Bob Truman, First Place Realty

Bob I think in order to call this a crash index you need to go back and see what this index said in previous months. Did it predict a rise or drop in prices in the last few years?

I agree with Jimmy, calling it a crash index kind of seems to imply that it's a good predictor of crashing prices.

3 of the lowest crash index months, along with what happened the next 3 months to median SFH prices:

Dec 08 -42 -6k, +1k, +0k

Jan 09 -48 +2k, +5k, +6k

Feb 09  -40 +5k, +6k, +10k

Kind of the opposite of a crash index :)

Do you think artificially low interest rates might have skewed the numbers post Feb 2009? (By the way, check your numbers. I get something different.)

Look at these months where the crash index started to move up:

March 2009: +5 +10 +9(net gain +24)

April 2009: +10 +9 -9(net gain +10)

May 2009: +9 -9 +10(net gain +10)

The above months predicted a price increase which turned out to be accurate.

My interpretation of Jimmy's comment is that he wasn't making a judgement but was simply looking for more complete data. I'll take it back further and see what happened before interest rates came into play. It's a bit time-consuming but stay tuned. -Bob

Don't get me wrong, I think it would be fantastic if something like sales and listings numbers could accurately predict price movement on a consistent basis.  

But as we've seen, there are other factors (psychological and otherwise) that keep the Calgary real estate market as unpredictable as any other market.  Wouldn't this crash index be pretty closely correlated with the absorption rate?

So far, we've seen that the index predicted Mar '09 to May '09 accurately, and Dec '08 to Feb '09 inaccurately.  

Would it be fair to call it about as accurate as a coin toss at this point?  If someone were to take the time to delve into more complete data and come up with a different conclusion I'm sure people on here would definitely appreciate it.

Just noticed that the AmericaCanada blog made a post today that sort of relates to this discussion:

http://americacanada.blogspot.com/2010/05/listings-21-tipping-point.html

(re: New listings to Sales Ratios)

Thanks for all that stats work Bob.  

Just quickly scanning that chart, periods where the crash index was -40 or lower, the index predicted a drop correctly 11 out of 14 times (for the 3 month period).

For the 6 month period, the accuracy seemed to drop to 8 out of 14 correct predictions using -40 as the minimum.

Although, if you use -50 as the minimum, the 6 month accuracy seems to be 100%.

What do you think about America/Canada's claim that the magic ratio is about 2.1 ?  

"No matter which way you cut it, it appears that it is better to buy when the ratio falls below 2 and to sell when it moves over 2."

Bob your crash index is very limited by the fact you are only comparing to 12 months before. If the market was unbalanced 12 months before, it will throw off your crash index. The market was not balanced in early 2008 or 2009 I would say.

Also bond rates are heading down so fast now that its possible we will have much lower rates in the coming months. In that case the argument that low interest rates unfairly affected the early 2009 numbers might still apply to the summer of 2010. I'm starting to wonder if the variable rate rise might be put off as well.

Bob I think I misunderstood your comparison. Point taken. I do think you need to look at what the crash index was saying in the boom years before 2007 though.

It becomes less accurate the further back I go because the database will only give me stats for SFH for nine years. For the 2007 stats, I can only get a six-year average and that's about as far as I think it has any validity. Perhaps if I get some time, I can do it with the combined(old criteria) stats which go way back. -Bob

A bit off topic, but why is the inventory by price range so different than the overall inventory numbers on the SFH and Condo pages?

http://www.bobtruman.com/Inventory_by_Price_range/page_2022389.html

According to the SFH and condo pages, inventory is over 8k, but on the other page, the inventory is 5635.

Total inventory, condo inventory and SFH inventory look a lot like October 2008, so it would be interesting to see if the percentages of homes in each price range is similar.  I'm also interested in seeing how interest rates have affected the absorption rate by price range when that info is available at the end of the month.

Mabus

The page hasn't been updated for two months, but I'll get it updated today. -Bob

Thanks Bob,  I was looking at Mar 15 but was seeing May 15.

Mabus

Dear Bob,

I was wondering if I may ask you a question which is a little off topic here.

In Calgary real estate market, how much does it worth for a walkout basement, a developed basement, or a green space next to the back yard? Say, for example, if a house without those can be sold for 400k, how much can it be priced with those features respectively? Based on your experience, do you have a rough idea about the values?

Thanks a lot,

Jessica

It's difficult to give a definitive answer because it can depend on factors such as location and community, but I can ballpark a few numbers for you.

