to scream.

* the fact that, historically, we should be at about 280-300k for an average home in Calgary in 2009, not 420k (based on the average 5.2% growth rate for the past 40 years)

* the fact that our price to rent ratio is at 18.4X right, when historically it hovers at about 12-13X.  

* the fact that mortgage rates are as low as they can go, yet home sales are still down 20%+.  

* the fact that the only people buying right now are the first time buyers who have been sitting on the sidelines for the past 3 years, and felt like they 'missed the boat' when it came to buying a house like their friends did. (see Bob's absorption rates by price range)

Shall I go on?

If the 0/40 mortgages(which were discontinued in October) were being utilized mainly by first-time buyers, and was their only way into the market, why are we seeing such an increase in first-time buyers now? -Bob

"If the 0/40 mortgages(which were discontinued in October) were being utilized mainly by first-time buyers, and was their only way into the market, why are we seeing such an increase in first-time buyers now? -Bob"

Hi Bob,

It looks like you've presented two statements here...

1) the 0/40 mortgages were being utilized mainly by first-time buyers.

Is that true?  I can't really comment on it, since I don't know the facts.  You would definitely no better than I would.

2) the 0/40 mortgages were the only way into the market for first time buyers

Again, is that true?  I have no idea.

I'm not really sure why you brought up the 0/40 mortgages, I don't see anything in my post about it?  

I'm assuming that over the past 3-4 years there were a lot of hard working people that could qualify for a traditional mortgage, but when house prices doubled overnight they either

A) realized it was not a smart move to be buying during the bubble

B) felt they could no longer afford to buy

C) wanted to wait for prices to come down

Once they saw the prices come 'back down' by 18%, they felt this was it.  This was the moment they were waiting for, after years of watching their friends buy homes, get out of the rental lifestyle.

People tend to have a short memory, they forget it wasn't really all that long ago that houses cost 200k in Calgary.  We're talking 2002.

To these people, 420k looks like a bargain, compared to 506k less than 2 years ago.

Anyways, that's just my opinion, from a man on the street.

CM, you didn't mention 0/40, but you did say, "* the fact that the only people buying right now are the first time buyers"

Your comment begs the question. I find it odd that first-time buyers are so numerous right now, immediateley after the discontinuance of the 0/40. The popular sentiment was that 0/40 mortgages were given out mainly to first-timers. Perhaps some of the assumptions are incorrect? I never took part in any transactions where the buyer was obtaining a 0/40 mortgage, so I can't speak from first-hand experience.

I appreciate your comments, and all others on this topic, because I know my buyers will be very interested in what you all have to say. -Bob

No problem Bob, I always enjoy the discussion.

You would know best, who do you see buying houses right now?

Your own absorption rate charts show that the properties being bought at a high rate are the ones < $400k, and the ones above that are still at a high absorption rate.

Who are these people that are only interested in homes priced at average or below ?

My buyers in the Under $400,000 price range include:

-an Edmontonian who is buying a house for their daughter who is attending U of C this fall.
- a couple selling their condo and moving to a house because they want a yard.
- a young couple with a baby on the way who need a larger house(I was their agent when they bought their first house in 2006).
- the only first-time buyer I have is a young man who has a 25% down payment. He found me through my ski blog,
-Bob

A comment about the < $400K sales.

This is misleading, because if the market dipped 11-12%, we should be looking at sales of homes of  >$450 from last year, and not $400K, to compare apples to apples. (i use 450K, cuz its easier to compare statistics, i think actual year over year avr price dropped 11.4%)

I.E. A home last year was bought for 430, and sold this year for 390.  It didnt get counted last year, but will this year.  Same market segment.

So march 2009 646 sales for under $400K

March 2008, 583 under $400K, but considering the dip, we should be looking at sales of homes >$450K from march 2008, so there were actually 857.

So instead of a 10% rise in sales in that market segment, we have a 25% drop.

Way different story

The interesting part is that using the blanket average SFH statistics are made up of many different locations, a very wide price range, and a varying amount of inventory.

The SFH isn't a weighted average (or is it?).  That would be interesting to see.  I read somewhere that part of the reason that the SFH average for March stayed relatively the same as February was due to an increase in $million properties.  I think that those type of properties really skew the average.  If you subtract those out of the equation- or use a weighted average- what is the actual SFH? the year over year change?  See what I mean?

As well, real estate in Calgary really tends to fluctuate based on location and amenities/features.  While the overall hit has been felt throughout the city some of the inner suburbs and well planned neighborhoods with desireable features have remained more bouyant price wise in relation to locations/neighborhoods that have less to offer.

What I'm saying is, there are mini-markets going on throughout Calgary, all with different characteristics.  I'm willing to bet some have bottomed out, some have further to go, and some will sit tight for now.  If you want to buy, the right deal can be had if you do your homework.  So buy now if need be.  But, the days of buying practically anything and watching it go up are over for now, you need to shop intelligently.

For the record, I own two rental properties and have recently purchased another property in Richmond as my principal residence.  My purchase price was only about 12% higher than what the property was purchased for at the end of 2005 (literally right before the big takeoff to the moon).  The seller had obviously paid much more than that for improvements so tell me that this property has another %20-30% to go down(sarcasm)?  

I agree and have been one of the main proponents of using the median price as the main indicator. Compared to 2008, the average price in March is down 11.4%, but if you eliminate million dollar sales from the mix, the average price is only down 9.8%. Million dollar sales in March were down 53% compared to last year, so it's a dubious claim to say that million dollar sales in Mar 2009 skewed the price, at least in relation to 2008.

"I read somewhere that part of the reason that the SFH average for March stayed relatively the same as February was due to an increase in $million properties."

