Bob Truman, First Place Realty

Sure, but what happens after interest rates start to climb back to historical norms? Run out of buyers + increasing inventory = decreasing prices. I'll wait to buy thanks.

When do you think those higher interest rates will come about? -Bob

I don't think you can read anything into the market in December/January/February since we're looking at such tiny volumes. We'll need to wait for March at least before we know how the summer plays out.

I think the most telling indicator recently was the fact that the highest price of 2009 was reached in November. This rally still has legs and for those wondering how far Canadians can overextend, just look  how many years the US market was inflated before reality set in.

Quoting Garth is basically wasting time for a lot of people now since his statements are always a foregone conclusion. If he changed his mind and became a bull his book sales would dry up so what do you expect from him? At least he's good for a chuckle.

Garth Turner.....

He won't even predict the trends for resale prices for 2010.

He's too busy scaring the hell out of children to sell his books.

This is what is wrong with his "vision" for higher number of listings?

1. Interest rates won't drastically go up tomorrow to substantiate those listings;

2. Why all of a sudden would the market have an avalanche of listings?; and

3. He's been consistently wrong in the past and will again.

Yes rates will go up. One day. Yes that will erode affordability. Yes it will affect listings down the road and at least prices will stay put.

But... "I have no doubt an avalanche of new properties will be the big real estate story in the weeks ahead."????????

NOT LIKELY!!!!

...And then there's always that spring rush ahead.

Good breakdown of the speech made by David Wolf (Mark Carney adviser) regarding the housing bubble (that doesn't exist)

http://calgaryrealestatereview.com/2010/01/11/bank-of-canada-premature-to-talk-of-canadian-housing-bubble/

with comments from Mike.

Looks like the pending average/median condo is currently $293k/$267k.  I agree that January doesn't really say much, especially the first half, but can't help but notice month to date January condos are at $246.5k median.  

January 2009 finished at $243k, which was about the bottom for that 18% slide from the peak that we went through.

Condos are on pace for 240 sales (Jan '09: 225) and SFH on pace for 524 (Jan '09: 550).  

But again, that's using the first half of January which is obviously going to be really slow, I'm sure those numbers will pick up.

Nice, thanks Bob!  Definitely a better way to look at the numbers.

Kind of surprised by this one, thought the job cuts were tailing off...

1,000 more layoffs coming for Suncor

http://www.calgaryherald.com/business/Suncor+plans+more+massive+layoffs/2433333/story.html

With all the Trillions of new currency "printed" throughout the world in the last year or so and all the Trillions that will be "printed" in the years to come, it is pure rubbish to think that over the long term, deflation in Calgary Real Estate prices is a rational option. Those thinking the above option is plausible will be living in Mommy's basement for a long,long time.

The "last time" we were in a situation like now - the Decade of the 1970's (which I remember well),low growth and rising interest rates, caused Real Estate prices in Commodity rich Western Canada to increase several hundred percent. Those who think that interest rates in the 8%,10% or even 12% range will prevent Real Estate prices from doubling or tripling over the next decade are sadly mistaken. For me, Mommy's basement is not an option. Protect yourselves.

Here's an excellent graph which shows there is minimal housing bubble in canada

http://www.economist.com/media/houseprice2/Economist_HPI_July_09_Chart.swf

Analyzing current events based on historical comparisons, which scenario can be expected for the US economy?

Inflation? deflation? disinflation? stagflation? reflation?

Given our economy is highly correlated to the US economy, if the US economy doesn't improve soon, neither will ours. Today is much different from 1970's. With globalization, corporations can offshore and therefore wages will not increase.What happens when there are less jobs, existing wages stay stagnant, the stock market hits all time lows and the private debt markets dictate higher interest rates? Commodities will not save us because the boom will go bust when China's domestic stimulus ends.

Calgary and for that matter Canada's property prices have been in a bubble for a few years now. Without income growth and job creation, once the greatest fool has the product, he will have no one else to flip to. Just like what happened in US a few years ago.

