September 2009 Statistics
Single Family Homes (Metro-Calgary)
- Average price was $459,085, a 3% increase from last September ($444,048) and a 1% increase from last month ($454,130)
- Median price was $399,900, a 1% increase from last September ($395,000) and down $100 from last month ($400,000)
Condo (Metro-Calgary)
- Average price was $290,253 – up slightly from last September ($287,426) and a 2% increase from last month ($283,330)
- Median price was $265,000 – no change from last September and up 2% from last month ($260,000)
You can read the full CREB report here
Source: CREB September 2009 Stat Package
September Comparison Summary
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Updated: October 4, 2009
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Mike F,
You forgot to mention about the sales being down again this month (4th month in a row) for both SFH and condos.
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Mike Fotiou says: Sales are down again this month (3rd month in a row) for both SFH and condos.
In response to TT’s comment on prior post (July Home price index) — TT you raised the issue of old school prudency in buying into the Calgary RE market at current levels, as a first time home buyer, given unsustainably low interest rates.
It’s fine to be ‘long’during a secular bull market, such as we saw in the economy and housing from 2004-2007 — as long as you’re willing to ‘sell when it gets too good’ to quote Buffet.. or- ‘buy high and sell higher’ in stock market lingo.
What we have right now isn’t a bull market in anything, but rather a confused market. During this phase the markets have a high degree of uncertainty as to where it’s going, along with high price volatility. In this phase the market tends to ‘remain irrational longer than you can remain solvent’. For example, fundamentals say house prices should continue to drop, but the only way it can do so is by going up first (though not making a new high) until the supply of buyers at a 2% variable interest rate is exhausted. At that point the market becomes ‘overbought’ (run out of buyers at that price level).
In this phase, there is a lot of value in leaving your cash in your jeans and not making huge commitments.
In RE it’s a lot easier to deal with the ‘irrationality’/volatility of prices than in say the stock market because it moves way slower. In fact slow enough that you can make measured judgements based on the stats here without ever missing any boats in a meaningful way. Though one has to approach this with the knowledge that in bear markets RE prices only drop with a LAG to fudamentals (sales/inventory). This was proved in the past couple of years in Calgary RE, and is even more true now. And that lag is measured in seasons, not weeks.
At the moment, the number of pending sales, which Mike F reports on a daily basis, is the most leading indicator (because it shows to what extent the impact of 2% interest rates on demand is waning), inventory is a middle indicator, and asking prices are the most lagging indicator of the state of the market. So don’t just look at asking prices and conclude that it can’t go down from here. Rather, can that average family house near the edge of town go up from here in any meaningful way over the next few years? I think common sense and the concept of half a million $ comes in here. How could it go back to 300k?- we just have to run out of buyers willing to pay $400k.. just as unthinkable as it was a couple years ago that prices couldn’t go up infinitely, is it now unthinkable that it can go back to 300k?
Pending sales peaked at 550 in June and are now 324 I see for SFH. This is the total number of ‘conditional solds’. Pending sales become sales after a few weeks and then impact inventory numbers. It’s my belief that at the moment demand (sales) is the main driver of the market, and inventory is responding to sales, as if sales look to be stalling out meaningfully this will trigger more new listings by savvy speculators looking to take profits on say something they bought in 2005.
Mike- is it possible to add pending sales to the historical graphs that you update? You already have great long histories on everything else…
In addition TT, suggest check out the link on LHS of page on Bob Truman’s blog (Mike has a link) for “Absorption rate by price ranges”… very useful info to see the vast difference between the state of bottom and top of the market in terms of where the buyers and sellers market is. Again reinforcing the notion that it is mainly first time home buyers and interest rates that are the driver currently.
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Mike Fotiou says: I’ve added the Pending Statistic chart.
“Mike Fotiou says: Sales are down again this month (3rd month in a row) for both SFH and condos.”
I had to check that as I remember making a remark last month about it being down 3 months in a row… But according to your stats (and I do trust your stats):
SFH:
2009 September 1257
.
2009 August 1277
.
2009 July 1585
.
2009 June 1837
.
Condos follow the same 4 month sales drop pattern as well.
That is 4 months in a row right?
Mike
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Mike Fotiou says: June sales didn’t decline from May.
If I was to analyse the Calgary market I would say:
What we have here is the slowing down of “pent-up demand” and less people who cannot afford to purchase at historically low interest rates. To spur further demand either interest rates will have to drop further (maybe a 5 year at 3% fixed or Var at prime – .5 to 1%) or prices correct down even further.
The low sales volume we are experiencing leads to more dramaticly fluxuating average price numbers as very expensive ($1m+) homes are sold in a low sale environment.
