(These statistics are unofficial, and March 1-15th 2009 sales have not yet went through CREB’s month-end audit. For official statistics please visit CREB.COM)
Sales continue to pick up the pace from December-February, although still not close the sales recorded during the same time period (March 1-15th) in previous years. Will SFH’s break the 1000 sales mark this month? The last time was back in September 2008 when 1152 homes sold.
Prices for SFH and Condos have barely fluctuated from the February’s month-end, but year-over-year the price drop is more evident. You can view more indepth statistics at www.FindCalgary.ca
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Today, SFH pending sales surpassed 300 for the first time in a long while…
Pending Stats
SFH Average: $445,458
SFH Median: $387,900
Condo Average: $310,883
Condo Median: $269,900
(Remember to apply the current SP/LP ratio of 95% to the above numbers)
I have to say…its hard sitting on the sidelines when u see sales picking up and listings dropping, but i feel a little better when i see the sales volume compared to other years. I have to believe this is a bit of a spring rally but we will see listings pick up shortly. It also seems to me that for the most part people are pricing aggressively, there seems to be a recognition that its still a buyers market.
YoY numbers (sales/prices) are the big picture to look at. Monthly fluxuations are just that, fluxuations in a short trend.
There is definately a smaller supply of buyers in 2009 than in previous years. Buyers, faced with raising unemployment, lowered wages, killed bonuses and an uncertain future.
Then you have much tighter lending restrictions, losses in the stock market, lower savings rates and high credit card balances it’s hard to imagine how many buyers there really are out there…
…and then you bring in that houses are dropping in value…
Prices will only slow their decent if there is enough buyers out there, but I can’t fathom the sales numbers right now at all… Why buy at this moment? Speculation?
There is no way we hit a bottom on prices, it’s only been a year and the bubble was many years in the making…
Mike
hey mike, not sure i agree with everything u have said. Looking at YoY #’s is backward looking and says nothing about what is going to happen. No question there are fewer buyers today, but there are also few listings. I agree we have raising unemployment but we are still at very very low numbers. Lowered wages, I’m not seeing or hearing about that. Killed bonus’s, depends on your industry but yes probably. Uncertain future, no question…but i think most people are optimistic. I don’t agree with tighter lending restrictions…maybe for a few but not for most. Losses in the stock market…is the bottom in? Lower savings rates…wrong, people are starting to save, the rate in the US has gone from negative to positive. While I personally think there is more downside…one should keep an open mind, because i can guarantee that NOBODY can pick a bottom.
2228 average sqft yesterday, that’s a wowser. I do belive sales are going 1000+ this month for SFH. Sales are strong (normal??) if you take into consideration the economic slow down and the 0/40 elimination. IMO Canada did not see any credit crunch, I know individuals with ~$80k household income who bought $400k+ houses in December and January, with %5 down. The only ones affected by the so called “credit crunch” are the unemployed who can no longer get as much money as they used to get before, however they still qualify for lower mortgages.
I believe this is going to be a strong spring for RE, lower rates and prices as compared to last year, are tempting. As for longer term, I guess time will tell, really hard to predict anything right now.
Mike Fotiou says: Regarding the square footage, there is one sale that had an abnormally high square footage amount – I didn’t have time to look into it this morning, but it was an Estate Lot which had the lot size in the square footage amount. If we were to remove that sale completely, square foot average would be 1667. The error has been reported, so hopefully it will be updated and not throw off our price per square foot calculations later on.
Update: The error has been corrected in MLS, and I’ve updated the daily and month-to-date stats accordingly.
Effective March 18, 2009, RBC has adjusted their 5 Year Fixed Rate as follows:
For resale homes with possessions within 90 days :
• 5 Year Fixed Rate @ 4.15 %
For new homes / builder spec homes / quick possession with possession dates within 120 days:
• 5 Year Fixed Rate @ 4.10%
Cj –
If we all agreed, how could we learn anything new?
I’m not picking apart what you said at all, I just wanted to explain where my thoughts were coming from…
I look at YoY to show compaire what the market is doing now. History is a great teacher and using historic values helps tell you what is happening today vs yesterday.
Fewer/More listings – Depends what year. 2009 has 100-200% more listings than 2007/2006, but a less than 08.
