Bob Truman, First Place Realty

My other ex-neighbor slashed the price of his house by 25 grand. That's 2 friends now who have had major price reductions in Rocky Ridge to dump their places. Those are 2 houses selling for 45k less (~-13%) than the mean, when the value of our homes used to match it dollar for dollar not 1 year ago.

Not to sound like a broken record, but something is screwy with that mean price right now.

We need a stat that tracks changes in value vs the assessed value by the city or something - some kind of anchor to indicate whether or not people are taking a bath on their sale.

Yeah, I can sell my million dollar house for 800k, but if I'm the only house that sells does that mean the average for the city is 800k? (*Seemingly good*) No, it means I just took a friggen bath. Something like that.

I would say that you have to drop the price some more.  Look at comparables and beat them by 5%.  If you have already purchased another home, you probably don't want to hang onto this for a long haul.  I wish you the best of luck in getting your place sold.  I had a condo once that could have sold for $330 around Christmas time (07) and we sold it for $292K in april.  Prices can drop quickly when sentiment changes.  Just my $.02.  It's easy come, easy go with home equity.  We have had years of easy come and now it is time for some easy go.  

As an owner of two rental properties I love to see people sell and go into renting.

It would be interesting to know why would an actual homeowner sell his own house, move into renting and buy back at a later date?

Say you sell your house today for $400k, then the same house price goes down %10 over the course of one year and you buy it back at $36ok. The sell/buy/move out and in costs are somewhere around $15k. The average rent for one year would be around $20k. At the end of day you buy the house back after one year, $40k cheaper but you already spent $35k on living and other expenses. You end up with $5k in your pockets, not to mention that interest rate hike can actually wipe off all that and even burn a whole in your pockets.

How about a 5year %30 price depreciation, just like down in the States? $120k cheaper house as compared to $115k spent on living expenses over the same time period? Or maybe people believe that houses in Calgary are going to depreciate %30 in one year alone due to subprime lending/recession/massive job loses/massive inventory/Garth Turner saying so ...

I wonder how people who play this game with their own houses, believe this is going to work out for them. I mean $5k over the course of one year (IF) with all the hustle and bustle, or better take $5k to Elbow River Casino and settle the score in just one night ( or a few minutes for that matter)?

My advice would be to set your price lower and sell now if you can.

A few weak days of listings but they've picked up a little the last few.  I still think it's the seasonal slow down followed by herd listings as sentiment changes with the year over year numbers coming in worse and worse.

Still have us nearer to 9000 then 6000 when the year ends.  If that's the case it will be ugly!

Calgary Rip Off is borderline insane. He's posting on Garth's blog under the name "Heavy metal guitars in Calgary" and he says "I would live in the NE, the only problem is the infestation of criminal element."

zoro I agree - I have a hard time believing stories about brilliant investors playing their houses like they are stocks and timing the ups and downs. There are many folks out there living fantasy lives by trolling on internet forums and once they starting claiming they make more money than the rest of us, I'm afraid the game is up.

That reply from rip off was hilarious - at least he's entertaining. If what he said happens to be true he's enjoying himself and I can't argue with that.

Squidlly is mocking you on his crappy blog, calling you "desperate beyond belief" and that your "post is not professional at all".

Pretty odd for a guy that threatens other folks on his blog, he is obviously very unprofessional himself: too bad alcohol rules his life.

At least he checks in here regularly...

Calgaryripoff is a pathetic soul. He spams the CBC web pages all day, no matter what the subject is he complains about housing costs.  You can read his posts here.

https://membercentre.cbc.ca/ViewMember.aspx?u=10437065

zoro "love to see people sell and go into renting"

I'd be careful with your 'renting' assumptions. Americans thought vacancy rates would fall too after their (1st) meltdown, but nationwide they shot above 10% and still remain there. And i think you're sell-rent-buy calculations are a bit off. For instance, a home i sold in '07 (Red Deer) just sold for 23% less last week (or $93,400). Since i sold it myself, my total expenses were less than $2000. Sure, this is one of the more extreme examples of the homes/rentals i sold in the last 5 years, but nevertheless a concrete example (due to it's recent sale). The crazy thing is my rent is far less than the ITI,etc (in PITI) that i would have paid if i lived in the house. In other words, i figure if i was the one who rebought my old house last week, my total savings would already be over $115,000. And this is after what i believe is only the first leg down in world real estate markets.

