Bob Truman, First Place Realty : Sales up 63% in November

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Fair and balanced comment on the Calgary real estate market from Bob Truman and Dailystats.ca

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CM said:

and on the flip side of the coin, the rental product officially becomes 3% cheaper ...

The median rental price (per month) for a SFH in Calgary has fallen another 3%.

For those that have seen my posts before, I track the median rental price of SFH and 2-bedroom apartments in Calgary using the data from rentfaster.ca

Link to all SFH for rent: http://tinyurl.com/ygt7uj2

Here is the data (month: price)

07: $1650

08: $1600

09: $1600

10: $1600

11: $1600

12: $1550

Looks like the rental decline is happening at about 1% per month.

The current median price for a SFH in Calgary is $408k.

This translates to a current price/rent ratio of 263.

# December 1, 2009 7:37 PM

DaBull said:

CM....ahhhh... duh. First; you need valid numbers to arrive at a valid median.

Your current metheod of picking the middle ad from the total ad's posted is not really the proper way to arrive at the median rental rate for SFH. It gives invalid results, too many invalid data points or as I like to call it "noise".

To get a valid median, you have to get rid of this noise. So go through those ads and knock out the 20% from out of town. Then knock out the 20% that are duplicate/multiple ads. Knock out the 20% that are for roommates. Knock out the 20% that says "house for rent only $800" but after further reading states "that's only the basement suite", if you want the mainfloor with it that will cost you an extra $1200 for a total of $2,000 (ouch).

Then with the 20% of valid ads you have left put the numbers in a nice linear set and pick the middle one. That will then be the valid median.

So please, when you have time, sit down and go through all those ads and throw out all the invalid ones, you know the ones I mentioned above. After you have have that and arrived at the truely valid median, then and only then would I except your results as meaningful or may I say "valid". As it stands right now your median rental rate results don't really mean anything, except maybe more people are looking for roommates than were previous were or that there is a lot more basement suites.

So good luck with your rental median project and let us know the results when you have them.

DaBull... Waiting with bated breath for the valid results.

# December 1, 2009 11:57 PM

CM said:

DaBull: Obviously I've hit a nerve.

Your points are valid, but I believe the 20% number that you pulled out of your sunshineless posterior is not.

On RentFaster.ca you can do an 'advanced search' specifying that you only want properties located in Calgary (eliminating out of town results).

You can also specify 'house' as opposed to 'mainfloor' (eliminating 'only for the basement suite' results)

http://www.rentfaster.ca/advanced_search.php

This advanced search query is what I use each and every time, and is the one generated here:

http://tinyurl.com/ygt7uj2

Now, are there rental property owners who try to pass off their basement suite in the 'house' category?

Absolutely, but I've found that to be a very small percentage. A far cry from the '1 in 5' that you suggest. How about we do a random sample based on the query above?

Are there rental property owners with a property out of town that they've mistakenly/purposely specified as being in the NW/NE/SW/SE/Inner-City of Calgary?

To be honest, I have yet to see one, and I'm willing to bet it's a very, very, very small percentage. Not much chance of fooling someone into believing your property in Okotoks is in Crescent Heights.

I'll do a random sample of 100 properties using the standard advanced search query that I always use, and let you know what the margin of error is, so we can unbate that breath of yours.

# December 2, 2009 11:01 AM

worldclass said:

CM, it is unfortunate for yourself, and many other financially prudent folks, that the housing market is going the way it is going right now. Though I urged people to buy if they could afford a place of their own and needed it to live in (not speculate with), I understand the backlash I received. Those who really cannot "catch up" playing a fair game with this rat race are understandably frustrated with the system.

I for one hope that home prices stop rising from here on, and even a healthy correction lower would be favorable. However, with the debasement of fiat money and the recent run-ups in everything "un-cash"... we might see a unsightly jump in real estate values come 2010. Hold onto your seats, it'll be a tough ride.

# December 2, 2009 11:28 AM

CM said:

Yes, thanks for your thoughts and understanding WorldClass.

My life is absolutely miserable as a renter.

I will never catch up.

It's absolutely terrible knowing that I could pay cash for virtually any average to somewhat above average home in YYC yet choose not to because of my belief that the fundamentals are completely out of whack and make that a very poor decision.

