Bob Truman, First Place Realty

One thing I am curious about is this: Prices are going up, sure. I've been keeping my eye on the market and am seeing that, more than ever, homes that have always been out of reach, because of their location, are now getting "in reach". Could it be that median prices are on the up, but the actual size/location one gets for that median price is improving? That would be an interesting statistic to see...

Thanks Bob! Just an update on the rental market from the RentFaster.ca data:

The median price of rent has remained pretty much identical since the fall months, nothing new or exciting there.

One thing I have noticed is a drastic drop in inventory, about 20% by my estimate.  It seemed to happen suddenly, near the beginning of January, and hasn't come back.

Perhaps this is something that occurs every year, I'm not sure.

2 Bedroom Apt (median)

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[2010]

03: $1095

[2009]

12 - $1099

11 - $1099

10 - $1100

09 - $1150

08 - $1150

07 - $1200

Calgary SFH (median)

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[2010]

03: $1600

[2009]

12: $1550

11: $1600  

10: $1600  

09: $1600

08: $1600  

07: $1650

CM, could it be that more individuals and families are moving into Calgary hence the drop in rental inventory?

Frnk: I have no idea what caused it, or if it's just something that happens in the winter.  I haven't been tracking rental properties long enough to really say.

Just by intuition, I would think that there hasn't really been a sudden rush of people flocking to Calgary ala 2005.

One thing I noticed is a lot of familiar properties from RentFaster were showing up on MLS.  A lot of times they were both for rent and for sale.

I know a lot of landlords were having trouble finding tenants this fall/winter that forced

them to reduce their monthly rent.  Maybe some of them were accidental landlords or just wanted out?  

I do think yet another corner has been turned.  The seasonally adjusted sales to new listings ratio of below 50% is indicative of a falling market.  I am expecting a peak inventory of between 9,000 to 10,000 old criteria units for this year before falling off (so very similar levels of inventory as compared to 2009).  By mid summer, I am expecting year over year inventory to be flat, so I am expecting that prices will be dropping to flat to slightly rising for a few years.

Are there statistics available that break-out the inventory numbers at different price ranges (so the days on the market and absortion rate)?  

I was looking around MLS a few minutes ago and it seemed like there are more properties then I would have expected that are in the inner city in that $800K to $2M range.  You start moving out to the suburbs where houses are cheaper and there doesn't seem to be nearly as many available (for example, if you compare an area like parkdale to panorama hills).  

It made me wonder how well the higher end places sell compared to the averages.  I wouldn't think there are as many millionaires being made these days as there were a few years ago to buy up the product?  Is there really a set of two different market conditions right now?

This page has some of the information you're looking for Absorption rate by price range -Bob

Will:

It's difficult to quantify the "value" of a house that the median price is representing but price per square foot has increased considerably - just under 10 percent - over the last year as well, indicating that any given house is more expensive than it was 12 months ago.

I think it's likely that the rental inventory has been switched onto the MLS inventory in the last couple of months. Calgary is growing but I don't think anything happened in the last 2 months to cause a rapid influx. My guess is that the increase in inventory this year will be front loaded as a result but only time will tell.

Speak of the devil...I found this on Turner's blog today:

"how many years has Garth bee predicting a crash and still we see nothing. Nothing.

Garth, either you’re Noah building his arc, or you’re the guy with the long beard in his pajamas on the corner with the sign, “The end is near.” For your sake, Garth, I hope it’s the former and not the latter. But then what do you care, you’ve already made a bundle on your books. So what if you were wrong, you’re rich."

For someone who has been so notoriously inaccurate with predictions in his previous books, it's simply astounding how he can keep the sheeple under his spell. His snake oil is powerful.

I recall Garth saying something about the buyers of early 2009 being the "greatest fools" I guess they are now the "almost greatest fools".

It struck me that defining capitalism and markets by the greater fool theory leads to the conclusion that "fools" have things (houses, goods, stocks) and the others with no or very few things are "not fools". I guess if you have a lot of cash, you can feel good about this until you spend it, at which time you become a fool again. Garth, who still owns multiple properties AFAIK should thus be at least twice the fool that most people are.

Since there are many of us out there who have very few things, it feels good when we read Garth's blog to know that the other folks are fools. I suspect that people who have a lot of cash, have probably bought nice things with it and so would automatically be fools as a result

Garth would get more respect from me if he would define what "soon enough" means. Maybe you should ask him when he gets here Bob, if they let you in.

It truly is amazing how blind people are to Turner's past.

The man who now has the temerity to lecture the rest of us on all things moral and ethical got rich by doing some questionable things. It turns out that Garth and his production company, Millenium Media Television, were featured in a forgotten CBC Disclosure investigative report in 2002:

http://www.thepolitic.com/archives/2006/11/26/re-examining-garths-ethics/

His investment advice has been laughable:

"If you own Nortel, or a mutual fund holding it, don’t bail out now… If you do not own Nortel, then this is the time to start accumulating it."- Garth Turner, Conservative candidate (Halton) November 27th 2000 at the start of the stock's plummet from $50 to pennies a share

Read more http://rickmercer.blogspot.com/2006/01/look-whos-back.html

Rental inventory has also continued to fall even further...

http://tinyurl.com/ygt7uj2

This exact same database query would result in approximately 650-750 listings anytime in fall 2009.

