Comments on: Inventory Balancing Act http://calgaryrealestatereview.com/2009/11/10/inventory-balancing-act/ Calgary Real Estate Information and Discussion. Mike Fotiou, First Place Realty. Serving Calgary, Airdrie & Chestermere. Thu, 18 Mar 2010 15:47:18 +0000 http://wordpress.com/ hourly 1 By: NumbersGuy http://calgaryrealestatereview.com/2009/11/10/inventory-balancing-act/#comment-1051 NumbersGuy Thu, 12 Nov 2009 21:32:22 +0000 http://calgaryrealestatereview.com/?p=2491#comment-1051 I have heard that developers were caught a little by surprise at the level of sales this summer/ fall, and have little in the way of new subdivisions with lots for sale. At the current pace, inventory may continue to decline over the winter as developers will wait for warmer weather to push in new roads and services this spring to bring newe lots online. This in turn may lead higher prices in the spring until developers can catch up. I have heard that developers were caught a little by surprise at the level of sales this summer/ fall, and have little in the way of new subdivisions with lots for sale. At the current pace, inventory may continue to decline over the winter as developers will wait for warmer weather to push in new roads and services this spring to bring newe lots online. This in turn may lead higher prices in the spring until developers can catch up.

]]> By: Realesto http://calgaryrealestatereview.com/2009/11/10/inventory-balancing-act/#comment-1048 Realesto Wed, 11 Nov 2009 04:30:02 +0000 http://calgaryrealestatereview.com/?p=2491#comment-1048 Great post Mike, I always enjoy reading your take on the market as well as the summary of the statistics provided by the boards. Keep up the great work. Great post Mike, I always enjoy reading your take on the market as well as the summary of the statistics provided by the boards. Keep up the great work.

]]> By: Jimmy http://calgaryrealestatereview.com/2009/11/10/inventory-balancing-act/#comment-1047 Jimmy Wed, 11 Nov 2009 00:31:42 +0000 http://calgaryrealestatereview.com/?p=2491#comment-1047 This is a wild card that might throw SFH prices even further from fundamentals next year. If builders hold out, wondering about shadow inventory or another downturn, they stand a good chance of underbuilding and causing a temporary surge in prices. It's really the opposite of 2008, when unemployment was low, salaries were rising but overbuilding pulled down prices throughout the year. It seems so long ago now... Notice I say temporary. If we sit at inventory less than 3000 for too long, especially into next spring I have no doubt prices will get "too high" and correct eventually. It's too bad for prospective buyers that interest rates will almost certainly be higher by then. The buying opportunities this spring were pretty good in retrospect. Mike I'm sceptical that one can call this a balanced market based on the ab rates. I think the absorption numbers that determine a buyers vs sellers condition need to be revised for other factors. In a balanced market, prices shouldn't be peaking in November. And about the SFH-Condo differential, I think that's really a measure of the lack of inner city land to build homes on and the cost of building a new home relative to a condo. This is a more recent development in Calgary compared to most cities due to our rapid growth. Another Calgary problem is the poor quality of transit options in outlying neighbourhoods, making "outer city" land less feasible. Condo capacity can always be increased and is essentially completely elastic. SFH capacity is space-limited. Just look at what Hong Kong does when they need more apartment or office real estate. It's easy to see that this dynamic is only going to make the Calgary SFH-condo differential increase going forward unless we invent hover-cars and live like the Jetsons. This is a wild card that might throw SFH prices even further from fundamentals next year. If builders hold out, wondering about shadow inventory or another downturn, they stand a good chance of underbuilding and causing a temporary surge in prices. It’s really the opposite of 2008, when unemployment was low, salaries were rising but overbuilding pulled down prices throughout the year. It seems so long ago now…

Notice I say temporary. If we sit at inventory less than 3000 for too long, especially into next spring I have no doubt prices will get “too high” and correct eventually. It’s too bad for prospective buyers that interest rates will almost certainly be higher by then. The buying opportunities this spring were pretty good in retrospect.

Mike I’m sceptical that one can call this a balanced market based on the ab rates. I think the absorption numbers that determine a buyers vs sellers condition need to be revised for other factors. In a balanced market, prices shouldn’t be peaking in November.

And about the SFH-Condo differential, I think that’s really a measure of the lack of inner city land to build homes on and the cost of building a new home relative to a condo. This is a more recent development in Calgary compared to most cities due to our rapid growth. Another Calgary problem is the poor quality of transit options in outlying neighbourhoods, making “outer city” land less feasible.

Condo capacity can always be increased and is essentially completely elastic. SFH capacity is space-limited. Just look at what Hong Kong does when they need more apartment or office real estate.

It’s easy to see that this dynamic is only going to make the Calgary SFH-condo differential increase going forward unless we invent hover-cars and live like the Jetsons.

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