Just pretend the Leaning Tower of Pisa in this pic represents Statistics, and, well...the analogy made sense in my head.
…continued from previous post.
Statistics are a wonderful thing. Hard data. The thing is, they can be easily manipulated to portray something different, sort of like forced perspective in visuals. We had a brief discussion earlier on this blog how by selecting different time periods we could make the point that sales were increasing or decreasing, prices rising or dropping. The same goes for omitting points that don’t make your case.
RE/MAX released their 2009 Bricks & Mortar report. Here is the excerpt for Calgary:
Demographics, opportunity, and return on investment have greatly contributed to the upswing in residential real estate activity in Calgary over the past 30 years. The vibrant dynamic of this economic powerhouse has attracted young Canadians from various parts of the country, especially in recent years. Homeownership levels have soared as a result, rising from 58.4 per cent in 1981 to 74.1 per cent in 2006. Calgary has experienced 13 consecutive years of upward momentum in terms of average price, and in spite of a setback in 2008, the residential real estate market is moving towards recovery.
While concerns over oil and gas still loom overhead, unit sales are almost on par with 2008 levels. Average price is holding steady, with year-to-date values—at $380,489—just 7.5 per cent off last year’s pace. First-time buyers— many of whom were priced out of the 2007 market—are behind the push for housing. Fifty-four per cent of entry level, single-family homes and 91 per cent of condominiums sold are priced under $400,000. With demand for starter homes on the rise, inventory in that segment of the market is tightening.
Some multiple offers are breaking out on well-priced properties, particularly in Calgary’s north central and southwestern communities—with market conditions shifting in favour of the seller. Farther east, more balanced market conditions exist. Although tradeup activity remains somewhat sluggish, some of the best deals can be found in the $500,000 plus price range.
The top end of the market is starting to come alive, a fact best underscored by the recent sale of two $10 million-plus properties. Calgary has a history of phenomenal growth—with sales doubling from 1980 to 2008 (11,599 vs. 23,136). The number of homes sold in 2009 promises to be on par or ahead of year-ago levels. Housing values have also experienced strong growth, rising 304.9 per cent since 1980. With the unemployment rate among the lowest in the country and economic stability a cornerstone, in-migration will continue to be a factor propelling real estate activity and as such, the future outlook holds much promise.
Source: RE/MAX
“Housing values have increased 304.9% since 1980.” In 1980, average price was approx $93k. In 1990, about $128k. In 2000, approx $176k. As you can see the majority of the increase has been in the past decade, specifically the past 5 years (Note: CREA doesn’t use Metro-Calgary statistics if you were wondering about discrepancies) Is it sustainable for prices to have doubled (and keep increasing) in a few years when it took almost 20 years to do so previously?
It’s interesting to see what the same chart looks like if you adjust for inflation:
“Sales doubled from 1980 to 2008 (11,599 vs. 23,136)” The population in 1980 was 560,000.
“The number of homes sold in 2009 promises to be on par or ahead of year-ago levels.” Unfortunately, 2008 sales levels were quite muted, so an increase needs to be taken in context.
“With the unemployment rate among the lowest in the country and economic stability a cornerstone…” The unemployment rate has increased to a 13-year high of 6.9% in just 12 months. During this period the number of employment insurance beneficiaries has jumped from 3,970 to a record high of 19,000.
Conversely, you’d think if the unemployment rate was the highest in the country it would be mentioned as a negative factor. But scrolling to their commentary on Newfoundland & Labrador, you wouldn’t know it. It even calls St. John’s a “stable employment market..robust” (those receiving EI has increased by 39% from June ‘08 to June ‘09)
“First-time buyers— many of whom were priced out of the 2007 market—are behind the push for housing.” What’s left unsaid is what has changed since 2007 that has allowed the first time buyers to enter the market: prices & interest rates decreased. The report states the trade-up activity has been somewhat “sluggish”, reinforcing how important first-time buyers are to the market.
“Some multiple offers are breaking out on well-priced properties.” I’ll have a post in the near future about dealing with multiple offers and what you need to know to protect yourself.
“The top end of the market is starting to come alive, a fact best underscored by the recent sale of two $10 million-plus properties.” Technically, 1 of those was in Priddis. And let’s take a look at the sale of million-plus SFH & Condos sold YTD (Jan 1 – Sept 23):
- 2009: 245 sales
- 2008: 320 sales
- 2007: 385 sales
So unless your definition of “high-end” are only properties over $10 million, sales have been dropping the past few years.