Little surprise by the numbers , I think this year will play out this year by a increase in sales and price by 10% . But if rates rise and the job picture gets worse then we will see prices come down and less buying by 10%.

It is hard not to be cynical about economists when you see one change their opinion 180 degrees after accepting a new job.

I am referring to David Wolf who used to be the chief economist at Merrill Lynch Canada until he joined Mark Carney at the Bank of Canada.

He made big headlines in 2008 when he released a report on Canada's housing market.

Canada's housing bubble could soon burst: Merrill Lynch

http://www.canada.com/topics/news/story.html?id=04fe6225-ae78-4e70-84e0-6d340844ab01

Canadian households are nearing the financial tipping point that Americans reached two years ago, which plunged their housing market into the deepest recession since the Great Depression, a senior Bay Street economist warned Wednesday.

It may just be a matter of time before the Canadian housing market tanks like the U.S. market did, Merrill Lynch Canada economist David Wolf said, warning that Canadian households are now nearly as overextended as households in the U.S., and even more so than those in Britain, prior to the bursting of the housing market bubbles in those countries.

Today he gave a speech in Edmonton - BoC sees no housing bubble yet

http://www.financialpost.com/reports/property/story.html?id=2429324&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+canwest%2FF244+%28Financial+Post+-+Top+Stories%29&utm_content=My+Yahoo

It is "premature" to talk about a bubble in the country's housing market, a senior Bank of Canada official said Monday.

"Recent house price increases do not appear to be out of line with the underlying supply-demand fundamentals," David Wolf, an advisor to the governor, Mark Carney, said in a speech in Edmonton.

Following the party line... Must be hard to look at himself in the mirror every morning.

In regards to the 1000 layoffs posted above, for those that don't read the articles posted with it these layoffs are not traditional layoffs.

Suncor is just throwing out the overhead it picked up with the petro-can merger.

And as stated in the article most of these workers will be picked up by the companies that buy up the assets that Suncor is selling from this merger.

As for My thoughts on 2010 I am of the thought that prices will stay relatively flat this year. I expect the typical up in the spring down in the winter.

The argument that there will be a flood of listing "very soon" has really been played out in the last 9 months, that argument seems to have started AFTER the listing ballooned a year and a half ago, it's typical.

It's the same phenomenon as the people yelling that prices will go crazy after they already went crazy and people yelling that prices are going to drop after they have already dropped.

Bob, thanks for the mention.  I might not have time to blog as much as of late but I still read postings.  I do hope that we do NOT see a scenario as Garth Turner would want.  Nor would we want to see ever rising prices beyond fundamentals (some would argue that we already are seeing that).  A flat year would be a good year.

Our average RE price/earning ratio is too high as compare to USA RE bubble peak (2005). Calgary (current price) RE is more expensive than USA (2005) except bay area, NY, Boston.

We pay more for taxes, gas, food, grocery, car, hotel, flight and everything. There are no tax benefits for jumbo mortgage here.

Right now a big population of recent buyers is having nice home, nice suit, nice car and empty bank account with jumbo debt. They have nothing to fall back in rainy days. I am not sure how can they predict next 10-30 yrs on zero margin.

RE Bull logic??-

- House price goes up when interest goes down or mortgage conditions are relax (0/40, 5/35)

- House price stay same when interest rate goes up or mortgage conditions tightened (10/30)

- House price goes up with low unemployment

- House price stay same with high unemployment

Summary-

House price never go down and these stupid Americans did not learn from us how to keep RE affordable.

Frnk:

About inflation and deflation:

Most bears are still calling deflation, whether it be manifested by asset prices like US houses, unemployment and income etc. and what they forget is that when you inject trillions of dollars, buy up failed banks and force rates lower with low central rates and quantitative easing, the money doesn't instantly flow into people's income and jobs.

Imagine if instead of giving the money to stimulus and bank bailouts, every Canadian was given $2000 in Ralph bucks to bump up our 2009 income by 3-4%. That wouldn't actually be true inflation because we'd still feel scared about spending it.

In the US that number would have been about $3000 to each earner (this is very rough math), resulting in an even higher increase in income. It would all end up in mattresses without easing credit first though.

