Monthly Archives: February 2009

A Closer Look at the Sales Price to List Price Ratio (SP/LP)

Posted on February 13, 2009 | Leave a comment

This post might not appeal to everyone, but for those that like getting into the nitty gritty with the daily MLS statistics that are provided, read on.

Between February 1-11th, 283 Single Family Homes had sold with a 96% Sale Price to List Price Ratio.  (That means that a $400k home would’ve sold for $384k if it had a 96% SP/LP ratio)

Of the 283 homes that sold, 107 of them had price reductions before selling.

The average price reduction of the 107 properties was $35,977  (median price reduction was $25,900)

Although the current SP/LP ratio is at 96%, if we used the original list price to sale price, we get a SP/LP ratio of 93%.  The List Price in the SP/LP ratio uses the current List Price at the time of the offer, not what it was originally listed at.

Unfortunately, the statistic gets even more convoluted.  For example, if a property was priced at $425,000 and the the listing expired, and was later relisted down the road for $400,000 and sold for $390,000 – the original list price in this example would be $400,000 (even though technically, it was $425k under a different MLS number)   This is because the relist gets assigned a new MLS number, and even gets added to the ‘New Listing’ count for the month.   

This probably means that the more accurate SP/LP ratio is even lower than the 93% currently- however, I don’t have any statistics on how many properties expire only to relist at a lower price.

Keeping the above in mind, and how the DOM clock resets when a property is relisted, I found the following statistics interesting:

  • Average DOM for a SFH that needed a price reduction before selling was 89 days.
  • Average DOM for a SFH with no reductions was 29 days.

This shows the value of pricing your property correctly.

These statistics may not be too useful to you because it encompasses all SFH’s of Calgary.  However, when working with me – whether buying or selling – we’ll look over statistics that are relevant to your community and type of home.   If selling, we’ll be able to see what your competition was really originally listed at (even if their listing expired and was relisted) as well as their accurate DOM so we can price your property appropriately to get it sold for less time.

Sale Price to List Price Ration for Metro-Calgary SFH

Sale Price to List Price Ration for Metro-Calgary SFH

 

Buy OR Sell with First Place Realty and you can Win $10,000!     Feel free to contact me at anytime.

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Mike Fotiou, First Place Realty is a licensed Realtor, Certified Condominium Specialist, Accredited Buyer’s Representative and Commissioner for Oaths in the Province of Alberta.

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New Home Prices Continue To Contract

Posted on February 11, 2009 | 1 Comment

newhomeGood news for buyers as the cost of a new house continued to contract across Alberta, according to StatCan.

The New Housing Price Index (NHPI) is a monthly series that measures changes over time in the contractors’ selling prices of new residential houses, where detailed specifications pertaining to each house remain the same between two consecutive periods.

Between November 2008 and December 2008, prices declined by 1.3% in Calgary.  Year over year in December, Calgary experienced a 4.3% drop, while Edmonton was down 8.2%, recording the largest negative change in the country.

In the previous New House Price Index release (from November 2007 to November 2008 ) Edmonton saw prices drop by 7.9%, while Calgary’s drop was 2.5%.  At that time, it was the largest year-over-year decrease recorded in Edmonton since May 1985, while the drop in Calgary had been the largest since November 1991. (Source)

On a year-over-year basis, the New Housing Price Index increased by 0.4% in December 2008, slowing slightly from the 0.7% increase recorded in November.   The increase was fueled among cities such as Regina (+21.7%) and St. John’s (+24.4%)  which had the largest positive movement.

Statistics Canada

Chart Source: Statistics Canada

Statistics Canada

Chart Source: Statistics Canada

 

New Housing Price Indexes
  Dec 2008      Dec 2007 to Dec 2008         Nov to Dec 2008
  (1997=100) % change
Canada total 157.4 0.4 -0.1
House only 165.5 -0.7 -0.2
Land only 141.0 2.7 -0.1
St. John’s 177.6 24.4 0.2
Halifax 150.3 3.6 0.1
Charlottetown 119.4 0.3 0.0
Saint John, Fredericton and Moncton 118.3 2.8 0.0
Québec 159.4 5.4 0.0
Montréal 163.7 4.6 0.0
Ottawa–Gatineau 169.6 4.5 0.2
Toronto and Oshawa 146.4 1.9 0.0
Hamilton 152.4 2.1 0.1
St. Catharines–Niagara 155.6 2.7 0.0
Kitchener 143.2 2.7 0.5
London 143.3 2.7 0.0
Windsor 103.7 0.6 0.1
Greater Sudbury and Thunder Bay 112.7 3.6 0.0
Winnipeg 181.4 5.8 0.0
Regina 248.7 21.7 0.0
Saskatoon 218.1 0.9 -0.7
Calgary 240.7 -4.3 -1.3
Edmonton 228.7 -8.2 -0.3
Vancouver 120.6 -2.3 0.0
Victoria 115.6 -2.9 -0.4
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CREA Forecast for 2009: Alberta Prices, Sales to Drop

Posted on February 9, 2009 | 1 Comment

CREA (Canadian Real Estate Association) forecast today that average Alberta prices will drop 8.9% in 2009, and then another 1.1% in 2010.

