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Might this insanity finally be ending???

The headline came from Garth Turner's blog greaterfool.ca/. A blogger, upon being the only person at an open house, asks if we've finally seen the end of the mania, and also asks the question, "How many first-time buyers and greater fools are out there?"

From the depths of despair only ten months ago, house and condo prices have risen steadily in 2009 and are now about the same as they were last year. Our most recent transaction(yesterday) involved full list price after one day on the market. What trends are we seeing so far this month? Are first-time buyers really driving the market?

Mid-August reality check

For the first 15 days in August:

Homes are still being sold quickly: 29% are sold within their first 7 days on the market. Last month was 30%.

Condo sales are up 40% over last year. Single family home(SFH) sales are up 6%.

Inventory is 40% lower than last year. We still haven't seen the influx of new listings which was expected.

12% of SFH are selling at list price or higher. Last month was 11%.

28% of homes listed in the past 30 days already have a sale or conditional sale. Last month was 30%.

Jimmy’s Domino Theory

Jimmy made a good comment on the previous topic which in a nutshell says:

"Brisk activity from first-time buyers early in the year allowed move-up buyers to finally sell their home and consequently buy something more expensive."

I've experienced this phenomena first-hand with my own clients. The statistics also confirm it:

- Sales of homes in Aug over $600,000 are 15% higher than last year. In April, this segment was down 24%.

- Sales of homes under $400,000 are only up 4% in August. In April, this price range was 26% higher.

Last autumn when sales cratered, I remarked on pent-up demand, saying there were plenty of buyers, but with move-up buyers being unable to sell their homes, we were in grid-lock. This ultimately turned out to have been an accurate observation. It appears from the above stats that first-time buyers have finally satiated themselves.

With the effects of unemployment, low natural gas prices, and no more pent-up demand, prices should start to drop and we'll see a better selection of homes. Anyway, that's what I keep telling my buyers...but it's wearing thin.

Posted: Sunday, August 16, 2009 12:11 PM by Bob Truman

Comments

CM said:

Seems like a theory that could definitely be credible.  Checking out your very own Absorption Rate by Price Range page Bob...

http://www.bobtruman.com/Absorption_Rate_by_Price_Range/page_2184951.html

< $400 k, hits balanced market in late Feb

$400-500k hits balanced market in late Apr

$500k-600k hits balanced market in early June

$600k-700k hits balanced market in mid June

Without FTB, the game of musical chairs can't continue for very long.

It would seem that anyone with a pulse and wants to own a home now has one.  

I'd be curious to know what our percentage level of ownership is here in Calgary.  I remember in 2006 they said that Canada had reached it's highest percentage in history (jut under 70% I believe).

# August 16, 2009 1:31 PM

calgary annette said:

Very well said.   Amazingly, a realtor with clear head/wisdom/insight.  Kudos to Bob.

# August 16, 2009 2:29 PM

Jimmy said:

Garth's blog is quite something. He's advocating a new way of "shorting" real estate prices (which could end up in disaster for those who play the game). I guess he saw this peak of 2009 for what it was and was advising people to buy last year to take advantage of the top of the bubble this year of course.

CM this "game" (it's called the real estate market) will never end. It happens every year people buy houses after they've sold them. There will be first time buyers until the population of Calgary goes down.

This year was a bit different because everyone got scared off at the end of last year. What that means is that the mean and median "should" have been higher earlier this year, not that the prices next year "should" be lower. I think our market is now "balanced" as the absorption rates suggest.

About Nat Gas. Bob - I don't pretend to know the ins and outs of that market - it's as volatile as they come. When NG was $2.00 in 2002 should we have sold all our houses?

http://en.wikipedia.org/wiki/File:Henry_hub_NG_prices.svg

Anyone who thinks they can predict Nat Gas a year out is fooling themselves. It goes up and down for many reasons (extreme weather, unpredictable shale plays, oil exploration, coal power speculation). Any sensible company in the game is hedged and they usually sell oil (for which the long term fundamentals are better). I do think there will still be layoffs to come as with any economic cycle.

One thing I must say is that I can't believe how stupid our province is for pinning so many royalty hopes on such a volatile industry. Please remember this everyone at the next election!

# August 16, 2009 2:47 PM

Bob Truman said:

 What’s happening on the west end?

Kendall and I have spent a good portion of the past four months in the communities of Cougar Ridge, West Springs, and Springbank Hill, working for both buyers and sellers. We even managed to find a home in the Montreaux area of Springbank Hill for one of our buyers which wasn't even listed on MLS. The seller contacted me through my "Homes Wanted" page and it turned out to be the perfect home for Bridgette and Sid after viewing over 40 homes which were on MLS. They did not have to compete with any other buyers and had lots of time to think about their purchase.

What about the seller? Why would someone want to sell their house outside of the MLS system? A couple good reasons:

- Avoiding the hassle of showing your home. This is probably the biggest problem which sellers have with MLS. How many times will you have to clean and prepare your house for showings? You will then have the inconvenience of leaving home for at least an hour. It can get monotonous and very tiring, especially if you have pets or kids.

- Paying less commission. When I sell a home which is not on MLS, I automatically forego half the normal commission. In the case of this seller, it amounted to $10,258.

I noticed that four of the five homes which were listed in the Montreaux area sold recently, all within the space of a week.

Sales over the past 30 days for homes below $550,000 in Cougar Ridge, West Springs, and Springbank Hill are up 47% compared to last year. The absorption rate is a low, low seller's market of 1.4 and the median CDOM is 15.

# August 16, 2009 2:49 PM

JC said:

Re: Influx of new listings

The information below was in a thread posted by the moderator of the alberta bubble blog on March 27, 2008...

http://albertabubble.blogspot.com/2008/03/weekend-open-thread.html

"20 months Supply of Condos in Calgary

At the current rate of sales of very optimistic 600 per month, there will be supply of at least 20 months."  

"40 months supply of condos in Edmonton

At the current sales of around 300 per month, there will be more than 3 years of supply. But there are no bubbles."

Last time I looked, there was a  2-month supply of condos in Calgary and a 4-month supply in Edmonton. 

# August 16, 2009 3:16 PM
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