First this money has to drip down - the banks get a massive bailout and low borrowing rates so that they can provide loans and ease credit. This has to some extent been done. We now have ridiculous low mortgage rates. Bond rates have been forced low through quantitative easing and this will continue and even if Canada doesn't ever get around to it, the effects on US bonds spread to our market. Even Alberta borrowed money to pay the budget when it has a huge stash in the Heritage fund (and that was a very smart move so far)

The net result is that big money invests into corporate debt, the stock market and commodities, rather than staying in cash. Governments also get to take advantage of super low interest rates by issuing massive debt which in turn goes into stimulus spending that does ultimately need to be paid back when wage inflation kicks in. All of these things have now happened except the wages and the taxes.

Unfortunately because governments spend money inefficiently, only some people get the first turn at the trough. That money trickles down inefficiently and doesn't do a great job of stimulating. More inflation will happen when inflated asset prices (oil and other commodities) drive income to those industries and down to their workers. This might manifest as a pickup in hiring in the oilpatch in the coming months. Australia is already feeling the effects of this.

The real question is when will these drivers affect people's inflation expectations and then the velocity of money. Only after that will you see consistent income inflation. Check this link to see when that is happening in the US (it's now)

http://www.businessinsider.com/henry-blodget-inflation-expectations-charge-higher-now-back-to-pre-crisis-levels-2010-1

The argument about wage arbitrage or offshoring is certainly valid but short-sighted. As high paying jobs go overseas, the playing field is rebalanced. The consumption of those overseas earners also increases (China is now the largest auto market) and this drives inflation on a global scale. Controlled currencies like the Yuan will eventually revalue upwards and this will in turn drive their own purchasing power and a more balanced trade picture. Consumption in developing countries will also increase if and when they develop proper social programs and more sophisticated insurance.

So if you think that inflation is not happening because US or Canadian wages are flat, there is a nasty surprise on the horizon and with inflation expectations already back to 2007 levels, it's a lot closer than many think.

"So if you think that inflation is not happening because US or Canadian wages are flat, there is a nasty surprise on the horizon and with inflation expectations already back to 2007 levels, it's a lot closer than many think."

Jimmy, I couldn't have said it better myself.  I've been trying to get this "big" picture across to as many people as I can, so that they don't get blind-sided later on.  Even just knowing what may transpire is better than not knowing.  I tell friends that they are enjoying, or about to enjoy, one of the best consumption opportunities in likely a decade.  That is, if they were smart enough to save back when everyone was spending, now they can deploy that cash and consume what they've been waiting to consume.  Not that you should go run out and get a flat screen TV... but if you needed lumber to build that garage... NOW is the time to get that lumber on the cheap.  Auctions galore for building supplies.

Just an update on the rental market..

Median SFH - $1500/month as of Jan 15

http://tinyurl.com/ygt7uj2

Median 2 bedroom apartment - $1095/month as of Jan 15

In other words, not much movement either way.

SFH | month: price

07: $1650

08: $1600

09: $1600

10: $1600

11: $1600

12: $1550

01: $1550

Price/Rent ratio of 254

2 bedroom apt | month: price

07 - $1200

08 - $1150

09 - $1150

10 - $1100

11 - $1099

12 - $1099

01 - $1095

Inventory was down, as to be expected, but climbing back up to the pre-Christmas levels.

David Wolf is so funny. Look at what he said about the bubble 2 years ago. He is just a political guy. No credit. Period.

Sorry,

I don't agree that the people being laid off by Suncor will be picked up by the acquiring companies.  If I'm out buying assets, unless it's a completely new field, why would I need to add team members in most cases?  Sure, some of them will be picked up.  I think the whole "most of these guys will get jobs with the asset purchasers" is just a crock of sh*t they're feeding the media...who have sucked it back without any sort of critical analysis...no wonder they need reminder advertising to tell us that "Local TV Matters".  

About Layoffs

Basically a Layoff is a Layoff no matter how one slices it. Sure some at Suncor will find another job, but I bet those that got or getting the pink slips are spending a lot less .

