Bob Truman, First Place Realty

Seriously, there are people who have listed at a certain price who just want to see if they can sell it for that price.  If they can't because the market is cruddy, then they'll simply pull their home off the market and rent it out/ live in it instead of "moving up".  With rates where they are at there is no reason to sell your house and start renting again.  The only reasons I see to sell are:

-You can't sustain the mortgage even at these historically low rates.  In which case you probably overbought and should have been renting or buying a condo instead

-You have multiple properties and need to unload some to gain working capital for other endeavors, hopefully profiting on some of them that you purchased awhile back

-You are moving out of the city

-You lost your job and can't find another one in time to sustain the mortgage

-You divorced

Many families are trying to sell in order to "move up".  Unless they bought their move-up home before selling their current home (dumb move with such high inventory), they don't need to sell.  A cruddy market means many people will just stay put and enjoy their home, because it's likely still better than they would get paying for a rental of comparable living conditions.  They are renting, but renting money from the banks and not a landlord.  I call this "same $hit, different pile" syndrome.  Only that their home is better than some converted basement suite that floods.

Case in point... my buddy pays 1500 a month mortgage for a detached bungalow in the inner city (and that is with accelerated biweekly payments).   Comparable rentals (like the house literally 2 homes away) run at $2000 a month for the whole home, or 1400 for upstairs and 800 for the basement.  His house is also way better looking inside too, because he's been fixing things in his spare time.  You wouldn't fix up your landlords place for free would you?

I don't think this is too early to call a trend Bob.

Listings have been declining on a seasonally-adjusted basis since April - we are due for a massive drop this month of 15-20% off the July pace.

Even inventory has actually been declining when adjusted for seasonal gains for the last 2 months.

It will need to get quite a lot lower to spur sales. It's hard to get motivated to buy a house when prices and fixed rates are slowly dropping and there are tons out there to choose from.

We are probably losing more inventory to expiries than sales which is weird when you think of it.

One of my friends has taken his house off the market because he doesn't like the price he can get for it. He's under water on his mortgage, so selling and writing the bank a cheque isn't something he wants, or can, do. So he's waiting. But he can't afford his mortgage and is going further into debt every month, waiting, hoping, that the prices come back to 2007 levels. You could say he's living in denial.

I finally sold my house after a whopping 14 months of unemployment. People can hold out for a long time but when it comes, it comes.

Home prices going forward are obviously linked to the energy industry, but what I'm seeing out of the US right now doesn't leave me with a warm fuzzy. Their stimulus dollars are running out and the economy isn't exactly doing backflips. 3 million people down there just lost their unemployment benefits. Millions are being laid off in China because of the manufacturing slowdown. Long term I'm bullish on Calgary real estate, but short term gives me the willies.

The story appears to be the same in Vancouver, check out this chart...

http://img249.imageshack.us/img249/6864/pubv.png

2010 was outpacing 2008 in terms of inventory up until about week 24 of the year (Juneish) but has since leveled off and then dropped fairly significantly.

Although in 2008 you can see that it also leveled off at one point during the summer and then came back for one last big gasp in the fall.

There does seem to be a fair amount of inventory coming back into the rental pool this month in Calgary, looks to be back to 2009 levels.

Great comments today.  As Joe said, it sounds strange but maybe there are a lot of people who can't afford to sell.  One of my friends is currently trying to sell.  He bought in '07 with the help of a $20,000 down payment from his father in law.  He is now underwater by about $20,000 and his father in law is going to pay the bank whatever the difference is when/if it sells.  His father in law feels partly responsible for pushing the purchase in the first place.  Most people do not have the luxury of dipping into their parents' pockets.  Interesting times.  I feel for those who are stuck.      

Jimmy makes a great point too.  With people no longer concerned about an imminent rise in interest rates, the rate driven sense of urgency seems to have died.  Why buy with low rates now when you could buy with low rates and lower prices in the fall?  If I was buying, I would get a long rate hold and then observe the market for a while.  One thing is for sure, no need to rush unless you have a very specific property or neighbourhood in mind. I mean, it's not like rent is going up either.  

I believe it was just a bunch of expired or pulled listings. I was watching the active listings for a while in the calgary/area from this site http://www.realtyexecutivesapex.com/search_map_form1.php . The listings were steadily rising since april 19 when the new mortgage rules went into effect. Then an interesting thing happened around june 30 and july 1.

There was quite a reduction in listings in one day. That has probably skewed the the trend. Most likely a lot of these properties will be back on sooner or later. Heres the data.