I would suggest working with your RE agent and looking very carefully at comparable sales in your neighbourhood* over the last 90 days - what are the trends? How long did it take to sell these properties? At what prices? Also, how many people are looking at your house per week?  Don't panic right away. Do an open house to gauge how many people show up and what they are saying. I think you should wait a few weeks (say 3) before you start making adjustments. If there is clearly a problem at that point, and you can't afford to wait or rent the place out instead of selling it, then make a change that will make people notice: Let's say the best deal in your neighbourhood for a comparable home recently has been $450. I think setting an asking price of $419 or so would be reasonable and leaves some room for negotiation as well. That's a drop of about 6% - from the best deal so far. Or you could go all the way to $400 and put something like "priced to sell quickly" in your ad.

Overall, I agree that if you want to sell your home quickly and can't afford to wait or rent it out if a sale doesn't come through, then make a price adjustment that should really make people notice vs. the comparables.

*Comparable sales in your neighbourhood: Most important is to make sure comparables are in the same neighbourhood as yours. Next look at zoning and lot size. Next look at square footage. Then age and condition.

Just an update on the Calgary rental market...

After being quite low for the first 4-5 months of 2010 it seems like inventory on RentFaster.ca is back to being fairly close to the average levels seen in 2009.

Maybe rental inventory levels are subject to this sort of seasonal fluctuation every year.  Or sticking with the theory that a lot of landlords were trying their luck on MLS this winter/spring, and have since given up, maybe this inventory is now being returned to the rental market.

The median rent of a SFH rental is still higher than it was last summer though, by around $100, with the current median rental price being $1700/month for a true SFH (not shared).

The median rent of a 2 bedroom apartment also looks to be higher in 2010, at $1138/month, after being pretty much rock steady at $1100/month in 2009 and most of 2010.

An article in the Economist released 3 days ago suggests that Canada is about 23% overpriced using long term price to rent ratios (my favorite metric).

http://www.economist.com/node/16542826

Australia leads the way at 61% overpriced.  Australia is interesting to watch because they remind me a lot of Canada economically, and the way their citizens have similarly racked up debt in the property game.

Article: "Has Australia's property bubble popped and no-one heard? "

http://australia.to/2010/index.php?option=com_content&view=article&id=3913:has-australias-property-bubble-popped-and-no-one-heard&catid=134:news-wire&Itemid=209

"It seems that all around Australia listings are flooding the market as are rental listings, all while sales volumes take a 50% or more decrease from April to May and another drop through to June 30."

"Are you starting to get the picture? This is the same mostly throughout Australia, while auction clearance rates drop, new building virtually stops and lending becomes even more restricted."

bullbear, I'm not familiar with RD RE market, but %23 drop in 3 years that's a lot. The only houses I know that have had a similar drop in Calgary are the ones involved in the BMO mortgage scam scandal.

Anyways, my previous post was not to say that someone could/should not gamble with their main residence, but more to question why do that when there are investment properties that can be used for the very reason of gambling.

The numbers I was using are average (or close to average), of course there are so many different situations.

As for comparing Canadian RE market with US, I have nothing against it, however US is a big place, so lets use the link below and go cherry picking.

http://www.forecast-chart.com/values-home-c.html

I don't know about those desperate sellers, but you can hear the desperate buyers just like this calgary rip dude, years and years of daily obsessions and unfulfilled fantasies could put a dent on one's brain.

Vlad,

Thank you for your comments,we started at 489,000 as the next door neighbor had sold in a day at 475,000(two months ago) and they had an undeveloped basement and no deck or lanscaping in the back yard.We have had 11 showings in 30 days and have dropped the price to 469,000.We had to move because my wife lost her license due to health reasons.I know timing is everything but where to you turn to the real estate agent who has a vested interest and will want you to price dump or Grath Turner who is predicting doom and gloom.It is hard to figure out the value for a developed basement(well done)and adjust your price accordingly.Bob say a 4.1% decrease but from what starting point.I have looked at historic values and could not find compariables for this time of year.4.1% from 489,000 is roughly where we are at or 4.1 from 469,000 is around 450,000 25 grand less than my neighbors with 35,000 less spent on the basement fence deck and landscaping Oouch!Thoughts?  

Hi Rich,

I'd like first of all to say that I'm not a big time expert in RE, and what I do know tends to be about condos more than single family homes. So don't take anything I say as gospel!

That said, since you asked, here's what I think. I would not worry too much about overall price trends across Calgary. The fact is, you want to sell your specific home, right? There are hundreds of homes sold in Calgary every week, so you just want yours to be one of them! Getting into big picture issues should not be a priority right now. I wouldn't worry too much about Garth Turner and other super bears. Even if they're right, they're clearly a few years off. We're not gonna see a major meltdown in prices this year.  

It sounds as though you have a home that shows well, one that makes people feel good when they walk in the door. That's good. That should improve the speed with which your home sells.  In my opinion, such homes do better than average even in a down market. The number of viewings doesn't seem amazing, but it's not terrible either. So, why did none of the people who viewed it buy it? I think that's the big question. Was price the main issue?