G'day Bob,

I was curious if you could explain the discrepancy between your stats, and another blogs stats.

http://www.andrewkyle.com/mlsca/home_page.php?page=weekly_stats

On January 16, 2010

Bob Truman SFH 30 day sales: 611

Bob Truman SFH inventory: 2335

Andrew Kyle SFH 30 day sales: 377

Andrew Kyle current listings: 2333

On January 16, 2010

Bob Truman Condo 30 day sales: 268

Bob Truman Condo inventory: 1312

Andrew Kyle SFH 30 day sales: 142

Andrew Kyle current listings:1318

I notice that the inventory or current listings is pretty much the same (I assume difference is just due to different expiry times when you ran the query).

However, I'm not sure why there is such a large difference between Andrew's sales numbers and yours and was hoping maybe you could check into why the sales numbers are so different?  

I suppose I am curious whether the last two absorption data points indicate the market has weakened considerably or are accidental error?

Cheers!

I double-checked my numbers and they are correct. At first glance it looked as if Andrew's numbers were for Jan 1 -16 and included towns around Calgary. When I run that search, it comes to 379 sales, which is close.

When I run the search for condos, however, I get 174 sales which is substantially higher than his 142.

So I'm not familiar with the criteria he's using.

You're correct about the inventory. Unless everyone compiles their stats at exactly the same time of day, the inventory numbers will be slightly different. -Bob

I would suspect we will see rates starting to go up Q3 2010, then steadily rise ~25 basis points per quarter or half year until we reach a more realistic level (3% BOC rate). Not saying the housing market will crash, just normalize itself to where income levels dictate. Basically the increased interest costs will be more than offset by the decrease in home values - escpecially the higher priced homes.

Radley: Just to add a third source into the mix for you, CalgaryHomePros.com shows 576 SFH in the last 30 days (as of Jan 18) and 260 for condos.  So pretty much the same as Bob's numbers.

Always loved the innovative features on Andrew's site, but there are a few things that made me wonder whether he was still as actively involved in real estate as he used to be (and not just because he hasn't updated his blog in nearly a year).  

Seems to have a few new features on his site though, such as the community profiles and absorption rate maps.

A few points about the inflation/deflation debate going on here.

For inflation to take hold, it requires an industry or the economy as a whole to be operating a near capacity:

1. Currently there is rampant overcapacity around the globe. Manufacturing could literally double without effecting inflation. In Canada we are operating around 67%. Does anyone understand how competitive this will be to get out of? It's going to be a fight to the lowest bidder for many years in front of us.

2. US unemployment unlikely to go below 8% before 2015. Try to work the numbers yourself. Even with 150,000 jobs created a month (and that's not going to happen), surpassing this threshold just won't happen.

3. CPI inflation doesn't show up in assets that are purchased with credit. Credit Inflation boosts these asset prices, most notably real estate. In the past thirty years we have seen more credit inflation than in the history of mankind. In Canada alone, we've grown mortgage debt by 450% (in real terms) since 1984. Between 2000-2009 mortgage credit expanded by 132%, yet CPI inflation accounted for only 14% of this growth. Dear bulls, if you wanted inflation, you had it!

3b. To counteract the deflationary forces on assets dependent upon credit (real estate), you would like need to see the world governments print upwards of $60 trillion US. This would debase the currency and make goods and services impossible to afford. No investment would look good under these circumstances.

4. CPI inflation will cause interest rates to rise. Wages rarely lead in inflationary times, and regardless, wages won't rise fast enough to compensate for increasing interest rate costs. People will default on large loans such as mortgages. This will cause credit deflation, which is most likely to cause a financial shock, causing people to hoard cash and cause deflation.

5. In June of 2008, the US hit nearly 6% inflation. How did real estate do then?

6. If CPI gets up to 6%, but is not immediately followed by an increase in wages, then there will be a lack of purchasers for such inflated goods. This will cause prices to deflate within a matter of months.