If sales drop to under 1000 a month I would say the CREB does not have sufficient data to extrapulate the market with any precise accuracy.
As for inventory levels, they must rise even if sales do not keep up.
Mike
Feb 28: $300-$400k SFH reach balanced market
Mar 31: Sub $300k SFH reaches balanced market
Apr 30: $400k-$500k SFH reaches balanced market
May 31: $300-400k SFH reaches sellers market
Jun 30: $500-$600k SFH and $600k-$700k SFH reaches balanced market. $400-k-$500k reaches sellers market.
Jul 31: sub $300k SFH reaches sellers market
Sep 30: $700k-$800k reaches balanced market
The cheap money has almost worked it’s way up to the top of the food chain.
Mike:
you are saying that inventory must rise, yet it has declined every month since May and always falls in the winter months. You base this on the declining sales volume (which also happens every year) but completely ignore declining listings.
I don’t think inventory will rise this winter (I think that would be an historical first Mike F?). I think inventory will rise in the spring like it does every year…
If you are wrong again next month would you change your mind about your conclusion or delay it until the month after that? You are entering permabear territory here!
Why would inventory rise when the market is now balanced for almost every price range (and still a sellers market for low end homes) as CM has pointed out?
I suppose now that temperatures are dropping we can look forward to absolute zero sometime next fall or so…
Thanks MH for the insight, your opinion is appreciated.
Wow Jimmy, lots of hate and anger there in your reply! Check it at the door please.
Forcasts are just that, forcasts and no, unlike the CREB, I do not “alter” my forcasts to “look right” after I call them.
I agree with you in “normal times” (which we are NOT in) you would be 100% right. Where the inventory has gone? I don’t know, I’m only guessing. We can only go on facts. And the big fact we can see is low sales numbers, so we DO know that it wasn’t sales that killed the inventory.
Where the inventory is? Did it become rentals (did the vacancy rate increase?), Did it become forclosures? (did the forclosure rate increase?), it is listed now as FSBO (did welist/comfree inventory go up?).
Jimmy, rather than spew insults, look into the questions above and help us figure out where it went.
Mike
All this chatter is just small noise compared to the macro-view of things that are coming. This is why homes in Calgary will now likely rise to levels that may rival 2007 prices:
http://www.marketwatch.com/story/gold-hits-record-high-as-dollar-slumps-2009-10-06
http://www.marketwatch.com/story/potential-end-of-dollar-based-oil-deals-lifts-gold-2009-10-06
You thought you didn’t have inflationary pressures yet? It may come faster than we all think. Remember, tangible assets = good. Oil, property, gold, etc. Cash = bad, unless you are in a foreign currency that is LESS connected to the strength of the greenback.
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Mike Fotiou says: If inflationary pressures were mounting, wouldn’t the BoC be increasing rates?
With all the focus on home ownership, just wondering if anyone out there has noticed anything interesting going on in the rental market?
There are 2 database queries from RentFaster.ca that I like to watch….
[1] Inner city rental properties that are $1500 or less
http://tinyurl.com/yao24zl
In the spring of 2009 there were usually about 7 or 8 pages worth. Right now it’s at 13, and I’ve noticed that it’s growing at a really quick pace lately.
[2] Every SFH for rent in Calgary
http://tinyurl.com/dccdb4
Currently at it’s all time peak since I’ve been watching, listings have grown by about 8% this month.
Maybe this is normal seasonal activity? One thing I remember being surprised at is that listings seemed to increase a lot in August/September, which is a time period when I would have thought there would have been a noticeable decrease (university, getting settled for school, etc).
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Mike Fotiou says: I’ve asked RentFaster.com if they keep track of their inventory statistics. I’ll be sure to post the results if they do.
I could see a large chunk of the missing inventory showing up in Calgary’s rental pool. I know of some people I work with who built without selling their other house so eventually rented the other house.
I’m also with Mike. My economics profs always said, “Economists can anticipate what will happen, just not when”. Only time will tell what will happen, ceteris paribus. This low inventory we are experiencing, down ~50% vs 2008, will put upward pressure on prices so long as peoples, being buyers, expectations are that the economy will normalize shortly and housing prices will continue to increase.
I, on the other hand, just don’t see any “normalcy” returning to the market any time in the next 2 years.
Just noticed the July bankruptcy statistics were published, you can see them in the link below, here is a summary of Alberta.