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Shouldn’t reports be objective and not just advertisements that are picked up by MSM? You would think we as an industry would have learned our lesson. Take a peak at this statement from Bruce Benham, Chief Operating Officer of RE/MAX International, in the May 2005 issue of the Real Estate Professional, regarding the US Market:
We’re all aware of the dramatic headlines proclaiming the inevitable “housing bubble” that will reportedly cripple the real estate industry, and the entire U.S. economy, when it eventually bursts. But you know better. And I hope your clients do too.
The alleged bubble, rooted in fears created during the dot-com aftermath of the early 2000s, is a media-manufactured myth. It’s based on the projected collapse of a national housing market that simply doesn’t exist.
You can read the rest here.
You can view the daily Calgary MLS statistics on my website here for an indepth, transparent look at the market so you come to your own conclusions as to when is a good time to buy or sell. When that time comes, feel free to contact me. 
14 responses so far ↓
Jimmy // September 25, 2009 at 10:10 am
It’s great that you’re poking all the right holes in this predictable real estate puff piece Mike. Articles like this give all realtors a bad name.
I think though that too often we see blogs and internet forums picking apart the stats that support one side while ignoring obvious holes in the other side’s arguments.
If I had a nickel for every post I’ve seen recently claiming unemployment to be a leading indicator or that recent home inventories and sale prices are somehow “imaginary” or being manipulated by a conspiracy I could probably buy a house in Vancouver.
Stats are routinely misinterpreted and selectively picked out and that’s mainly a result of poorly educated media editors and reporters. On the internet blog side, it usually has to do with a persons own financial situation and agenda.
The fact remains that Calgary house prices went up (a lot), declined and now are coming up again. At the same time our population grew faster than almost anywhere in the country and wages grew and continue to grow at a rapid rate.
You can argue all you want that prices should “be flat or follow a straight line” but legitimate market forces (supply and demand) played a large role in the runup this decade and they will continue to play a role in the future. These forces do not always follow a straight line.
“You get the market that you get, not the one you think should be there”
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Mike Fotiou says: I believe that the market will eventually trend toward equilibrium if it has deviated in the short-term. Then again, we’ve seen some serious government intervention that has changed the playing field.
C // September 25, 2009 at 1:20 pm
I just wanted to say I appreciate this post, as well as all the other reasonable and transparent posts & statistics you’ve published in the last year. If I ever decide to start searching for a house, at least I know who to go to for a realtor.
Gary // September 25, 2009 at 5:34 pm
Jimmy
The fact remains that Calgary house prices went up (a lot), declined and now are coming up again.
Of course for you my friend !!!! SFH on market
3693 (Realty executive APEX search engine) and 1839 SFH for price 460K +… It’s a 50% all market. You will tell me the price will rise ? Hm….I don’t think so.. And situation around Calgary with acreages and land in deep hole.On those kind properties prices drop 400K-700K !!!!
Gary // September 25, 2009 at 5:40 pm
I can say ONLY interest rate drop to 0% prevent dramatic house decline in Calgary. But even BoC governon says we will return to normal interest rates. What is means”normal”
with our deficit we will see !!!
Jones // September 26, 2009 at 11:14 am
Mike F,
I read the report and could not help but agree with you on all the points you made.
I get the impression that people are still greedy and not so fearful. When I met with some friends who recently bought a house they said “we got a good deal on this place, probably made $20 or $30k on it already.”
I am going to continue to sit on the sidelines with our massive downpayment until the market returns to normalcy and the economy shows signs of stability, not just tea leaves of recovery.
Can you also update your $1M plus stats?
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Mike Fotiou says: Updated.
worldclass // September 26, 2009 at 10:56 pm
What a lot of readers like Gary here seem to forget is that they are holding onto history. Sure, history repeats itself… but then again, never has there been a time in history where the monetary base of the RESERVE currency of the world has been debased so abhorrently. This is a whole new beast we have here. The world has a decision to make… leave the USD or prop it up. So far, they’ve been propping it up by debasing along with the USA.
Sweden has -0.25% rate for goodness sake… they are charging people for saving. This is the crazy world we live in. Debt levels can remain constant you say? Not when you get to pay them back in increasingly worthless currency. Then it becomes easier and easier to pay back debt.
Gary // September 27, 2009 at 9:10 am
Worldclass
I even don’t want comment you bla,bla,bla !!!!
I now you opinion.
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Mike Fotiou says: WorldClass respectfully gave his opinion, please return the courtesy.
worldclass // September 27, 2009 at 9:13 pm
Gary, you sound a lot like “Mike” on Bob’s blog. You have such broken English that it destroys your credibility when you try to insult people without anything to actually back your comments up.
Fail.