Feb 2009 4352
Feb 2008 4985
Feb 2007 2032
Feb 2006 1097
Unemployment – It is low, but raising. Take a look: http://cuer.sauder.ubc.ca/cma/data/Employment/UnemploymentRate/rate-unempl-calgary.pdf and note the last bust cycle year 1987 (see also 91-95)…unemployment rose to 11%!
Lowered wages – I don’t have personal past experience on what happend in the last 80′s bust, but I’ve heard wages dropped hard as job supply (low) and job demand (high) kicked in. Right now I do know O&G companies in Calgary who have frozen wages all employee wages and cut bonuses even though most of 2008 was at $100-147bbl.
Tighter lending restrictions – What I mean mostly is no $0 down, 40 year mortgages anymore, also with the sub-prime US explosion banks are more hesitant about lending out more than “traditional lending standards”. The UK (eg) is starting “no more than x3 income” for a mortgage lending standard now. I can see this in Canada/USA in the future too.
Lower savings rates – Rates as in “savings account rates”. For example, PC Financial Interest Plus savings account:
01-19-08: 4.10%
01-20-08: 4.00%
01-24-08: 3.85%
02-13-08: 3.75%
03-10-08: 3.35%
04-30-08: 3.05%
12-03-08: 2.75%
01-23-09: 2.25%
02-06-09: 2.55%
02-25-09: 2.35%
03-05-09: 1.85%
03-16-09: 1.65%
You can see that those who saved (are were prudent) are not making anywhere near the return they used to. Yes, they still have money though and that’s a very good thing.
Mike
hi Mike (a); thanks for the clarification….actually all I was trying to point out is that 1. its frustrating to be sitting on the sidelines and the market isnt exactly going the direction I had hoped or thought….i know, patience grasshopper!!
2. its almost impossible to know when the bottom will come and its very easy to keep reading all the bearish news and miss it. The hardest thing is to keep an open mind. In that regard, I think people get confused when they read Garth Turner. Some of his comments do seem to be contradictory, but I believe his message has been the same, but he also takes a pragmatic view knowing you cant pick the bottom so if the right deal comes along jump on it (i assume thats the reason he bought a house).
cj, you are most welcome for the clarification. I can understand your fustration quite well. If we look back to these days 10 years from now we would know what to do and when to do it.
I’m going to give you a report that helped me out more than ANY other report or book I’ve ever read. Because I’m a believer in history repeats itself; thus learning the past offers a glimpse of what will come in the future.
To know when the bottom comes means you know what to look for and what the bottom really is. The biggest problem is we don’t live long enough (and don’t have long enough memories) to have personal experience in situations like this.
This report will take you a couple of days to read, but I assure you, you will be engrossed and won’t put it down.
http://www.thelongwaveanalyst.ca/pdf/08_01_07_News.pdf
Enjoy and pass it along if you know someone who can benefit from it, I have.
Let me know your thoughts when you are done reading it.
Mike
Mike (a), funny….i first read Ian Gordon in 2000. I have studied the Kondratieff theory a lot. I actually trade commodities for a living so I’m a bit of a nurd when it comes to market theory etc. So i really appreciate the link. Having said all that….I do agree one can look for signs but at the end of the day, you simply can’t know when the bottom came. As a buddy says..there is no bad bid in a bear market. I expect this time around it could take years to figure out where the bottom is. I think this latest move by the US Fed is actually pretty bullish. Are we out of the woods…I have no idea. I did like Garths post today…i think it makes a lot of sense. As for Calgary RE…well, I just signed another 1 yr lease (for the 6th yr), I’m renting a home in the SE thats worth $400K for $1350/mth (down from $1650). How can I go wrong?!?!?
cheers
Cj,
How ironic you read Gordon in 2000! You most likely know more than I about it and can share a tip or few. It is interesting what the Fed is doing, I’m not sure its a good thing as they are trying to prop up falling prices/economy with cheap cash and credit… isn’t it this that got us into this situation in the first place?
Good for you for renting now, I’m sure you are miffed you missed the RE boom, but that’s hindsight and in the past, who would have guessed in 2003 it would last this long before things crashed? Good rental price! I heard people are talking to their landlords and getting lowered (successfully). I was renting our sold house in Scarboro from the buyer for $3000/mo, much less than it cost to buy!