The above statement is correct. For example, look at the following:

When million dollar sales are included, March was $4786 higher than Feb. When you take out the million dollar sales, the average price actually goes down $1849, which is less than .5%. It stands to reason that the median price is a truer measure of market activity. It was $375,000 in Feb, also $375,000 in March.

Sales in March were down 23%. Take out the million dollar sales and they were down 22%.

I used to keep a page posted on my website of the prices less million dollar sales but received a lot of criticism for doing it. I was accused of micro-managing the numbers. Maybe it wasn't such a bad idea after all?  In any event, it was redundant because the median price tells you the same thing.

There is a huge variation in the percentage change in average price among the various neighbourhoods. When I get a chance, I'll give a few examples.  -Bob

What advice would you give to my buyer?

Wait, don't buy. With the rate of job losses we are seeing in Calgary, your savings would be in the six figure range by waiting another year!

What to look when you buy a house these days?

If one income (out of two) can pay your mortgage (i would pick a %6 rate, you never know what's going to happen 5 years down the road) also pay your bills and buy you some food, then I'll say you good to go. It won't be fancy but I take the one income - out of two - as worst case scenario, temporary "recession" casualty.

Best time to buy a house is when you feel comfortable with the idea also comfortable financialy wise. House prices: $420,000, condo prices: $280,000, peace of mind ... priceless.

Buy a place to enjoy, not to lose sleep at night thinking of how you going to recycle the toilet paper as you out of cash and can't afford a new roll.

I am wondering why people continue to compare this year to 2 or 3 years ago. We all agree I think that the boom is done but why does everyone seem to be either looking for the Bust or grasping for more Boom.

Shouldn't we instead be looking for indicators of a healthy market? I've been looking and aren't using the digits irrelevant. We know those numbers are gone but what does comparing just the percentages say, month to month and YOY.

Bob what are your thoughts on something like this.

Condos # sold # sold Increase

Feb-07  895 Mar-07  1026 14.64%

Feb-08  562 Mar-08   565  0.53%

Feb-09  343 Mar-09   446 30.03%

SFH # sold # sold  Increase

Feb-06  1804 Mar-06  2049  13.58%

Feb-07  1942 Mar-07  2272  16.99%

Feb-08  1252 Mar-08  1418  13.26%

Feb-09   825 Mar-09  1086  31.64%

With all the uncertainty in the world shouldn't we just want an indicator of health in our real estate market?

Looking at numbers in isolation is shortsighted, and quoting a specific set of data is misleading if not put in context, but people with agendas do it all the time to try and prove a point.

Anyone can see that sales in 2009 were the lowest of those years, but 2009 has shown the largest percentage increase in sales for both condos and single family homes. More importantly, for someone who is considering a purchase or sale, what does the trend tell us?

The number of SFH active listings has never gone down from Feb to March, except this year. All predictions were for large price decreases and huge inventory build-up in the spring, especially for condos. So far, the exact opposite has happened. Are the large price drops and ballooning inventory still going to occur? -Bob

And when comparing % in Median price wouldn't the 0.00% for Feb/Mar 2009 be a good thing as opposed to the -1.87% of 2008. I'm going to keep looking at things this way for the rest of the year as I am rooting for a healthy market.

As Bob knows I am fairly new to this real estate world and this Blog has taught me a lot I didn't know or think about before (thanks Bob). It may be a simple minded concept but I think we should be looking for health.

Condos median price                       % Diff - / +

Feb-07 $280,800 Mar-07 $290,000        3.28%

Feb-08 $295,000 Mar-08 $293,000       -0.68%

Feb-09 $249,900 Mar-09 $260,000        4.04%

SFH Median Price                         % Diff - / +

Feb-06 $321,000 Mar-06 $339,000      5.61%

Feb-07 $408,000 Mar-07 $427,000      4.66%

Feb-08 $428,000 Mar-08 $420,000     -1.87%

Feb-09 $375,000 Mar-09 $375,000      0.00%

If you are looking at someone who is sick for signs they are getting better you don't compare the amount of red blood cells they have to the beginning of their illness you check it against when they were ill to see if they are getting better. I just think to be comparing the market $$ amounts to our over healthy boom time doesn't tell us what is happening right now. And doesn't help the first time buyer make an informed decision.

Look for trends. -Bob

In the under $400,000 price category, here is a compelling new home value that has set the resale market on its ear:

Centrex and Excel are offering 2200 sf homes for $399,900 including home, lot and gst.  You get a brand new home with upper floor laundry, granite, 9' main floor, hardwood, tile, 6 appliances, window coverings, fence, deck, and front and back landscaping...

Tough to compete with that.

Heather,

If you want to determine if the market is "healthy", figure out if prices are justified by rents.

Perhaps advice could be dependant on the type of job that they are in.  I can tell you first  hand that a tradesperson in Alberta (especially in the service industry like myself) has not felt a 'recession' per say.  It's slower, but we're still working, if not running off our feet.  Many (journeyman) trades people in the city here are making 80-100k per year.  If you compare the prices of starter homes, especially in the suburbs (harvest hills/bridlewood type of places), you'll probably find that homes right now are actually teetering on the affordable point.

That said, I think that most people inherintly want to own their own homes, and are not looking at it as when is the best time for an investment, so much as do I like it, and can I afford it.  

If the buyers can finally take a bite out of our inventory, I think that Calgary will return to a regularly appreciating market.  Personally, my advice would be (to take my own) if you find a place that you like, and it's also one that you can afford, Alberta still has solid economical fundamentals and is a great place to invest.  

...Just my two cents.