We’re bombarded by differing news from various sources (FindCalgary.com Real Estate News Archive)
Some predict “moderate” growth, others a “correcting” of real estate prices.
“The 2008 forecast for Calgary prices is significantly different depending on who is making the prediction. Re/Max’s forecast is for prices to remain the same next year. Canada Mortgage and Housing Corp. is forecasting a 7.7 per cent growth. And the Real Estate Investment Network is calling for a 12 per cent hike in average Calgary prices.” – December 18, 2007 – Calgary Herald.
Royal Lepage’s report that was just released predicts a 4% rise in Calgary home prices, with the national average rising 3.5% in 2008.
Who do you believe? Many of the predictions are from inherently biased sources with conflicts of interest. At the same time, their credibility is at stake if their forecasts are off base.
As we can see from the chart below, Calgary real estate prices began their quick escalation near the end of 2005, reaching their peak this summer. The median and average prices have been dropping (SFH, Calgary) since the summer highs, but how far will the prices drop? If we were to extrapolate the steady climbing price trend from 2002-2005…
Was this price escalation a bubble, or was Calgary simply catching up to other major Canadian cities? Does Calgary have the same economic and foreign investment factors such as Vancouver and Toronto to justify high property prices? Will prices stabilize until incomes catch up to recent price escalations, or will they drop allowing more buyers to enter the market? What do you think?
It should be noted that it’s very easy to over generalize the real estate market in Calgary. Many communities defy price trends (whether going up or down) You can view the community stats for Calgary on this page
Another factor is the inventory available and the absorption rate. Historically, sales drop off during the winter months as we can see in the graph below:
However, we still have over 4000 active SFH listings, compared to 2,623 at the end of December 2006
It’s interesting to note that there are 1,400 more listings than this time last year, and there are 1,500 vacant/new construction homes on the market. With 35% of the SFH’s listed vacant, what effect will this have on the market?
Fundamentally, Alberta’s economy is still healthy. Alberta employment growth leads the rest of Canada, with continued growth expected for exports (source)
“Alberta has had the highest standard of living of any province every year since the early 1980s, and there is no letup in sight. Moreover, its GDP growth has outpaced Canada’s overall growth almost every year since 1990, and this strong performance is expected to continue over the medium term.” – Global Insight, Canada (Aug 2007)
On the other hand, we have to keep an eye out for other factors: US subprime fallout. “TD Canada Trust is the only one of Canada’s big banks not to have any writedowns in 2007 for investments in some way linked to the default-hit U.S. subprime housing market.” (Source) What will this do to interest rates? Oil & Gas Sector: How much of an impact will softening natural gas prices and the Alberta Royalty Review have on the future growth and development of Alberta? Housing Affordability Erosion: Many buyers simply can’t qualify for an average $400k home, even with 2 incomes. Rent in Calgary is the highest in all of Canada (Source) How much will this affect migration into Alberta?
What will 2008 hold out for Calgary? It will be very interesting to note whose predictions come the closest.
I thought it would be interesting for us to post Calgary’s real estate price predictions for the year here.
Again, here’s what the industry is predicting:
Re/Max: no price growth
Royal Lepage: 4%
Canada Mortgage and Housing Corp: 7.7 %
Real Estate Investment Network: 12%
FindCalgary.com poll results, closed December 2007. (204 votes)
Question: What will happen to Calgary home prices?
14% Price will stabilize
21% Rise Slowly
6% Skyrocket
34% Drop slowly
23% Plummet
Be sure to post your prediction for:
Single Family Home Average: % (+ -)
Single Family Home Median:
Condo Average:
Condo Median:
Here was the other poll result:
What do you think the median house price should be in Calgary today? (109 total votes)
400-450k: 13%
350-400k: 16%
300-350k: 23%
250-300k: 24%
200-250k: 21%
u should have a cashprize for the closest prediction at the end of the year or something
12/31/08 prediction
sfh
median 350,000
average 400,000
condos
median 230,000
average 290,000
I really like your website Mike. Best of luck to you in the new year. I don’t think the average family can afford the average home and with the recession happenning in the United States due to the collapse of there housing bubble and a slower Albertan oil patch I think house prices are going to come down significantly. Personally, I have decided to hold off on buying until it is within a reasonable budget for my family.