Total Properties 15419 - Res 8977 - Condo - 3639 Acreage - 1087

Data Last Updated June 30, 2010, 2:57 pm

Total Properties 15400 - Res 8961 - Condo - 3636 Acreage - 1087

Data Last Updated July 1, 2010, 11:27 am

Total Properties 14602 - Res 8510 - Condo - 3432 Acreage - 1028

Data Last Updated July 1, 2010, 10:57 pm

Total Properties 14662 - Res 8553 - Condo - 3443 Acreage - 1034

June 30 is one of the most popular days for listings to expire. If you follow this website and blog, you'll discover just how many expireds get re-listed. For example, I reported that 36% of Friday's new listings were really "old listings," ie listings which expired and were re-listed.

Yesterday, only 11% of the new listings were re-lists from June's expireds. 16% were already re-lists from July.

The data from from the Realty Executives website is meaningless for Calgary. Why would someone who is looking to buy a home in Calgary be interested in Lacombe, Pincher Creek, or Duchess? -Bob

squidly on his blog just predicted that "In about 5 days, sales will further seize and prices will begin to plummet big time."

Here:http://albertabubbleblog.blogspot.com/

What's your take on that Bob?

Where's he been? Sales seized two months ago. You mean he's agreeing with me that prices will go down? Remarkable!! -Bob 

Keith in Calgary aka carioca is said to be shipping a case of Rogaine your way...

Tell Keith that I'm drug-free, not a crackhead like him. 

Glad to see those two continue to torment themselves. -Bob

My point is prices are not going to fall as much as people think and you can expect that rental rates are going to increase. Landlords are not charitable organizations. Do you really expect they are going to pay (incur a monthly loss) in order to put a roof over YOUR head."

Uhm... is the implication that landlords *could* be charging more in this market, but choose not to?  The market dictates the price paid, not the landlords.  

It doesn't really make sense that if a landlord sees his equity in the property melting away (or not increasing), he or she could just 'decide' to raise the rent without consequence.  The market would need to bear such an increase, ie: increased demand, reduced supply.

One can certainly find arguments that rents will go up (or down), but to argue that landlords can arbitrarily decide what direction they will go  seems like nonsense.

The market wants what it wants.

I agree with CM - The market dictates the price paid, not the landlords.

There are tons of people who are bought investment RE in last 2-3 yrs and living paycheck to paycheck...forget about long term. They can not sale on loss (or write a check to bank) then they can not afford to keep empty property for rent they want...

Go to open house by builder and then rent in any newer condo building – ex: London phase 1 and 2.

My rent is going down from last 2 yrs and cheaper to rent than own. Why should I buy when RE can go only in one direction? - Buy when price is low and trend is up.

Hmm, let’s see…

- Decade of record housing starts (00’s)

- Interprovincial migration shifting negative

- Persons per household now climbing (like US)

- Baby Echo wave from renting to ownership

- Far too much supply, dwindling demand

- Vacancy rate skyrocketing…

…I wonder where rents are headed this decade??

@bob:

There is nothing in that article except the opinion of one individual with absolutely no support for his projection.

To me, that is an industry puff piece and a pretty desperate sounding one at that.

My 2c

"...maybe, by the first quarter of 2011, we'll be in a sellers' market"

says Zaharko, who is broker/owner of Royal LePage Foothills in Calgary

Heh………Calgary………maybe this is why listings are slumping....after all, what do we have 14,000 +/- not counting shadow inventory and new home builders inventory ?? But only 1,400 a month are selling ???

When the market was going up from 2004-2008 realtors always used the most advantageous statistics and dates carefully picked and worded to market their wares……

So I am going to use the exact same tactic they did, but in reverse, to accurately describe where we are at currently…….

SFH unit sales as of July 2010 are down 54% from their highs in March of 2007……..1,061 versus 2,272…….

Condo unit sales as of July 2010 are down 57% from their highs in March of 2007……..445 versus…….1,026……..

SFH median prices were $418K in June 2010 versus $439K in June of 2007.

Condo median prices were $269K in June 2010 versus $309K in April 2007.

Now subtract 7/3% in RE commissions, as well as an average 5-10% discount from your list price (which is always based on or lower than the average sales prices if the realtot wants to have any chance of selling it at all) and finally, don’t forget to subtract the mortgage prepayment penalties (if any) and, you also have to subtract your monthly carrying costs over and above what a rental would cost you, and your lost down payment, as well as the lost opportunity cost.

Have I forgotten anything ???

FLIP THAT HOUSE……!!!!

What are you waiting for ????? Send the bill for the deficiency to the realtor who sold you the bloody thing in the first place.

Keith, when will you learn to take responsibility for your actions? Blaming others and whining just makes you look like a loser.