7. Canada is currently only 75% as productive as America. In this competitive global marketplace where the gap between quality and skills of Chinese workers is closing in on us, what makes us think that we're worth half the wage we're paid today? Huge adjustment could be on its way if we don't get our ass in gear.

8. Baby boomer retirement is likely to cause credit to contract. This will cause asset deflation.

Cheers,

As an addenum to my previous comment, I should say that I do agree with the inflationistas, that over the long run, all currencies will eventually be worthless. I just think they are jumping the gun.

Your Virtual tour...

Asking $599,900 for a run of the mill cookie cutter 2 story on a pint sized lot.

lol ... who would have thunk!

We've had fifteen showings in the first five days. Attractive homes that back onto green spaces are rare commodities in this price range, but thanks for bringing some more attention to it. Property Details

Do you want me to let you know when it sells? -Bob

Did you expect CREB to predict a decline?!!

Money supply includes credit. While gov'ts may have "created trillions", the credit side of the money supply equation is contracting [globally] at a record rate. Net effect, for immediate future, is deflation.

You're a fox in charge of a hen house...a realtor trumpeting real estate...and you have no clue about MACRO economics.

I am "trumpeting" relevant and up-to-date information. That's how buyers and sellers are able to make informed decisions. 

I believe it is very relevant to hear CREB's prediction, since I have posted predictions from others, including Garth Turner and a number of bubble-bloggers. The fact is, CREB's prediction last year was almost right on.

I appreciate the fact that you think I am able to control prices, and thanks for the compliment,  but the market seems to take its own direction regardless of what I do.

If I could control the market, I would make prices fall so that more people could afford to buy.

I am not trained as an economist, but how did all the highly-educated economist's predictions turn out last year?

What is your forecast for house prices in 2010 or are you scared to make a prediction? -Bob

When david wolf, an fam??s economist predicted the bubble two years ago, many buyers were so happy excluding realtors. Now some realtors are definitely applausing that david wolf is joining with them again. Got big money from BoC? lol.

"At least CREB has the courage to make a prediction."

Let me guess.... it was a positive prediction

Who would have thunk! lol

For me, a positive prediction would have meant lower prices. -Bob

Why lower house price is called pessimistic thought???

We like to pay lower price for everything so we can have more money for family, saving, RESP, RRSP but lower house price is called pessimistic thought???

We don't have a sub prime problem here, so we won't have a real-estate bubble, we are told.

We can afford these prices along with higher price for taxes, gas, food, car, grocery, flight, cell phone and everything.

Yes.. we can afford. We can afford monthly payment (cheaper rates) but not house.

FYI..............Just before the US real estate bubble burst, house prices were five times higher than the average American income. In Canada today that ratio is 7.4 times.

Those complaining about the prediction should just calm down.  When making decisions wouldn't you WANT as many viewpoints as possible?  Just because those predictions do not jive with what you wish, you must not let your anger and frustration cloud your judgement.  I would like to hear every prediction and compile them into a list...then look at them a year later.

I for one thought the CREB prediction for 2009 was overly optimistic and wrong.  But then again, they DID end up as the most accurate.  Do the honorable thing and eat that humble-pie.  Numbers do not lie.  I ate the pie when my friends who bought a home a few months ago are FAR better off than if they were to buy it now.  I told them not to, and that prices may come down.  They thankfully didn't listen to me otherwise I'd be in their bad-books.  They've saved on rent and are happy home owners.

Please spare us the retort about low rates, government stimulus, etc etc.  We've heard it all before.  Fact is, when making predictions one MUST try to take into account all the other factors that may affect things (like low rates and money printing).  Don't tell me you didn't see helicopter ben coming with his low rates and quantitative easing.  I've been reading that bubble blog and this one for a long time and there have been numerous people warning about this BEFORE creb put out a prediction... nobody listened to those fellows, and instead wrote them off as crazies.