Single Family Home Average: -20%
Single Family Home Median: -20%
Condo Average: -20%
Condo Median: -20%
Nice Blog Mike!
Mike, Bob Truman use to have neighbourhood reports that would show all the list and sales prices by day for communities (mostly inner city).
Are you considering adding this information? I would be most interested in it.
As for predictions, it’s really tough to say as I could see it going a number of ways, so I will take the easy way out and say price stabilization within a 5% increase/decrease.
Hello Jimmy,
Thanks for your comments!
At this time I’m not planning on doing daily stats narrowed down by community.
However, CREB does provide monthly stats broken down by community. I have links to them on my website here:
Community Stats Monthly MLS Statistics
Didnt you have the amount of sales posted here for the first week of Jan compared to previous years? Where is it?
Can you repost it, but with the totals up until today?
Trying to figure out what this market is doing compared to other yeras.
Hello Anony,
I had a mishap attempting to edit my article to add the poll results and ended up deleting my previous comments. Here are the statistics again, updated to the 10th:
Single Family Home Sales (Calgary)
January 1-10 2008: 244
January 1-10 2007: 319
January 1-10 2006: 261
January 1-10 2005: 173
Condo Sales (Calgary)
January 1-10 2008: 86
January 1-10 2007: 118
January 1-10 2006: 83
January 1-10 2005: 66
I hope this helps, and feel free to contact me if you have any other questions.
PS: You said you were trying to “figure out what the market was doing.” Besides sales figures, take a look at other factors such inventory numbers. For example, January 2007 had a SFH month end inventory of 1894 (compared to 3585 currently, early in January)
Pending Sales as of January 11, 2008
There are 283 SFH sales pending, averaging $459k, with a median price of $415k
There are 135 Condo sales pending, averaging $345k, with a median price of $290k
To get a realistic final picture, take 97% of each figure as that is the current List to Sale Price ratio
We recently sold our Bridgeland condo (about 25 DOM, lucky us). Shortly after, we received our 2008 assessment which is 6K (2.8%) over our selling price. This was a bit of a surprise.
If sellers consistently sell under the tax value, does this affect the market? I can’t see how any Calgary seller will get the tax value with the current market conditions Comments?
Hello Jim,
Congrats on your sale!
Please bear this in mind regarding 2008 Property Assessments: “The real estate market establishes the value of your property. We simply measure that market value as of July 1, 2007.” Source: City of Calgary 2008 Assessments Brochure
So the Property Assessments are always approx 6 months behind the current market value.
You can read more about property assessments at the City of Calgary website (www.calgary.ca)
Hi Mike,
This is my first post on your blogsite, although I used to post on Mr. Truman’s blogsite on a regular basis. In fact, if I’m not mistaken, I was the second person ever to post there. The first person to post there was a great fellow named “Mike”.
Since there aren’t a lot of posters taking action on this particular topic, I thought I’d take the liberty of talking about a whole lot of issues that pertain to your question.
You sucked me in by asking for a prediction. That was my weakness on Bob Truman’s site as well. lol
I truly enjoy stats and predictions and I couple years ago, I wasn’t bad at it. But today, considering that so many dynamics have changed in the world, I’m don’t have near as much confidence as I had back then. But for what it’s worth, here goes:
First of all, I look at the macroeconomic scene first, then at the micro scene. The micro scene would be regarding Calgary only, or maybe all of Alberta. But the macro scene includes the USA and what’s happening down there. That opens an entire new can of worms.
How will happenings in the USA and the new price of oil (priced in an American dollar that is falling off the cliff) affect Alberta? I’m not sure.
All we hear in the media these days is about the sub-prime debacle in the USA (but not in Canada), and the increasing price of oil and gold (again in terms of an American dollar that is in the toilet). There is no doubt in my mind, the American dollar is in big, big trouble and it’s only gonna get worse in 2008.
How that affects Canada is debateable. Canada’s exporting industries like the huge manufacturing sector in Ontario, and the lumber sector in B.C. could be hit hard. But how will that affect Alberta?