This might interest you then…I posted it on Albertabubbleblog but wanted you to see it here too. Mike might find it interesting as well…
Excellent article I wanted to share that I just read:
http://www.kondratieffwinter.com/kw_home_values.html
From the article:
50 years of steady values
Until recently, homes were stable, unspectacular investments, not get-rich-quick schemes.
Nationally, the typical existing home was worth roughly the same in 2000 as it was in 1950, after adjusting for inflation, according to Yale University economist Robert Shiller.
Newly built homes generally were bigger and more expensive than older houses. As time passed, that meant Americans lived in larger, more valuable homes overall. But a house, once constructed, grew slowly in value. California in the 1970s, Texas in the 1980s and Florida on-and-off for a century were conspicuous exceptions to the rule.
Despite only modest increases in value, homes were smart investments. Owners lived in a house, then got their money back when they sold. That’s a better deal than renting. Borrowers got tax breaks, too, and built equity that could be leveraged into bigger houses as their incomes grew.
From 2002 to 2006, houses went from being a tortoise to a hare in the investment world. Home sale profits and relaxed lending standards such as lower down payment requirements and adjustable-rate mortgages (ARMs) made it possible for buyers of all income levels to pay more for houses.
When the housing bubble began to deflate in 2006, history had a sobering lesson to teach. Home values had closely tracked three common-sense measures for many years:
• Income —Home values floated at about three times average household income from 1950 to 2000. In 2006, the average household income was $66,500. Under the traditional model, home prices should have been about $200,000. Instead, the typical home sold for $301,000.
•Rent —Homes traditionally have sold for about 20 times what it would cost to rent them for a year. In 2006, houses were selling for 32 times annual rent.
•Appreciation —Existing homes grew in value by less than 0.5% per year, after adjusting for inflation, from 1950 to 2000. From 2000 to 2006, home prices rose at an average annualized rate of 8.2% above inflation and peaked with a 12.3% jump in 2005. Housing prices began to fall in the second quarter of 2006.
Inflation could help homes recapture their old prices, if not their value. But when inflation is factored in, home prices might not return to their 2006 peak for many years. Housing prices are meaningless if you don’t adjust for inflation, says Schiff, the investment manager.
He points out that gold peaked in 1980 at $850 an ounce in response to inflation and the Iranian hostage crisis. It never recovered. Today, it sells for about $750 an ounce and would have to top $2,000 an ounce when adjusted for inflation to match its value in 1980.
“That’s the nature of bubbles,” Schiff says. “The price never comes back.”
Read the article for more…
Mike
mike (a)….i moved back to canada from houston in 2001. Hell…i thought RE in calgary was over valued then!! Of course it then proceeded to go hyperbolic…I’m a big believer in reversion to the mean, so in my book this market has a long long way to come off. However….we are living in unprecedented times, its quite possible that things are different this time (as much as I usually run in the other direction when I hear that!!). My rule of thumb…when i dont have a strong view…do nothing, that has always seemed to work for me in the past.
Great posts and info btw, thanks for sharing.
cj
Mike & CJ – thanks for sharing those links. I’ll definitely give them a read.
Here’s an update on the condo projects that have been halted, which is positive since there’s currently enough supply as it is:
Nine Sites Being Monitored
1. Astoria–9th Street And 10Th Avenue S. W.
2. Oslo–12th Street And 11Th Avenue S. W.
3. Strategic On 4Th –2004 4Th Street S. W.
4. Gateway Midtown–517 10Th Ave. S. W.
5. Sky Tower–201 10Th Ave. S. W.
6. Manchester Station — 5320 2Nd St. S. W. (Filled In)
7. Haras–1215 5Th St. S. W. (Filled In)
8. Grand Park–101 29Th Ave. N. E. (Filled In)
9. Grand Riviera–1505 23Rd Ave. S. W.
You can read more about it here (Calgary Herald, March 19, 2009)
cj: “This time it’s different” – famous last words for every bubble in the history of markets.
Follow your instincts, I think you’ll be rewarded
CM…man aint that the truth….but then again…the capitalist system is officially dead, so we are in uncharted waters…..anyone have a crystal ball thats working…mine is totally fogged over!!
cj – “i moved back to canada from houston in 2001. Hell…i thought RE in calgary was over valued then!!… My rule of thumb…when i dont have a strong view…do nothing, that has always seemed to work for me in the past.