If someone sells a house and makes a large profit, is the realtor entitled to the profit? -Bob

Bob

"Too bad. I've been enjoying the summer with nothing to do except hike, bike, and paddle."

Don't worry Bob! You will be OK!!Enjoying the summer, may be fall, winter too!!! Let's Mark Carney play more with interest rate...

I already have plans for the fall and winter! SkiHere.ca -Bob

It's funny how most of the doom and gloomers fail to recognize the role of government and public funding to prop up the status quo. Yes, we all know the economy is one big ponzi scheme (no fiat currency in the history of human civilization has ever avoided going straight to 0 with a bullet), but what the doom n gloomers don't seem to want to recognize is that before the government will allow the whole fucker to go belly up, they'll loot the public coffers to prevent it. (Like we're seeing now). Look at the States, the US government practically owns the whole country (they might as well start waving the Hammer and Sickle at the White House) - yet life goes on, and a worst case 'CRASH' in housing has amounted to a 25% drop in value over a 2 year period.

While I think Calgary is in for a bit of a price drop, it's not going to happen overnight. The last housing bubble in alberta ended with a slow grinding price drop playing out over 5 or 6 years until inflation caught up again. The US mortgage crisis was an anomaly.

If there's one thing people hate to do is realize a loss, and they'll hold onto their houses and loser stocks till they are FORCED to sell, either through divorce or job loss or because they no longer can afford their houses even with 2 renters living in the basement.

Massive price drops only happen when you get a run on the bank, but with housing, everyone has their limits of how long they can hold out before realizing that loss. As I mentioned before, I went a whole 14 months without a paycheque in a single income home (ie me) but still managed to keep my house and car.  I could have held on for another whole year if I had to. The point is, there won't be a run on the bank to desperation sell. It'll be a prolonged period of grinding stagnation or modest price drops over 6 or 7 years like it was here in the 80's, NOT a Road Warrior 'AHHHHH! The whole fucker is coming crashing down!' type event.

@Joe - 25% off todays prices, 5-6 years of prices grinding lower.  Sounds gloomy to me and pretty much what most "doom and gloomers" are calling for - give or take 25% ;)

Joe Winnipeg:

There's one fault with your logic.  Not everyone bought their home at the peak, so people are still able to sell for a profit in a declining market.  People that bought 5 or 6 years ago can still make a profit and don't have to sell at a loss.  Even better, people who bought in the 90s or 80s can also sell for a good profit (even if they sell below market price today).

Anyhow, it's impossible to say with any certainty how fast or how much prices are going to change.  You may be right in that we may face a slow grinding downward trend over 5-7 years, but to base it off 1 small demographic...  well, you get the picture.

The SFH inventory on RentFaster.ca is ballooning rapidly.  

Maybe that's where the stampede went. -Bob

Hey Bob,

   I stand behind my prediction that we will reach the $398k median price mark before the end of August.  I further predict that we will reach the $350K mark within 12 months.  This is my honest and conservative prediction.  I admit that it could be a bit on the positive side.  I am by nature an optimist.  Smart sellers need to be one step ahead of this curve.  For the love people, if average house prices are dropping $8k/month, don't lower your price by $5k after 30 days and expect an increase in foot traffic.  I see crazy stuff like this all of the time.  There are four houses within a block of my house employing this useless tactic right now.  I don't plan on seeing sold signs anytime soon.    

Spence you wouldn't happen to be in the market for a home would you?

While I agree with you that prices are heading down, you might not know that they almost always drop in July and actually the mean has gained this month when adjusted for seasonal changes. You argue that prices will drop 8k per month since that's what happened this month but why should they follow that trend instead of the 7% gain per year from last July?

What's funny is I made your argument on the blogs last year about prices rising and was met with folks who said a month-month trend doesn't mean much since prices were still down year-on-year then. I guess that rule only applies when prices are going up and not down.

That said I think we have a bit more to go down but with inventory dropping far off its usual seasonal gains this month that won't be for long. Sales:new listings is turning quickly positive which is usually a leading indicator of price gains although that could still be a few months away.

We'll see at the end of the year which of the predictions are accurate as Bob is one of the only bloggers who actually keeps people honest in that way. Any update on those winter predictions Bob?