It's horrible living in a 2000 sq ft home in perhaps the most desirable inner city neighborhood in Calgary with my 400+ price to rent ratio, with the freedom to move anywhere I'd like if I feel like it.

I will never catch up to my peers who bought in 05/06/07 and now feel trapped in their homes, afraid to put their homes up for sale, because they know they would lose everything they put into it. All with the looming threat of their landlord (aka bank) likely doubling to tripling their rent in the years ahead, while mine continues to offer reductions, allowing me to take even more vacations per year.

I hope one day this hell will end.

# December 2, 2009 12:38 PM

CM said:

220 more that might be having catch up problems...

15% of Talisman received pink slips today

http://www.calgaryherald.com/business/Talisman+lays/2294482/story.html

# December 2, 2009 12:44 PM

Newt said:

I guess that I must be one of those that can not keep up - too bad for me.

Sounds like Shell will also be laying off a ton of people, and I imagine that a lot of other "big players" will follow now that Talisman has thrown in some chips.

The rig and service companies are really going to feel pinch coming up also. I would not want to be employed in that area.

All of this just in time for interest rate hikes and the end of the stimulus cash flow.

But, this time is different. Don't bother looking at the past. That was then, this is now. We are immune to things. You better buy now or fore ever be priced out!

Personally, I'll take priced out. That way I won't be mortgage poor like most new home homers that I talk to.

Worldclass - how many homes do you own? I sure hope that if you have any money at all in savings, you are pulling it out to buy more real estate.

Anyways - back to being miserable and frustrated.

# December 3, 2009 11:47 AM

worldclass said:

Congrats CM on your absolutely fabulous personal wealth. Would you like a gold medal for excellence in saving? I didn't know we were on this blog to compare and boast about the size of our bank accounts. I for one don't believe that someone who can save up 400-500k in cash would spend all their time on blogs trying to convince people that homes are overpriced. Maybe you were instead a lucky lotto winner, or the beneficiary of a large inheritance.

Most of us who have accumulated a good amount of personal wealth are here WITHOUT an agenda. To merely pass the time and offer our opinions on what may be coming in the pipeline. I'm sorry, but I did not benefit from anyone who followed my advice to buy a home if you need it (back in May 2009) or to buy some gold as an investment (Jan 2009). Those who followed some of that advice I will never reap any financial benefits. I used to tell people NOT to buy back in 2006-2008 ... just ask Bob Truman to dig up my old old postings. Tell me, CM...who between you and I, have the "agenda"?

All I have to say is, you may be sarcastically laughing now with all that "ability to purchase any average home with cash", but you won't be laughing for much longer. You fail to realize your fiat cash hoard (supposedly, 500k?) is worth far less than it was a mere 6 months ago. If you've been sitting on 500k in cash all this time, you've got to get your head checked out. You missed a huge wave my friend...from gold, commodities, equities, AND real estate.... missed it good.

If you are sitting on 500k of cash, you have zero credibility with the majority of renters. Most renters do not have a hoard like that, and likely never will. To tell them that house prices are going to fall so "keep renting" because you looked in rentfaster.ca and did a crude estimate on price/rent ratios is just plain wrong. Your situation (if you aren't lying) is COMPLETELY different than the situation of the majority of folks who ARE scraping up for a down payment and DO NOT have 500k sitting in cash.

You, Carioca, Mike-o-rama, etc. are all (supposedly) renters with 500k-1million dollars in their bank accounts. You all tell people to rent and laugh it off when prices go higher. You tell them to wait, then wait longer as they see what little cash they have (likely far less than you have) erodes in value. You are all doing OK because you have hoards of money. But what about the little guy?

# December 3, 2009 12:03 PM

Fox News said:

I enjoy how none of the bulls care to take CM's median rent calculation at face value. Because that would actually require asking yourself why Calgary has a current price/rent ratio of 263. And then searching what a "normal" price/rent ratio is considered to be. And finding other cities that used to be at our same price/rent level. And then maybe starting to wonder how this is all going to end. Hint...rents probably aren't going to double any time soon, so if it isn't the denominator...well you know.

