The cost of new housing in Canada continued to increase in October as the NHPI rose 0.3%, following a 0.5% increase in September. The monthly increases have continued since July but are still down 2.1% from last October.
The cities with the largest year-over-year decreases are all in western Canada.
- Calgary: -5.6%
- Edmonton: -10.1%
- Vancouver: -4.7%
- Victoria: -9.2%
Source: Statistics Canada
The largest increases to new homes in Canada were recorded in St. John’s (+6.8%) and Quebec (+7.5%)
Source: Statistics Canada
Between September & October 2009, the NHPI for Calgary was on par with the Canadian increase of 0.3%.
Mike F, what happened to the traffic that you used to have on your blog? I have been away so this is my first post in a while.
In my opinion: disapointing numbers for NHPI, however this is much like looking at unemployment numbers since they are 3months old. However, NHPI is still important because of its impact on real GDP and nominal growth in the NHPI is going to hinder the growth needed to keep us out of recession.
Western Canada continues to get beaten down as oil drops below $70 USD and AECO-D NatGas is hovering around $5CAD (mostly because of seasonal demand and shut in production), the Canadian dollar is maintaining ~0.94USD and our government is running record deficits to keep the economy afloat.
Housing prices are back to where they were before the shock of the financial crisis last year, however prices were on the decline from July 2007 until as the market was unable to sustain itself at previous levels.
Jones, traffic is still there – just no commenting.
CM, here’s the latest on the rental market in Calgary according to CMHC:
The apartment vacancy rate in the Calgary region rose to 5.3% in October, up from 2.1% the previous year. That’s the highest level since 1993.
It was also one of the highest rates in the country, and nearly double the national rate of 2.8%
Average rents for a two-bedroom unit in Calgary fell to $1.099, down from $1,148 the previous year. That was still the second highest in the country, behind only Vancouver (Calgary Herald)
Thanks for the info Mike, that’s pretty much exactly what I’ve got recorded for 2 bedroom apartments in Calgary for October from the RentFaster data. Except I’m using the median.
It seems like 2 bedroom apartments, after falling $50 in August, and then another $50 in October, pretty much stayed steady after that up until this point.
SFH on the other hand, dropped $50 in August, and then stayed exactly the same until December, when they dropped again.
Here’s what I have recorded for 2 bedroom apartments (month – median rental price):
07 – $1200
08 – $1150
09 – $1150
10 – $1100
11 – $1099
12 – $1099
Advanced search query on RentFaster for 2 bedroom apartments in Calgary:
http://tinyurl.com/yfuedub
As of today, it looks like it’s back up $1 to $1100
Jones
It’s mostly bears that post on these sites I’ve noticed. I think some are looking back at the predictions made last year on various sites and probably frustrated. Go to Truman’s site to see what many thought would happen this year. Remember Mike (not Mike F) who thought that the market would crash this winter because sales were dropping?
The same conversations pop up every month here: so and so is laying off, rents are low, nat gas is low etcetera so it’s getting kind of boring.
December is also a dead month in the real estate market. However I do think it’s important that this may be the most expensive December ever in the Calgary real estate. I’m not sure what that means for next summer.
CM maybe you could throw your hat in the ring with a prediction for house prices on the Truman site. You seem to have your finger on the pulse of the rental market.
Did rents go up last year before house prices went up? Are they a leading indicator? I guess we’ll see later this year
Also Jones:
What does NHPI have to do with GDP? I thought that was just the cost of a new house. GDP went up in the US and Canada a while ago so it probably isn’t that closely linked.
CM asked on Garth’s site, thought I’d post it here to help others as well:
#55 CM “if you’ve seen this marked increase in listings in any other community?”
I follow the true $1m+ communities,
Yes, quite a few like:
Scarboro 10-14 listings, usually 2-4. 500% increase
Eagle Ridge has 4 listings now, they usually only have 1 or 0. A 400% increase.