Great posts and info btw, thanks for sharing.”
As always, your most welcome! If I learn something new everyday then it’s a good day! I like your rule of thumb.
It’s interesting to note that we moved in Calgary in 2000 (I was from Toronto originally) and I saw the home prices in Calgary as affordable and “too low” (because in Toronto homes were much more expensive) and wanted to buy asap. It wasn’t until end of 2003 did we have that downpayment needed. Bought in 04, sold end of 05, bought end of 05, sold in early 08. Now we are in 1 yr GIC’s and cash waiting on the sidelines.
Mike Fotiou – Mike & CJ – thanks for sharing those links. I’ll definitely give them a read.
Here’s an update on the condo projects ”
Thanks for the addresses! I can’t imagine what Calgary is looking like right now with all that bare land/deep holes! (I’m temporarly in the UK right now).
Mike
Ouch, looks like the SFH average this month is being skewed by multi-million dollar SFH sales.
Garth, how many homes have sold over $800k this month (x2 the average)?
The median is unchanged from last month though, which I would have bet it to be a little lower. Although, “spring fever” is upon us.
Mike
Mike Fotiou says: What’s ouch is that you called me Garth
. So far this month, 28 SFH’s over $800k have sold (out of 629 sales). Last year during the same time period, that number was 39 (out of 883 sales)
March is definitely ‘bucking the trend’ a little bit from what I had expected.
In March of ’08, the median fell about 1.8% from February. This year it’s staying dead even with February. (Mind you we still have a ways to go)
Also keeping in mind that last February there was a huge bounce over January, with the median rising 4.1%.
This year, there was no bounce.
Jan 08 – > March 08 = +3.03%
Jan 09 -> March 09 = -1.15%
Maybe this year the bounce has just been delayed, and March will turn out to be the best month of the year for Calgary real estate.
So far it’s still February though, with 0.02% growth, beating March’s 0.00% by just a shade
Forgot to mention, that as Mike’s awesome stats section shows, while the average is up, the average per sq ft is exactly the same as Feb ($272).
For all intensive purposes, March = February in pretty much every way.
Mike Fotiou says: What’s ouch is that you called me Garth . So far this month, 28 SFH’s over $800k have sold (out of 629 sales). Last year during the same time period, that number was 39 (out of 883 sales)”
LOL, sorry about that, it was a late night! To be so tired to forget your name is my name too. haha.
March is indeed interesting, I didn’t expect the numbers to be where they are (holding steady with Feb). Thanks for posting the stats Mike. So about 5% of the stats are homes over $800k. Not as many as I thought as buying expensive homes then.
Mike, historical norms: If we didn’t have the boom, what would today’s average/median price be do you think? $275,000k?
Mike
If we didn’t go through the boom I personally think the average would come in around 235,000 to 250,000 tops for a house .
Mike (authentic): Over the last 40 years, Calgary real estate has appreciated at approximately 1.2% above inflation.
If we were at ‘historical pace’ we would be looking at approximately 280k right now for the average home.
So lets agree then the “normal SFH floor in a normal market” is 250-280k, and it could be as low as $235k.
Right now we are at $423. So we still have around 37% down to go on your average SFH to bring the price to “normal”.
Now I doubt there would be much debate that we are not in a “normal” market here. So that would mean if we were at $250-280k right now and then all this financial crisis, job losses and stock market panic hit the price would go down below the historical norm.
So maybe $235 is more normal now vs 250-280k?
Then it’s not impossible we could shoot the boom as well…
That could mean a further 45-50% drop then.
Whoa. That’s actually possible.
Now, who is buying at 95.66% average sale price?
Mike
An (potentially) interesting tangent on the growth above inflation discussion is how much is actual growth and how much is because houses have gotten larger and larger over the years.
While statistically it may not be as big as issue since the median size would probably move largely in unison with the median price… the price of individual houses may not be growing at the assumed rate, since relative to the market they’re getting smaller and smaller as time passes.
A house built in the 70′s that was average sized for it’s time and would have sold for the median price then, certainly would not be average sized now, so probably wouldn’t garner the median price anymore… so have prices really increased at 1.2% above inflation?
Just a thought… anyway, back to work.
P.S. Great topics Mike, I really enjoy your blog!