Today it sits at around 500, down about 25%.

AKA inflection point

60% of the respondents said they would have trouble making ends meet if their paycheque was delayed by even one week. This group included many first-time buyers.

Canadian Business-

http://www.canadianbusiness.com/managing/strategy/article.jsp?content=20100315_10019_10019

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People have nice home, car, suits, vacation but empty bank accounts and living paycheck to paycheck. A lot of them can not keep same home when interest rates hit to the norm. How long they can go with 0 margin life?

It's been awhile since I've posted here, but I just had to comment on Bob's latest news about permits in the inner city.

Places like Altadore are amazingly resilient to downward price pressures due to the excellent location.  Take a drive around a lot of the inner city hoods in the SW and you'll see how quickly old homes are snapped up by builders or clients of builders.  The land value is solid in the inner city SW.

This brings me back to my old long forgotten posts about the idea that if you must buy then buy something with land in a good location in the inner city.  You'll be shielded way better from a eventual downturn in prices vs. someone in a far-flung suburban condominium.

Kevin over at EHB posted this today, a report by someone from York University.

"The Elusive Canadian Housing Bubble"

Lengthy, but worth a read.

Scribd version:

http://www.scribd.com/doc/28454918/Canadian-Housing-Bubble

PDF:

http://www.zerohedge.com/sites/default/files/Canadian-Housing-Bubble.pdf

Alex Pestov in the aforementioned article, states

"...the real-estate industry needs prices to go up too. Real-estate agents have a direct interest in convincing their clients that the home they‟ll buy will appreciate in value. It is difficult to sell a home on a premise “buy it now, or the price will plunge tomorrow, and you will be able to get it at half-price in a week.” Real-estate brokers and developers, mortgage brokers and other parties involved in real-estate transactions have a personal interest in promoting the illusion of prices rising into perpetuity."

So, Bob, just by posting his conclusions on your blog, you've disproven one of his theories already.

I posted this comment on the housing bust site, but am also interested in hearing the opinions of any of the readers of this blog.  This is my first post, so I'll just sat that I think  the blog and the main site are great and very informative.  Keep up the good work.  Now for my previous post:

This article does a solid job at showing how prices are out of line with a list of pricing fundamentals. What it doesn’t do is show is why the return to these fundamentals will be rapid like the USA rather than more gradual like it was during the early 80s here in Canada. For this to be a bubble, selling must trigger or induce more selling. Two factors (among many) present in the USA bubble included excessive supply fueled by speculation and a high percentage of mortgages that were underwater with relatively small drops in prices. Since these were investments, people were forced to sell the properties for a loss or claim bankruptcy and a combination of selling/bankruptcies reduced prices and induced another cycle of sellers/bankruptcies. People didn’t have the option to wait things out.

In Canada, I’m having trouble seeing a factor that could lead to this cyclical selling. Vacancy rates are reasonable, so I don’t see extreme excess supply in most markets. Unemployment numbers are rising, but not at the extreme levels seen in the USA (even accounting for differences in the calculation of unemployment rates). Everyone I know that purchased their house during the peak (at least 20% above today’s prices) just feel like they are forced to stay in their current house until prices recover – they are not even considering selling for a loss. Some factor must force a reasonable number of people to sell at a loss for us to be in a bubble, and this factor (or multiple factors) must be explained further in the article. Alternatively, the proportion of the market made up by speculators would need to be higher than I understand it to be.

Using interest rate rises as a trigger also doesn’t make much sense to me. If the housing market collapses, this will be a strong deflationary influence on the economy, allowing a return to lower interest rates. With the current state of the US economy and our strong dollar, it is hard for me to imagine the Bank of Canada being forced to cripple the housing market just to tame inflation. It looks to me like they will be able to raise interest rates slowly, taking plenty of steam out of the economy and the housing market with each raise in rates. I can imagine a much more gradual return to the historical interest rates than one that would act to pop a bubble.

I also think the description of the long-term pricing fundamentals is incomplete. Wages are important, but so is savings and this is not even touched on. The Vancouver and Victoria markets will always be different because of the positive migration. People arrive in the country with money to spend (high savings are required due to our immigration policies) and a high proportion of this individuals spend this money on a place to live in Vancouver. Retirees from the rest of the country flock to BC for their retirement. All of these individuals have high savings and can purchase a median house without needing a median income. They can earn nothing and still afford their home. These retirees plus the proportion of the economy estimated to be from the “underground economy” skew the wage data in your charts.

In short, long-term prices are determined by fundamentals. Short term prices tend to oscillate around this long term trend based on the factors of supply and demand. For a bubble to exist, the prices must be out of line from the fundamentals and must rapidly fall to or below the fundamental line due to a rapid change in the supply and or demand equations. More work needs to be done to explain the factors that will lead to the rapid readjustment.

Mabus