 A green space would add around $20,000 - $40,000.

A walkout basement $10,000 - $20,000.

A finished basement is dependent on the style of house, and the level of finishing, but on a two-story house where you don't have a large footprint, about $25,000.

It would be good to hear some of our readers weigh in on this and give their opinions, too. - Bob

Just out of curiosity, is there a notable difference between the crash index and just using the amount of inventory?

The amount of inventory in Mar-Apr-May 2007 was extremely low, which should be a predictor of higher prices. The crash index started to turn negative in those months, however, and it turned out that prices dropped in six months. -Bob

Bob - you mention in "what's new" that there are an avg of 128 price reductions/day. What's the "norm"?

Here's some price reduction numbers for comparison:
April 2010: 104
May 2009:  57
May 2008: 153

-Bob

Any guesses if we pass the 7000 mark in SFH inventory and pass the previous high set in May 08?  If yes, I wonder when.  

Here are the monthly changes in SFH inventory this year, +459, +593, +908, +972.  This month, we are on pace to see inventory climb more than 1000, making it look like we will hit 6000 in SFH before the end of May.  

Not only is inventory increasing, the rate of increase is continuing to increase.  If we have reached the fastest rate of increases (a big if) and if we decelerate at the same rate we accelerated (plausible, but just a shot in the dark - not backed up by anything), inventory will peak in September at ~9000.

Interesting times.

Mabus

"Not only is inventory increasing, the rate of increase is continuing to increase.  If we have reached the fastest rate of increases (a big if) and if we decelerate at the same rate we accelerated (plausible, but just a shot in the dark - not backed up by anything), inventory will peak in September at ~9000."

Definitely going to be interesting to see if we do hit the big 7,000 marker for SFH this year Mabus.

Although, regarding the deceleration pace, in 2008 it happened very quickly...

January 2008: 600 new SFH added to inventory

February 2008: 1000

March 2008: 1000

April 2008: 880

May 2008: 300

June 2008: -600

So if history is a guide, if May were to be the peak month this year, and we hit 6,000, and then add another 1,100 or so, and you've got 7,100 as your peak for the year.  

But on the other hand, who knows if this is the peak month, could be 1,200 added next month and then it's a whole new ball game.  

Just an update on the price of rent, the median price of rent in Calgary has bumped up another $50 for SFH to $1700/month.

It's up fairly significantly from 2009 when it was as low as $1550 at one point.  The inventory continues to be a lot lower (30% less) than 2009 as well.

The P/R ratio is around 247.  Still about 20% too high for my liking, but maybe it will balance out if rent keeps going up :)

The median rental price of a 2-bedroom apartment remains unchanged at $1100, and has been that way for quite a long time.

Just anecdotal, but some friends of mine leaving the country for work put up their home for rent last week and had 6 walkthroughs and 2-3 offers on it over the long weekend so far.  

Off the topic if it is okay.

A realtor told me that there are several Oil&Gas Company head office is moving to Calgary in the near future.   Have you heard anything about this?  Thanks. Grace

Grace: Why not just ask the realtor specifically which companies he/she is referring to ?  Or did the realtor just relay that information to you in a generic, non-descriptive fashion?

Realtor: "Several O&G companies are moving their head offices to Calgary in the near future."

Possible responses include...

A) "Ok.  I require no further info."

B) "Which ones?"

To:  CM

That's my immediate response:  "which ones?".  The realtor says the source never confirm the name. Am I being gullible?!

What is the "Crash Index" and how is it calculated?

Seems a little presumptuous to assume a housing cash in Calgary given that when the rest of the world was at the brink of financial collapse, house prices in Calgary barely corrected 5%.

Given fewer new development permits, it is more likely house prices will be stable at current levels with a bias to the upside. Canadians in general are in for a future of low income, stagnant wages, higher inflation, food and housing costs. I call it the "Vancouver Syndrome".

I could have just as easily called it the "Confidence Index." You know what would have happened then, right?

The easiest way to explain it is that an increase in new listings counts as a negative. A decrease is positive.

An increase in sales is a positive. A decrease is negative.

When you have both an increase in new listings and a decrease in sales, as we do now, it gives a negative number. -Bob

Nobody discussed the title of the post, "Crash Index has eased slightly", and that fact.

While I love this CCI chart, I wish there was a way to know what June's CCI was gonna look like considering that at this point the crash index is easing.