Kevin,
Good point, one that I’ve never really thought about.
All I can think is that 70′s house would be located in a mature neighbourhood, “closer” to downtown/work and have a “bigger backyard” on average. On the downside, it’s 40 years old, most likely needs updating and the layout won’t be “modern”.
So, size is one thing, but the 70′s house gains in others just by being build where it was.
Mike
From the research I’ve done, these are my thoughts on the ‘bottom’ of the Calgary real estate market…
Last crash (80′s): Prices eventually dropped to 56% of their peak before climbing again. Using this measure, we would be looking at 283k (56% of 506k)
Historical pace: As discussed above, prices have increased 1.2% above inflation in Calgary over the last 40 years. This is actually quite decent, considering real estate is basically just a hedge against inflation.
Based on this measure, we should be at approximately 300k in 2009.
Watching the U.S. market: Their prices have dipped down to 2003 levels. Nobody knows if it’s the bottom yet, but if ours did the same, we’d be looking at 215k here in Cowtown.
So far, it seems we’re being dragged down right with the good old USA, as we have in every other recession, just a few years behind as usual.
So, there you have it, 215k, 280k, and 300k. Average of those 3 is 265k, (52% of the peak) so I’ll throw that on the dartboard as my guess
I just noticed that, coincidentally, the ‘Plunge-O-Meter’ blog over at http://www.canadian-housing-price-charts.235.ca/
predicts the exact same number and says we have 32 months to go before reaching it.
I like that site: http://www.canadian-housing-price-charts.235.ca/ I think it’s very reasonable.
32 months for Calgary to correct, wow. I see Calgary is now losing $4,755 each month on the price of a house. Oct-2011 is the end date, which is really interesting as I’ve always thought 2012-2014, but then, that’s for the economy to pull up into a Spring cycle from the current Winter cycle.
On a side note I’ve noticed inventory is slowly building but forclosures are building at a faster %age. Mike, could you mls link to the forclosures again here?
Makes you want to buy while the prices are still high.
Mike
Here are the updated links for MLS-listed foreclosures/judicial sales:
Foreclosures, Part 1 (113 properties)
Foreclosures, Part 2 (36 properties)
Foreclosures, Part 3 (7 properties)
Just doing a preliminary search, 23 judicial/foreclosures have sold so far in March.
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Teranet House Price Index just released January 2009 numbers.
Of the six constituent city indices, three were down from a year earlier: Calgary (−8.2%), Vancouver (−4.2%) and Toronto (−2.4%). Two others were still up from a year earlier but by much less than last month: Ottawa (2.1%) and Halifax (1.2%). The sixth city, Montreal, also showed deceleration but maintained a respectable 12-month increase of 4.1%.
The Calgary index was down from the month before in 14 of the last 17 months, with seven straight declines from last July through January.
I’ve only been tracking the foreclosure percentages for SFH, not condos.
As a percentage, I haven’t seen anything too dramatic. That being said, the ‘peak’ (since Mike has been keep tracking of foreclosures) was just recently on March 16th, when 2.29% of SFH listings were in foreclosure.
When Mike started keeping track back on January 29th, we were at 1.86%.
From there it climbed steadily until March 1st (2.21%), and then it dropped back down, until March 13th (2.10%)
Then it climbed back up to it’s highest peak yet, on March 16th (2.29%), and here we are now at 2.27%.
The story might be more interesting for condos.
CM, regarding the story being more interesting for condos – not yet. Judicial listings have fluctuated between 50-54 throughout March while inventory is up from February month-end.
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Yesterday, sales for March surpassed the totals for month-end February. Currently, 852 SFH and 351 Condos have sold compared to 825 SFH & 343 Condos in all of February.
However, this amount is still off from February 2008 when 1128 SFH and 443 Condos sold during this same time period. (Mar 1-25)
Mike, I see you have a listing in Edgemont, its been listed since last October for what I can tell(maybe longer?), price got reduced to 389 and recently went CS, however looks like the sale fell through, back for sale for 389 for a couple weeks until today when the listing price got upped to 399. Just curious why the LP went up, of course I understand if you can’t post it here.
Mike Fotiou says: The listing is not mine, but it is with First Place Realty. That property was listed on November 14th at $424,900 then reduced to $399k, and then $389k, and then back up to $399k two weeks after the sale fell through…I don’t know why.