As far as price goes, like I said, I think getting a sense of what things have been selling at (as compared to list price) is important. however, just looking at one neighbour's house, while useful, is a bit dangerous. Who knows, maybe they just got really lucky! If you are selling your home on your own, Mike Foutiou over at the calgaryrealestatereview.com blog (I'm just a reader, not affiliated or anything) has signed up with a free service that gives you comparables data: http://www.homeinsight.com/Widget/default.asp?RRVVIRQAZP02 I have been using it just to keep track of the trends in prices of condo units in my building. Also, if you're selling yourself, don't be shy to ask people "do you like the home?" Assuming they say yes, go on with "all right, let's make a deal then." If they say they're not ready to buy it, you can then ask them what their main concern is. Maybe the price is way off from what they want, or maybe it's something else. It's a good start for a negotiation. At the very least you'll get some valuable information out of it.

Finally, as to improvements. I wouldn't put too much stock in those. I think you usually lose money on them. In other words, you won't make back everything you spent when you sell your home (unless you do everything yourself). In a buyer's market like we're getting into now, you're probably best off using such improvements as a lure to sell the home faster rather than getting a lot of money out of it. What I mean by that is if people are looking at two homes priced about the same, they'll pick yours because it's ready to go!

In conclusion: If you want to just sell the home quickly and get it off your mind (not to mention stop paying mortgage payments), take a realistic comparable (let's say your neighbour's house for now) and undercut it by enough to really make people notice. I am not quite sure what that number is. My gut feeling is 5%. Bob, others, any thoughts on what the magic number might be to sell quickly in this type of market?

PS: I am sorry about your wife's health. I am dealing with my own health issues at the moment, so I can certainly feel for you. :-(

Zoro, your mortgage/sell example doesn't take everything into account.

If we stick with your $400K sale with a 10% depreciation, let's break down the numbers.  For simplicity sake, let's also assume that your mortgage payment is the same amount as rent.

In the mortgage scenario, let's take the $20K in monthly payments and assume that 15K of that is going to interest.  Plus you have 2K in property taxes.  That would mean 17K per year is being thrown away.  In addition to that, you've lost 40K in equity from your home.  In total you've lost 57K in a year.

Let's take the rent scenario.  We'll take your $15K number for the sale as throw away.  We'll also add $20K in rent.  In total, you've lost 35K in a year.  That's a difference of $22K.

The main problem with your calculation is that you haven't taken any mortgage payments into consideration.  But if we assume that the house is paid off and the owner has no mortgage payments, then we have also have to assume that the owner can take that money and invest it for some additional gains.  Even if we assume a 4% gain on the 400K, that's a total of 16K in income generated (almost negating the cost of rent completely).  I realize it's a range and that some people will be in their first year of mortgage (probably less that 5% of their payments will be going towards their capital and others will be in the later stages of their mortgage).  Regardless of the stage of their mortgage, if less is paid off, then more interest is "thrown away".  If more is paid off, then you have the potential to invest your money (if you sell).

The last thing to consider is that the numbers start to look even better towards renting once you move into subsequent years, because you no longer need to factor in the "home sale costs" each year.  If the house prices fall another 5%-10% in the following year, you'll be ahead even further.

Anyhow, at the risk of sounding like a broken record, when comparing ownership vs. rent, you really need to consider that ownership has its price too.  Either in the form of a mortgage or in the form of lost revenue (i.e. your money doesn't earn you anything).

zoro,

Completely agree that it’s important to follow the real estate cycle with your investment property. But if you think about it, it’s possibly more important with your main residence due to the capital gains tax exemption. For example, Calgarians who were paying attention a few years ago could’ve set aside a large portion of their retirement fund by simply selling and renting ‘til this cycle bottoms again around mid-decade. As far as Red Deer, it simply mirrors Calgary percentage-wise usually with a slight time lag (ripple effect). I don’t have any SFH rentals in Calgary, but i have a share in a 15-suiter there that’s already dropped by almost a third – could’ve got 160ish per door (good comp sold for that near peak), now lucky to get 110. Downsides to having partners.

Dame Edna said: Squidlly is mocking you on his crappy blog, calling you "desperate beyond belief" and that your "post is not professional at all".

What's with that weird dude? He puts up a post full of insults and threats, then deletes it a few hours later. I'd be comcerned about this guy. He's unstable.

Now to the housing picture...How far do prices have to drop for buyers to think they're getting a good deal? The low interest rates pushed a lot of buyers into the market early. I was looking at the stats and saw that July 2009 had record sales. It will take six months for the hangover to settle. We'll see lower prices, but the market will resume "normality" by next spring(with prices 10% lower than now).