Consumer Bankruptcies
July 09: 872
June 09: 1,021
July 08: 457
Although m-o-m consumer bankruptcies are down they are still the 3rd highest in the 12-month period.
http://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br02265.html#tbl2
Followup to comments on my comment above: The missing inventory didn’t sell – what it represents in “overhead resistance”, ie. if price does rise, supply increases (remember the supply curve in Econ 101?) ..because speculators will follow Buffet’s advice and sell when it gets too good – as everyone has now realized that house prices aren’t infinite.
There are several linkages that drive inventory:
- lower sales mean that inventory builds up faster
- right now, if sales drop meaningfully inventory will go up from speculators who decide to get out if the concept of a spring 2010 rally were thrown into question (nb, the spring rally of 2008 that never was)…
- higher prices automatically bring more supply as mentioned above
These are all potential mechanisms by which the inventory that disappeared could reappear as needed to keep house prices from going beyond the amount of affordability that we’ve gotten back (which isn’t much) mainly via lower interest rates.
As Jones mentioned, supply and demand in housing are largely based on expectations — as a result there tends to be a lag between changes in fundamentals such as income or migration and the impact on house prices, as it takes a long time for expectations to change. Expectations could be quicker to change though now that people have had experience of a housing bubble where prices were cut in half in the US, and a miniature version of this in Calgary.
The US dollar definitely could weaken, but the main impact of it could be somewhat higher interest rates (because who wants to lend the US money when your treasury bond is just going to depreciate), rather than higher oil. Any increase in interest rates from current levels will have a devastating effect on housing demand at this point, as well as putting the stock market back into a bear market.
Aside: Oil doesn’t want to go above $75 due to fundamentals, regardless of what happens with the US$. That’s why the ponzi scheme known as Wall St. is now promoting gold as the next big thing because they need to keep drawing more money in just like any ponzi scheme (ultimately so they can get out). Btw, if you look at how much the US$ index actually moves it’s fractions of a percent – not say the 7% that the entire US banking sector dropped end of last week and then gained back on Monday and Tuesday as the Wall St. robot traders had fun with each other. Just trying to point out that what we see currently in the financial system doesn’t necessarily bear any resemblance to hard assets or any other reality but rather its more akin to a video game. Buyer beware!
Why is it that every explanation of financial markets and the economy leads to the conclusion that investors (including in housing) are going to be getting very very rich very soon, while everyone knows that none of the problems have been solved.
MH, great points.
Of course when price rises supply rises, I still remember those ECON101 graphs. Higher interest rates will also drive an increase in supply due to speculators and/or over-leveraged owners trying to cut their losses and/or dump negative equity mortgages.
As for expectations of future markets, I don’t think we have seen the worst yet. We’ve seen Natural Gas (Henry Hub) rally to $4.931 today (I think AECO-C is around $4.68), however that is more of a seasonal fluctuation and is still historically quite low. Oil & Gas companies are releasing their Q3 earnings near the end of the month, Nexen is scheduled for 10/26, so it should be interesting to see how their EPS will be relative to analyst expectations. Given the price of Oil & Gas I would expect their earnings will continue to be down ~60% vs 2008.
Mike:
I obviously can’t prove that I’m not angry and hateful so I won’t address that. I was trying to be funny and pointing out that seasonal effects happen every year.
Sales were actually high earlier this year. July was close to a record high. Building was very low last year and earlier this year. When many homes are sold and few built, inventory goes down. Many of those sellers from 2007/8 might still be living in their homes and just pulled them off the market.
Calgary’s population is still increasing rapidly and the new people are not all homeless.
I actually agree that more homes are being held off the market for rent or speculation etc. I don’t know how many nor does anyone (noone ever will). It does seem arbitrary to rely on a statistic that noone can measure to back up your argument since you can never be shown to be wrong.
You should be able to guess from the low vacant listing rates and percentage of total sales (825 vs 1489 in 2008) that they are probably not that high.
MH you’re right that these “held back” homes will bleed back onto the market with time but that should already be happening. If interest rates are kept low for a long time, the effect on the RE market will be less significant. This is probably what the central bank and government wants to do, with the dollar being so high now.
Mike F: foreclosures were actually at historical normal levels when you stopped reporting them earlier this year – is that still the case? I was surprised that they were actually normal even this summer.
Are welist sales included in the stats you report?
““There’s talk of inflation re-emerging and continuing weakness in the U.S. dollar, which suggest the gold price may well continue to climb higher,” said William Seddon, who helps manage about $300 million at White Funds Management in Sydney.”
http://www.bloomberg.com/apps/news?pid=20601116&sid=aIwa1wpL2NVE
If you look at historical gold prices vs. historical home prices in Calgary, you’ll see that roughly you can buy the same amount of gold today with the median price of a home. If anyone wants to make a chart that would be great to visualize this.