If the American buck plunges, oil will hit $150 a barrel easily. But that’s priced in increasingly worthless American bucks. How will that affect Alberta? Again… I admit I’m not sure. The real driver of Alberta’s economy is drilling for gas, not oil. Not even Fort McMurray is as lucrative as the gas sector. Enter another factor. Where is the price of gas going to go?
All these issues will determine what will happen to real estate prices in Calgary. In all honesty, I doubt very much that any of the predictors of real estate prices in Calgary even look beyond our city limits… including real estate companies.
There is so darned much happening in the world today, on a lightening quick basis recently, that making predictions is darned tough.
But having said all that, I think there are still so many factors that make Calgary and all of Alberta so attractive that I see prices increasing from Dec. 31, 2007 by approximately 8% in 2008.
Calgary 7%, Edmonton 9%, Red Deer 10%, Lethbridge 4%, Fort Mcmurray minimal, Grand Prairie 8%.
But do I see a drop in real estate prices in Alberta in 2008? Not a chance.
With so many wealthy Americans looking to leave the sinking ship, and with so many Europeans seeing Alberta and British Columbia as absolute bargains, the chances of a drop in prices are pretty much zero…in my opinion.
I could be dead wrong, and I appreciate each and every other opinion posted here.
Good luck to all in ’08
Al Bundy
Hello Al Bundy,
Thank you for your viewpoint, it is much appreciated!
I wanted to point out that I only recently began posting on Bob Truman’s blog, and have always used my full name (Must have been a different Mike)
Hey Mike:
Thanks for picking up the torch from Bob while he’s been out skiing, it’s very much appreciated. I also used to post on his blog from time and time and this is my first crack at yours.
I was wondering where Mr. Bundy had went with his repeated prediction last fall that the RE market in Calgary was going to “explode” on January 2, 2008.
As the stats are showing, the only thing that’s exploding is inventory. Averages are up about 2% while median is down about 2%(let’s call it a wash).
Sales are looking to end the month about 33% down YoY. While new listings will likely be up about 33% YoY.
As one realtor in the Herald put it this week, he expects 10,000 mls listings by April. Personally, I think that’s very conservative.
As Bob posted this week as well, we will soon be in the land of lower year over year prices. I’m dying to find out how CREB is going to spin this (they’ve already changed reporting criteria to exclude bedroom communities, to focus more on the median, and now apparantly to use some unknown aggregate of the years prices to claim a 17.94% increase for 2007 when the true number was more like 9.7%). Anyways, by March at the latest, possibly even February, homes will have declined in value year over year (and that’s not even including the effect of inflation).
SFH will end January with well over 4,250 homes on the market; while condos will have over 2,100 listings.
The pricing effect will then be two-fold. Sellers (mostly speculators) will quickly realize that prices are a factor of supply and demand – not of the calendar month – and therefore do not ‘always’ have to increase in the spring. Homes that haven’t moved by March/April will likely start taking some large reductions, as it’s been well proven that rents do not come close to covering the speculator’s costs of holding on to a property – so renting out their ‘investment’ will not be an option for all but those with the deepest of pockets. Buyers meanwhile will realize what U.S. buyers had to be reminded of – that real estate does not ‘always go up’ (this will be driven home within 60 days by declining year over year prices). As I’ve often said, the only people who were buying last spring were speculators and first time home buyers who were being lied to by the CREB and their realtor to “buy now or be priced out forever”.
All this is based on a healthy and status quo economy. If the States really is headed for, or already in, a recession; it’s only going to be worse. Employers tend to operate on a LIFO model for employees – “last in, first out”. If they have to downsize, guess who’s getting the axe first? The same people who have been stretching themselves to the brink for the last two years to make the mortgage payments on a place they have zero equity in and will soon be worth less than they bought it for.
I was planning on buying in September (assuming that prices will continue their now $60,000-ish cut and fall back to spring 2006-ish prices. But now, I’m not so sure. Even I was expecting the spring to go a little better than it’s shaping up to (where’s a dead cat bounce when you expect one?). Couple this with the massive clouds on the economy’s horizon…I’ll have to see how it all goes.
Anyways, just my thoughts. Say maybe a 10% chance prices will end 2008 higher than they came in. 20% chance they will be +- 2% (basically flat). And a 70% they will be lower. I’m guessing a further 10% reduction (on top of the 12% we’ve already reduced from the peak).