Those saying "rates have to come up to 4-5%"... get real.  They aren't going to lower rates to 0.25% and bump them up too quickly. That'll kill the economy, your job, my job, etc and send many families onto the streets.  You like that don't you?  Will rates eventually go back to 5%?  Yeah EVENTUALLY.... but keep renting that basement suite and wait for 5-10 years... how long is your life gonna be?  Maybe you can enter into home-ownership when you are 50 or maybe never (lifestyle choice).

BTW that 'cookie cutter house' is not "worth" 600K to you, but if someone is going to pay that for it, then that is what it is really worth.

Hard to say what is happening.  I wonder if the CREB is able to come in with the most accurate prediction because they control the majority of peoples expectations through MSM...I would not be surprised if this is working in their favor.  The CREB gets much more TV time in the news, and 'reports' in the newspaper.  

And, it is easy to say that renting is a waste of money, but for everyone it is different and people need to be able to assess the situation as it pertains to themselves - the personal economics should drive the decision, not shame for renting.  It's funny that when 'slamming' renters, everyone says that they are going to be living in their mom's basement.  If I lived in my moms basement, I wouldn't pay rent!  However, congratulations on living in a house for which you may have borrowed $300-500k from someone else to live there....you are better than the renters so keep rubbing it their faces.  But you don't own your home either, the bank does...it's probably best not to forget that.  

A 25 year old with a 35 yr mortgage doesn't clear title until they are 60!!!  Don't forget that either.

Anyways, not trying to support one camp over the other, I simply find the 'renter bashing' quite comical.  What works for you doesn't necessarily work for others.

CREB and pampers are winner because of change in rule in the middle of the game. What do you say about people who bought in 2007/2008 peak and sitting on 70-90K loss as per city assessment? How long it takes to save 70K after tax? A lot of home owners never saw that number in their bank account in their life time.

Asset price can not stay constant. There is no way these RE price can be sustained or go up for long.

I can see same kind of mindset, scary tactics and argument when I was living in US (2003-2006). US Govt. knew that RE estate can bring the economy crash in US but Govt. can hold water for sometime but can not stop collateral damage. We are going same path.

Financial illiteracy is very high in North America. Real Estate Board, media, Newspaper, economists and uncontrolled debt owners are throwing lot of crap on new buyers. Global news is sponsored by Remax in Calgary. Do you think they can tell you the truth when they are fighting for own existence?

CNN banned Peter Schiff and BNN banned Garth Turner.Why?

"David Wolf (Deputy Governor of the Bank of Canada):

Wolf, an adviser to bank governor Mark Carney, said that in the central bank's view it is premature to be talking about a housing bubble in Canada."

David Wolf (Merrill Lynch Canada economist):

"It may just be a matter of time before the Canadian housing market tanks like the U.S. market did, Merrill Lynch Canada economist David Wolf said, warning that Canadian households are now nearly as overextended as households in the U.S., and even more so than those in Britain, prior to the bursting of the housing market bubbles in those countries."

Rent or Buy, that is the question....

Well figure this one out for me...the exact same house.

Should you buy it for $569,000:

http://www.realtor.ca/propertyDetails.aspx?propertyId=8862249

Or rent it for $1550:

http://www.rentfaster.ca/Calgary-Apartments-For-Rent/3-BED-ROOM-BUNGALOW-44480

Doesn't seem to make sense to me!  And of course, anyone can run the rent vs buy calculator, but with all of the assumptions I am sure you could spit out an answer suggesting buy, and another suggesting rent.

TT: Are you on the Housing Bubble blog site?  Just curious because I saw that posted there, maybe it was you.

Maybe Bob can tell us if he's out to lunch on his asking price (for purchasing).  

That's a P/R ratio of 367, which even for Calgary is extremely high.  At their peak, the bubbliest of U.S. cities (Vegas, Phoenix) were in the high 300's.  

Well, San Francisco might have been into the 400's, but they also have a higher historical long term P/R.

From what I can estimate using the data on RentFaster we're about 250-270 P/R right now in Calgary.  

Anything above 180 in Calgary makes the rental product a better deal imo.

No, i didn't post that originally.  I saw it there too and thought it was provoking enough to bring to this blog, though there doesn't seem to be many interested in discussing...