Hey Jimmy,

   No, I am not in the market for a house.  I own one (the bank actually owns 1/4 of it).  My honest opinion is that house prices will fall to $350k median by next summer.  I believe they would have been at $350K right now were it not for the insanely loose lending standards that helped pump things back up after the drops in '08.  A drop to $350k would only be a ~13% drop from today's prices and I believe it would bring a lot more buyers into the market.  I think it would help to achieve a balanced market and ultimately be good for the city.  As we can no longer rely on cheaper interest rates to keep the good times rolling, I believe that prices will have to fall accordingly.  As far as my own home equity goes, I do not care if I lose $50k over the next few years.  Hell, in 2006 it went up about $100k in 1 year.  Ultimately the only number I care about is the mortgage principle.  It has been going down.  I have not been sucked in by the "you are richer than you think" crowd.  I have not treated my home as an ATM.  My lifestyle will not be affected by the RE trends.  I enjoy following this blog though.  BTW, an impartial opinion of today's market is hard to find.  With that in mind, I am just as sceptical of what the overleveraged homeowner/ RE investor has to say as I am of what the "bitter renters" have to say.      

I agree with Spence's comments.  based on the CREB website today, we have 6.7 months of SFHs in inventory, in July, in the middle of summer.  Over the last 30 days, we sold 28 houses per month, yet 76 new homes were added in the last 24 hours.  A lot of people that took their homes off the market likely did so because summer is upon us so they will flood back on the market in the fall.  If we keep selling at the rate we are and then some of those expired June listings come back, we're likely to see prices continue to fall.

The census report today showed that Calgary's growth has dropped off a cliff which should continue to temper demand.  If you look at Calgary's population growth stats from just before everything spun out of control, you could see there was a huge spike in net migration to our city.  Presumably with people leaving the city resulting in higher vacancies and more inventory we should see a downward trend.  (Disclaimer:  I live in a fully paid off house).  

Hey Bob,

What do you think of squidly77's latest "wise" assessment?

"I don't post on realtor blogs, Calgary home prices will likely plunge $15,000 a month for the next 18 months in a row, that's right, all the way down to the long term median price of about $160,000. "

He's made that prediction every year since 2006. Maybe this will finally be the year?

Keep in mind that he also predicted a couple weeks ago that we'd have 645 SFH sales in July.(It's already at 608) -Bob

Dame Edna,  

   I think that squidly guy has had a little too much of the bear koolaid.  I agree with him that prices will fall, but by no more than $5k/month.  His July prediction for SFH sales looks like it is going to be close though.  Hy may be 100 off, but I'm sure he was exagerating with that prediction as well.  Needless to say, the month end stats should be interesting.

superjer,

   For a minute there you sounded like a depressed, jealous, and bitter renter.  LOL.  Thanks for adding the disclaimer and congrats on attaining true home ownership.    

Bob,

  If you would have mentioned that there were 249 pending sales in your response to Dame Edna, then I certainly would not have said that Squidly could be close in his prediction.  Sounds like sales are picking up.      

Spence,

I think you need to put that 867 sales projection into context - current 30-day sales are 886, June sales were 1061, and July 2009 sales were 1585. That hardly sounds like picking up to me! :)

Disclaimer: I am a (non-bitter) renter currently living overseas and planning to move back to Calgary in the next year or so.

And as a first time poster I just want to thank you Bob for an excellent blog and website. It's nice to have found a well-informed, balanced source of information about the Calgary RE market.

This is neither here nor there, but, Winnipeg is getting spammed by 'Move to Alberta' television advertisements. That has to tell you something.

Bob,

Does the CC index change from June to July is saying that prices may go up?

It means prices may not go down as fast. If the index is in negative territory, history tells us that in nine months the price will be lower than it is today. -Bob

Does this mean that prices will go up in Winnipeg?

Hey Bob,

   Do you think we will reach the $398k median before the end of August?  What is your prediction for the end of the year?    

To answer your first question, I don't know. My crash/confidence index said we'll be below $398,000 by October. I guess it could happen sooner.

To answer your second question, my prediction for the end of the year is that it will snow in Nov/Dec and I'll be happily updating my other blog(which won an award for being one of the best in North America) -Bob

HaHa… CREA couldn’t forecast the next 5 minutes of weather

1.2% decline

http://creanews.ca/2010/07/30/resale-housing-forecast-revised-2/

5.5% increase

http://creanews.ca/2010/06/02/resale-housing-forecast-revised/

13.3% increase

http://creanews.ca/2010/02/08/resale-housing-forecast-extended-to-2011/

That's why everyone appreciates DailyStats.ca. We're a lot more accurate. -Bob

Congrats on your award, but now you need to do something with this blog. Squidly thinks it should be a different clour, like silver.

I'm glad to hear that he continues to read DailyStats.ca and torment himself. Readers come here for the content. -Bob

CRASH BABY CRASH! Then I can move back to Calgary and buy a new place closer to the core than friggen Rocky Ridge.

But then if it keeps crashing, it means the economy is sucking in Calgary, meaning I can't get back. Hmmmm.