I think seller’s are feeling more optimistic at the moment, which may be the reason for the higher price?
Bob Truman posts an interesting stat on his blog, ‘absorption rate by price range’, and it’s showing that properties between 300-400k have an absorption rate of 3.1 at the moment, which is pretty much a balanced market.
400-500k : 4.3
500-600l : 6.1
600-700k : 8.3
700-800k : 8.3
Properties under 300k are ‘flying off the shelves’ at an absorption rate of 2.5.
This might support the conclusion that first time buyers are the only ones buying right now. The ones who have been waiting on the sidelines these past few years.
Hi Mike, I totally agree what you said, It seems you analyze it pretty well, I think the foreclosure will mount in the next 5-6 months, and will cuase price drop to 15-20 percent..as in windsor it will happen in calgary, even tough not as severe as windsor..
I find it funny to see that properties under 300k are ‘flying off the shelves’ due to first time home buyers. For me, a first time home buyer, I have to keep telling myself that 300,000 with interest from a mortgage is going to be close to 500,000 dollars – half a million dollars! For what, a condo that I will pay 200+ dollars a month in fees, no actual property of my own,… . Yeah right, this market is way out of control still. I’m going to wait for one of the automakers to go bankrupt, for Petro Canada to lay off once Suncor takes over, and for all the other backlashes that occur in response to the economic situation that is, lets be honest, just staring to dig it’s teeth into Canada. If I still have a job, I might be willing to spend 150K – 200K on my first time home owner purchase. I think that is even a little on the steep side for a first time home.
This comment section sure seems to be filled with bears.
I have no doubt that the Calgary market will continue to decline at a measured pace over the next couple years/months/weeks/days? However, I think the Calgary market was chronically undervalued in the years leading up to 2005. We paid a heavy price in the real estate market starting around the early eighties and with such a boom and bust economy it appeared to hold values down for a significant period of time.
I’m not saying this recession is going to be a cakewalk- it still could spiral into the gutter at a moments notice- but I believe that Calgary is a much larger, more diversified city and economy than that of the past. In comparison to Vancouver and Toronto I think we warrant a higher “floor” than anything under $300K. I can’t statistically backup my argument unfortunately so flame away if you must! It’s just something I have a hunch about.
I’m actually going to venture out and say that the floor is somewhere closer to the $330K mark. Purely a hunch and total speculation.
Unemployment surges in Canada. Major employers teeter on the edge of bankruptcy. Commodities fall. Wages reverse. The economy shrinks dramatically. Ottawa fiddles.
This is why those who think our housing market (a) has hit bottom, (b) won’t decline nearly as much as the American one, (c) is actually bouncing back or (d) is just fine, because ‘it’s different here’ will make life-altering mistakes. Based on what’s happened here, the speed of it and the intensity of job loss and decline, it’s conceivable Canada is about to fall off a cliff.
http://www.greaterfool.ca/
“Hundreds of engineers, as far as the eye can see,” he says of the crowd dominated by mostly middle-aged men toting black briefcases at the Telus Convention Centre, their numbers growing so large by mid-morning Thursday that it wraps twice around the interior of the centre’s main floor.
http://www.calgaryherald.com/Business/White+collar+workers+Calgary+ranks+unemployed/1433290/story.html
US unemployment number just out:
March 748,000 jobs lost
February (revised) 707,000 jobs lost.
That’s a lot of people, people.
You would have to be either completely mad/nuts or financially irresponsible to buy a house right now and not wait.
Mike
Hi Chuck,
Check out the following graph:
http://img85.imageshack.us/img85/4922/calgaryinflationadjustede7.png
In 2005 we were pretty much dead on with our ‘historical pace’. Not overvalued, nor undervalued. (From 1990 to 2000 we were undervalued)
330k, if you’re talking about the average SFH price, would put us at 65% of the peak. Prices would have to come down about another 18%, which is certainly realistic.
Last year the big drops didn’t start happening until May, everything held up pretty well until then. (Prices actually went up by 3% from January to February)
This spring, there hasn’t been any increase, but there hasn’t been any decrease either, everything has just been flat.
I agree about another 18-20%
I’ll put it this way:
I hope it’s only another 18% at the MOST!