Thanks for the hard work on the site Mike, it’s been very much appreciated.
Yes indeed Mike Fotiou, that was a different Mike. I know his last name and so does Bob Truman. And it wasn’t Fotiou. lol
None the less, it’s nice to post on your blog.
It’s also nice to hear Warren’s voice once again. I haven’t read one of his posts in 6 months or more, but I’ve always listened to what he had to say.
I’ve gone nowhere Warren, and as I posted here the other day, I’m not sure what’s gonna happen this year. But I certainly never said that real estate prices would “explode in 2008″. I said they “would explode in 2007″, and I was right. I’d prefer if you wouldn’t misquote me like that.
Warren said:
“The pricing effect will then be two-fold. Sellers (mostly speculators) will quickly realize that prices are a factor of supply and demand – not of the calendar month – and therefore do not ‘always’ have to increase in the spring.”
Al Bundy says: the calendar month absolutely controls supply and demand… not the other way around (supported by math over the past 20years). In other words, supply definitely increases in the fall, and demand definitely increases in the spring. The calendar month just happens to coincide with “Winter and Spring” phenomenon.
Yes, it is absolutely connected to calendar months. It includes so many factors like people wanting to make a purchase in spring, so they can make the move in the summer, therefore not disrupting their childrens’ schooling. Or that they want to make the move in early summer so that they can get in a bit of summer holiday before winter.
It’s not rocket science.
This happens every year, whether it is a rising market or a falling market. My stats are accurate about the seasonality of it all. That is not debateable.
Having said that, I have no quarrel with Warren’s point of view.
Warren may well be right. This might be the last year in the history of real estate price increases in Calgary, for a long, long time.
But I doubt that. None the less… I respect most opinions. When a man refuses to listen to the opinion of other well informed people, he loses automatically. One must listen to others… always. That’s how we learn and improve. And then we must make our own decisions based on all the arguements and evidence.
Al:
Thanks for the kind words, I appreciate your opinion. Just to set the record straight though, this was your post on Bob’s site on August 28th, 2007:
“Watch for prices to start to solidify come September. And watch out in January…prices in Calgary are likely to explode.”
And again on September 22nd:
“I suspect that with the huge number of homes in inventory this year, that it will be one of those autumns, where prices are steady (not rising). But I think next January 2nd, prices will start to take off again as usual.”
Not trying to argue, it’s just that I don’t need to misquote anyone when google and cntr-c/cntl-v are so easy.
Hi Warren,
I stand corrected. Apparently I did use the word “explode” when refering to my opinion of ’08.
I certainly won’t use that word today. To be honest, my confidence in predicting is at an all time low at this time. I often speak to some of the bigger players in Alberta’s economy and I respect their opinion a lot. It appears that I might be a stubborn holdout, thinking things are all rosy for Alberta.
So I’m steadying myself to perhaps have to reset my thinking. If the economy in North America collapses, I still think Alberta is perhaps the best place to be. But I think I’m going to have to admit that I (and all homeowners and speculators) might take a hit in ’08 if they’re not careful. And perhaps in ’09 and beyond. Therefore, I’m considering lightening my meagre investment in condos and get more into cash! I don’t have much wealth, but I sure as heck don’t want to lose any of it.
If I do decide to lighten up on condos, I’ll still be using the seasonality of the real estate market to my advantage, though. I’d expect to get the best price in about April or May.
So I definitely listen to others whose opinions I respect. And that includes yourself Warren.
Best regards for ’08.
Al
It’s tough to say, since I’m far away, but as an investor, all the “gloom and doom” sure is making it simple to buy low, hehe.
Nick Cifonie
Host: http://www.rei-tv.com
Hummmm….
July 2008 Median house price = $406,000
July 2008 Median household salary = $90,00
Median house price / Median salary = 4.5x
Bank will lend at max = 3.75x
= Prices are not going up anytime soon, unless salaries go up a lot.
= price might come down to $90,000 x 3.75 = $337,000
DD
I think we’ll see at least a 10-15% drop.
Ok!!!! Predictors!!!! Now March 2009.
Price go down and non stop.