CREA also forecast that Alberta sales are to drop 19.1% in 2009. But since Calgary SFH sales were forecast last month by CREB (Calgary Real Estate Board) to increase 10% in 2009, I guess that drop will be focused in Edmonton. -P

Read CREA’s February 2009 Forecast pdf1

It must be noted that CREA’s forecasts have been dreadful in the past. Last May they said “The MLS® residential average price is forecast to rise 5.3 per cent in 2008 and a further 4.2 per cent next year, pushing prices to new heights” (Source)

In November 2007 they said, “The MLS® residential average price is forecast to set new records in all provinces this year and next…New listings are forecast to rise further in all provinces except Alberta.” (Source) Of course we know we hit record inventory levels here last year.

Let’s just hope CREA doesn’t always err on the optimistic side each time, because this current forecast was grim. The only real positive was, “But sellers unwilling to accept offers below their expectations will remove their home from the market,” CREA’s Chief Economist said. “Fewer active listings reduces buyer choice, and in time puts a floor under prices.”

CREA MLS® Residential Market Forecast

Source: CREA MLS® Residential Market Forecast

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Mike Fotiou, First Place Realty, is a licensed Realtor, Certified Condominium Specialist, Accredited Buyer’s Representative and Commissioner for Oaths in the Province of Alberta.

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Question Box: What are GDS and TDS Ratios?

Posted on February 8, 2009 | 6 Comments

The following ratios can help in determining whether you’re financially ready to purchase a home.

GDS stands for Gross Debt Service.  This ratio describes the percentage of gross annual income required to cover your payments associated with housing.   Housing costs include:

  • mortgage principal
  • interest
  • property taxes  
  • heating expenses

The above three are referenced as P.I.T.H.    If the property is a condominium, you also include 50% of the condo fees in your calculation.  If it is a leasehold tenure (ie. site pad) you include that full amount as well.

TDS stands for Total Debt Service.   This ratio describes the percentage of gross annual income required to your housing payments AND all other debts and obligations, such as credit cards, car loans, etc.

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THE RULES

According to CHMC, the first affordability rule is that your monthly housing costs shouldn’t be more than 32% of your gross household monthly income.   Again, this figure is known as your Gross Debt Service (GDS) ratio. Remember, it must be 32% or less of your gross household monthly income. (Sutton has their definition of GDS, excluding heat, being at 27%)

The second affordability rule is that your Total Debt Service (TDS) ratio shouldn’t be more than 40% of your gross monthly income.

To figure out your percentage, use the following:

GDS/TDS  =  Total monthly payments  (x 100)
                          Gross monthly income  

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PUTTING THE RULES TO THE TEST

In the Calgary Herald yesterday, a president and CEO of a builder presented a couple of financing scenarios to support his home-buying comments, based on a 5% down, with a 4.2% rate for 4 year term.

Scenario 1.

A household qualifying income for a $200,000 home would be less than $33,000.  Monthly PI would be $887.

Scenario 2.

For a $300,000 home, a family would need an annual income of slightly less than $50,000.  Monthly PI would be $1,330.

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How do those two scenarios above compare to the GDS/TDS affordability rules?  What amortization length was used?

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Here are some great calculators:

CMHC Mortgage Calculator

CMHC TDS Calculator

LendingMax GDS/TDS Calculator (scroll to bottom)

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January 2009 – Calgary Real Estate Market in Review

Posted on February 2, 2009 | 13 Comments

With 550 sales in metro-Calgary, sales increased 22% over last month, but still 49% less than last January when 1083 homes changed hands.  SFH average price was $413,049 (9% down year-over-year) while the median was $374,700 (down 8.6% YoY)

Condo sales increased 9.8% from last month to 225 sales, but 50% off last January’s level when there were 454 sales.  The average sale price of metro-Calgary condo was $270,940, 1.4% down from last month, and 13% down YoY.  The median price of a condo in January 2009 was $243,000 down 4.3% from December 2008 when the median was $254,000 and down 16% from January 2008 when the median price was $290,000.

jan2009comparisons

Total MLS absorption rate switched gears as increased sales stopped the Absorption Rate from continuing to increase.

jan2009absorption

Jan 2009
Metro-Calgary SFH Inventory Absorption Rate:  7.3 months    (Jan 2008:  3.7 months, Dec 2008: 8.6 months)
Metro-Calgary Condo Iventory Absorption Rate: 8.5 months   (Jan 2008:  4.2 months, Dec 2008: 9.1 months)

You’ll notice how the month-end inventory for January this year and last were almost exact (4040 VS 3997 for SFH, and 1923 VS 1926) even though new listings were down over 30%.  The other major difference being, of course, the amount of sales and $ volume.

calgaryrealestate2009

Airdrie

Airdrie sold 33 SFH’s,  Averaging $353,009 with a median price of $355,000.   Month-end inventory was 252, giving Airdrie a 7.6 Month Inventory Absorption Rate.

9 condos sold, leaving a month-end inventory was 60.  (6.7 months absorption)   Average Price: $227,100 Median: $215,000.  (more detailed Airdrie statistics)

Chestermere

Chestermere recorded 5 SFH sales in the month of January, with a month-end inventory of  120.  That brings the Inventory Absorption Rate to 24 months.

(Average price: $467,180  Median price: $433,900)

15 condos are listed but there were no sales in January.  (more detailed Chestermere statistics)

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Source for all statistics is CREB’s MLS Database.   For official statistics, please visit  WWW.CREB.COM

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