Or acknowledging CM's second post where he points out that Calgary's unemployment rate continues to rise. Quick, some cheerleader point out how the Fraser Institute (a Fair and Balanced institution if there ever was one) just came out and said that Alberta is still the best place in Canada to invest in. Don't pay any attention to a giant of industry in this province like N. Murray Edwards when he said this week that "If you look at what drives this economy, if you don't fix the major driver today, I'm worried about the opportunity for jobs ... and resource revenues". Because then you might start thinking about what tax bracket are losing jobs left and right these days. And how many of those people were sitting right at their max TDS level back when they at least collected a cheque. And what it will mean that Alberta is currently leading the country in our rate of bankruptcy increases. And then maybe starting to wonder again how this is all going to end.

No, no - much easier to just trash his comments and start touting "if you'd listened to me you'd be rich now!!" Hurry, it's not too late!!

Anyways, nice posts CM.

# December 4, 2009 12:31 AM

Vladimir Levin said:

I think CM's point about the ratio is interesting, but if I were someone looking into buying a home, I think I would focus on how much it would cost me to rent a comparable home vs. the mortgage payments (+ condo fees if applicable) associated with buying. Obviously one should factor in an expectation that interest rates will increase over time. I think if those numbers match up in a way that seems reasonable, and your overall financial situation is reasonably stable, then buying into the current type of market may not be a bad idea.

I don't anticipate prices to spike any time soon, and in fact they may go down, so I wouldn't hurry anyone into buying a home, but I wouldn't really say "wait 5 years" either...

# December 4, 2009 7:23 PM

DaBull said:

Fox News

If CM is going to go through all the trouble of making his own median rental price for Calgary, the least he can do is use valid data. At least then he won't have any problems backing up his findings. But I will give him credit, after he explained he was using the advanced search it makes his results more valid than simple picking the middle number from all 3200+ listings.

Murray Edwards?? What would you expect the CEO of CNRL to say... I have been in the Oil/Gas industry for 30 years and I hate to break this to you but things they are a changing in good Ole Oilberta. Alberta's Oilsands will be the future economic driver, not natural gas. If you haven't heard there is a crap load of supposed cheap shale gas every but Alberta these days. Alberta has a bit of low cost shale, lots of expensive coalbed methane and a lots of very expensive tight sands gas. BC is sitting on the sweetspot when it comes to shale gas, best lowest cost shale plays in Canada. So even if Alberta put the royalty rate at ZERO, it wouldn't help much, we have the wrong type of gas at the moment.

The main driver of activity is price and right now it's crap. Hopefully by next fall that will change and prices increase enough to make Alberta gas viable again.

# December 4, 2009 8:22 PM

Jimmy said:

I'm actually impressed with CM's effort to look into the rental market rates. Perhaps that's the canary in the coal mine that you've been looking for. I trust that CM will also report on any increases in the median rent that might happen in the coming months.

At least CM is looking at data systematically and not writing off statistics as manipulations by CREB/realtors/the government etc.

Yes it is definitely important that jobs continue to be lost. Unemployment always lags and I would expect jobs to recover late into next year. We'll probably see low wage growth (if any) for the next year or two as well. You'll have plenty more layoffs to post about in the months ahead CM.

Natural gas is certainly cheap now. I'm surprised it's not around $2.00 given the vast surplus. Could you tell us Fox News what percentage of unconventional/shale plays are economical at the $4.00-$5.00 range? I'm not in the industry and I can't find that information anywhere. You seem to know about this already so please enlighten us with some data and not what an oil/NG bigwig said. You're quick to find a hidden agenda among realtors so why let an oil company executive off the hook?

CM often mentions this or that company is laying off on real estate blogs. I must have missed his or her post about Cenovus hiring (potentially an equal number to the layoffs at Talisman) and the 79000 jobs reportedly gained in Canada in November though...

worldclass:

I tend to immediately lose confidence in anonymous people claiming to be sitting on hoards of cash/GICs/stocks that just happened to take off recently or even boasting about their house or how cool their rental spot is. It's completely unverifiable most of the time and the poster knows it. So why make a claim like that to bolster credibility? It tells you more about their thought process than their bank account honestly.

Anyone reading these blogs for advice from myself or anyone here except Bob Truman should look at the following link

http://en.wikipedia.org/wiki/On_the_Internet,_nobody_knows_you're_a_dog

Finally CM, your unfortunate peers who bought Calgary real estate in 05 have realized an approximately 33% return over 4 years. That has beat almost any other investment. I wouldn't get smug about those poor folks. The ones who bought in 06 are probably still in the black as well.