Bel-aire 4, usually 1 or 2, a 200% increase.
River Park/Elbow Park (south side of river), they have 6, usually 2, 300% increase.
Roxboro, usually 2-3, they have 6. 200% increase.
Mount Royal has 10. Usually 8.
Lakeview Village, 6, usually 3.
Pumphill, 9, usually 4.
Maybe the $1m+ prestige communities are not selling and starters are? Inventory here has never been so high.
Mike F can look into these stats and verify if he likes, I’ve been following these communities closely (almost daily) for 5 years now.
Mike
Actually CoffeeTims “Remember Mike (not Mike F) who thought that the market would crash this winter because sales were dropping?”
I WAS right, the market did drop for $1m+ homes. I’ve noticed a $250k drop per $1m asking price over the last 2 years. Unless you don’t consider a 25% haircut a drop?
BT can accuse all he likes, but in the end, it isn’t very professional.
Mike
Coffee: Yeah, you’re right, there hasn’t been much new to discuss in a while. Unless prices dramatically increase or decrease we’ll probably all just re-hash the same old topics over and over.
I believe in the approach of people like William Berstein (4 Pillars of Investing, Intelligent Asset Allocator) and Malkiel (Random Walk Down Wall Street) who show that markets cannot be predicted, by anyone, and that asset allocation is a far better predictor of one’s success in markets.
Which begs the question, am I not trying to predict the market by shorting Calgary real estate? That could definitely be argued, but at the same time the keys to success with proper asset allocation are 1) sticking to the asset allocation long term and 2) rebalancing your portfolio occasionally (but not too often), forcing you to buy low and sell high.
For me, the fundamentals just went way out the window, and while I don’t think people should necessarily treat their home as an ‘asset class’, for me, it was just time for a rebalancing.
So at price would I buy again? I still maintain that a proper valuation of a home should be no more than 185X-190X rent, which would be $285k-$290k for a SFH based on today’s rent prices.
Also, based on long term trend lines of real estate appreciation for Calgary (5.2%/year), this is approximately the range we would be approaching in 2010.
Anything below that and I think we would be ‘undervalued’. History shows that with most bubbles, when they pop, prices tend to go beyond their long term trendlines and into undervalued territory.
So I really don’t give much credence to predictions. Show me the world’s greatest fund manager who beat the market by 20% this year and I’ll show you the same one that’s just as likely to underperform it by 20% next year.
But $280-$300k is what I feel Calgary homes are worth at this point in history. The market feels differently.
Mike: Thanks for the info, I wasn’t aware you were only referring to $1M+ properties.
Not sure if you’ve seen Bob’s absorption rate by price range chart or not ?
The absorption rate for properties listed 800k or higher:
[Nov 2009]
6.2
6.9
6.6
8.6
8.1
8.7
5.5
8.1
11.1
13.1
15.6
23.1
[Feb 2009]
It’s about the only market range that hasn’t moved into ‘balanced’ territory. (Even $700-$800k was at 3.5)
Although I would imagine statistically the highest price range would nearly always have the highest absorption rate.
Erm, Mike (not Mike F)
You never mentioned that you were only talking about 1 million dollar properties. If all you do is look at the list prices of those properties over time, you would never think that prices increase.
Listing prices do not reflect value. I once saw a list price drop 33% in 2006. Doesn’t mean the value of houses dropped 33% that year. If I list a house that should be worth 500,000 at 1 million and sell at 700,000 it doesn’t mean the market went down 30%.
Ab rate is not usually “balanced” (between 2-3) for upper end properties because they almost always take longer to sell (am I right Mike F?)
You wouldn’t happen to be the troll “not Mike F” would you?
If you are I guess you got me
CoffeeTims – Troll? Ya, that would be about the furtherest from me as you could get. Nice try there buddy.