Gary // September 27, 2009 at 10:09 pm
worldclass:
I apologize realtor.
Mike // September 28, 2009 at 3:03 am
Worldclass…
“Gary, you sound a lot like “Mike” on Bob’s blog.:
FYI on those on this blog, I’m not the “mike” he is referring to.
Worldclass — So what you are thinking is the USD will go down in value it will bring a commodity based CDN down as well, thus increasing house prices?
Natually, you are assuming interest rates will raise hard and fast to combat inflation. Thus causing anyone holding debt to be affected twice as bad (raising interest rates and growing unemployment)
Jimmy – “If I had a nickel for every post I’ve seen recently claiming unemployment to be a leading indicator or that recent home inventories and sale prices are somehow “imaginary” or being manipulated by a conspiracy”
Shadow inventory has already been proven, google it.
Yes, unemployment IS a leading indicator when it’s raising. Raising unemployment shows what is to come as people start to enter the “non-work force”. It is an accepted fact that unemployed people do not spend, buy cars, houses, get loans or live like they used to when they had jobs.
Mike
worldclass // September 28, 2009 at 5:24 pm
Gary,
Isn’t it funny that anyone who doesn’t want prices to crash to 1 dollar a home is a “realtor”? You are the type of person who, unfortunately, destroys the image of the TRUE real-estate bears. I was a real-estate bear for the last 3 years… where were you?
Mike,
I think that the USD will collapse…and the USA will monetize some of their debt. That means massive QE, printing money, etc. Rates will rise for the BONDS, which will raise FIXED MORTGAGES. But… guess what, the variable rates will be very low, because Ben Bernanke will keep them there. Canada will follow…the Bank of Canada rate will remain LOW for the next year or maybe even 2 years.
“Other things being equal, a persistently strong Canadian dollar would reduce real growth and delay the return of inflation to target.”
Carney reiterated that the central bank will keep its benchmark lending rate at a record 0.25 percent until June 2010 unless the inflation outlook changes materially. He also repeated the central bank retains “considerable flexibility” to conduct monetary policy, even with the policy rate as low as it can be.
Basically our Loonie is flying too high, and if they raise rates in Ottawa our Loon will be on the moon. So again, if you are looking for rates to go up to 10% and have homes go into foreclosure… that’s NOT likely to happen.
To combat inflation they would have to raise rates fast….but it will be too late after the world has binged on the money printed. The rates will go up HARD, but actual goods and services will go up HARDER….people will demand more pay, and get it. With the devalued money they will pay off debts faster with cheaper “dollars”. Look at the Asian currency crisis. Rates rose in some countries to 32% or 65% in the case of the Philippines!!! Did this prevent the massive devaluation (and hence inflation) of the currency? NO.
worldclass // September 28, 2009 at 5:52 pm
Bloomberg article Sept 25 2009
Carney said the central bank still has tools to boost the economy if annual consumer prices, which the central bank predicts will fall 0.7 percent this quarter, look as if they won’t return to target. The central bank has an inflation target over the medium term, and Carney said it is “absolutely essential” the bank meet its inflation goals.
“If we have to provide additional stimulus and we think that this situation is persistent, we are going to do our job,” Carney said in an interview with anchor Peter Mansbridge of the CBC. With the policy rate as low as it can go, Carney said the bank opted to give a conditional commitment about the interest rate path, and could still resort to “more unconventional policies, quantitative easing,” if needed.
Gary // September 28, 2009 at 6:56 pm
worldclass:
I was a real-estate bear for the last 3 years… where were you?
Sorry bear…. You need time to hybernation,you tired…
Cory // September 28, 2009 at 8:34 pm
‘When I met with some friends who recently bought a house they said “we got a good deal on this place, probably made $20 or $30k on it already.”‘
Oh boy. If I hear this one more time I will snap. They have “made” nothing. They are living in it. Unless they SELL it, and realize the gain, the “paper” wealth means absolutely ZIIIIIPPPPPP!! Mortgage rates are set in bond markets and with competition for capital from many providers, mortgage rates WILL rise sooner than people think. That is the ONLY thing keeping real estate in this huge buble we are in and the govt will not let burst. Mike is right, such a huge amount of gov’t intervention is only harming the future for real estate even more.
Calgary real estate is still overpriced. I run the numbers in mortgage calculators all the time. I make well over 6 figure income, I have substantial savings and zero debt and I cannot afford to buy a house at these levels. I don’t know how debt slaves do it. I really don’t. One serious illness, job loss, or other life altering event and it’s over for a debtor.
The govt cannot keep it propped up forever. The question is when will it tank, not if.