Those who bought in 07 haven't done well but let's not find cheer in others financial misery. Maybe that will be you and I one day.

# December 4, 2009 10:45 PM

worldclass said:

"Those who bought in 07 haven't done well but let's not find cheer in others financial misery. Maybe that will be you and I one day."

I agree with this comment very much Jimmy. Too often we see a lot of cheering on about the downfall of things, the loss of jobs, and the hope to one day buy a home for pennies on the dollar. But then again, how well can you live if you have to constantly look out your window for criminals? Because crime will rise hard if the longed for "crash" that some posters want comes to fruition.

Some posters have even claimed that Brazil (where crime is rampant, drugs are rampant, prostitution is rampant, trafficking of humans is part of life, etc etc) is somehow better than living in Canada. Maybe if you are into living in rich, gated areas and turn a blind eye to those "ghetto folk" around you...

While I am not a proponent of wild speculation in real estate, I am also not a proponent of dumping on Canada. The governments of the world may be committing a huge mistake with the quantity of money they are "creating", but in the end I'd rather be in Canada to weather out the storm than crime-infested Rio de Janeiro where "the homicide rate of the greater metropolitan area was nearly 30 victims per week, with the majority of victims falling to mugging, stray bullets or narcoterrorism" (see urban stats on Rio).

By the way, those who are also claiming manipulation in the stats on 79,000 jobs created... why did you not question the stats when they showed massive job losses? Instead you kicked those who lost their jobs and threw salt on their wounds by cheering it on. With Harper signing deals with China, you'll probably poo poo on that parade too... Harper has done a very good job over there. We will now see more meat and grain exports, more exports of commodities, and higher tourism all with China. They have the hugest population and we have the 2nd largest known oil reserves. There's no stopping Western Canada in the LONG-run... the machine is just sputtering at the moment but make no mistake we are headed onward and upward.

# December 5, 2009 11:00 AM

CM said:

Good posts by everyone.

"Congrats CM on your absolutely fabulous personal wealth. Would you like a gold medal for excellence in saving? I didn't know we were on this blog to compare and boast about the size of our bank accounts."

WorldClass: I apologize for that, and my intention was not to draw attention to myself. Anyone who has seen my posts on this board, or others, should know that I've never gone in that direction.

I just get a little irritated sometimes when I see statements implying that somebody that is renting should be someone you feel sorry for. ie: the 'bitter renter' complex. I feel the incredible societal desire/pressure for home ownership, particularly this last decade, is really one of the things that got us where we are today.

I hear statements all the time from friends & family such as 'renting is just throwing your money away', even though they've never even stopped to think, or run the numbers, on scenarios in which this statement couldn't be further from the truth.

There's an entire demographic out there, probably mine and younger, that truly believes what we saw from 2004-2007 is the norm. There are people who believe another 'boom' is a few years down the road, rather than the infinitely more likely 30.

I post, not for me, because barring any really foolish decisions, I'm pretty sure I'll be ok, but as an attempt to offer an alternate viewpoint to home ownership at any cost.

I try to keep away from 'the sky is falling' or anything conspiratorial. I prefer facts, figures, and a close examination of history.

I think if one statement could sum up my beliefs, it would be 'everything eventually returns to their long term fundamentals'. That's pretty much all I truly believe, and as close as I come to 'predicting' with any conviction.

I also enjoy studying asset bubbles throughout history, the psychology within those bubbles, and the eventual outcome that every bubble realizes.

# December 7, 2009 12:53 PM

CM said:

"If CM is going to go through all the trouble of making his own median rental price for Calgary, the least he can do is use valid data. At least then he won't have any problems backing up his findings. But I will give him credit, after he explained he was using the advanced search it makes his results more valid than simple picking the middle number from all 3200+ listings."

Just as an update to this, I did a sample study of 195 of the 700 listings or so.

With the prices arranged in order, I started at the low end. This seemed to make the most sense, if any rental ad posters are going to try and get away with posting shared accomodation (main floor or basement suites) the prices are likely to be at the low end.

In each ad I looked for 3 things:

1. Inaccurate location descriptions (ie: not in Calgary)

2. Inaccurate property descriptions (ie: not really a whole SFH, but a basement suite or other)

3 Inaccurate living condition descriptions (ie: actually looking for roommate)

These inaccuracies were definitely far more prevalent at the lower end of the price range, as expected.

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