CoffeeTims “You never mentioned that you were only talking about 1 million dollar properties. Listing prices do not reflect value”
Maybe you should ask rather than attack and assume?
“Listing prices do not reflect value”
Right… Well then what you are saying is Realtors do not know how to competitively evaluate and price property and their neighbourhood comps are worthless.
If a large group of houses do not sell at “fair market value” and they have to drop the price, then the market fell. Do you just believe in “list prices” when the numbers go up?
Mike
CM – Always refreshing to read your posts, good insight, information and helpful.
“proper valuation of a home should be no more than 185X-190X rent, which would be $285k-$290k for a SFH based on today’s rent prices”
Interesting, I’ll try to remember that. I use the 25 year, 5% mortgage rule vs rent. Like your analysis it comes out right now it’s cheaper to rent.
I don’t go to Bob’s site or use his information as I find it unreliable and too bull biased.
Mike
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Mike Fotiou says: Bob’s site is very reliable and was the first to provide the public with daily statistics for Calgary.
Ten homes over a million $ have sold so far in December. The problem with many of these types of homes is that often there are no suitable comparables to help establish a listing price. Other agents accept listings even if the price is obviously overinflated; the price is eventually reduced to where it is finally absorbed by the market.
———
1. Cougar Ridge
Sold for $1M (Construction wasn’t completed)
Originally listed in Feb ’09 for $2.28M
No previous sold price on MLS (New)
2. Lower Mount Royal
Sold for $1.16M
Originally listed in Nov ’09 for $1,249,900 (20 DOM)
No previous sold price on MLS
3. Signal Hill
Sold for $1,165,685
Originally listed in Dec’09 for $1.2M (11 DOM)
No previous sold price on MLS
4. Elbow Park
Sold for $1.18M
Originally listed in Nov ’09 for $1.199M (20 DOM)
No previous sold price on MLS
5. West Hillhurst
Sold for $1.2M
Originally listed in Sept 09 for $1.325M
Last sold on MLS in ’08 for $1.25M
6. Elbow Park
Sold for $1.25M
Originally listed in July 09 for $1.495M
Last sold on MLS in ’07 for $1.45M
7. Sundance
Sold for $1.4M
Originally listed in July 09 for $1,799,999
Last sold on MLS in ’06 for $1.25M
8. Springbank Hill
Sold for $1.48M
Originally listed in Oct ’08 for $2.195M
No previous sold price on MLS
9. Elboya
Sold for $1.525M
Originally listed in Mar ’08 for $2.19M
10. Briar Hill
Sold for $1.725M
Originally listed in Mar ’09 for $2.25M
Last sold on MLS in ’07 for $875,000 (New home was later built on land)
—
Going to October/November million dollar sales, there are some that posted gains – obviously depending on when the home was originally bought. (I filtered out infills)
Parkhill
Sold for $1.075M
Last sold for $670k in ’04
University Heights
Sold for $1.075M
Last sold for $419k in ’00
Parkland
Sold for $1.170M
Last sold for $1.1M in ’07
Bowness
Sold for $1.175M
Last sold for $675k in ’02
Varsity Estates
Sold for $1,357,500
Last sold for $825k in ’07
Mount Royal
Sold for $1.4M
Last sold for $709k in ’05
Elbow Park
Sold for $1,749,900
Last sold for $999k in ’03
Rosedale
Sold for $2.28M
Last sold for $1.64M in ’06
–
…while others posted losses
Canyon Meadows
Sold for $1,188,000
Last sold for $1.5M in ’06
Mount Royal
Sold for $1.53M
Last sold for $1.65M in ’06
Roxboro
Sold for $2.24M
Last sold for $2.3M in ’06
Mount Royal
Sold for $2.3M
Last sold for $2.75M in ’07
Mount Royal
Sold for $2.6M
Last sold for $3.05M in ’07
—
The majority didn’t have previous sales on MLS
CoffeeTims: Your comment:
“What does NHPI have to do with GDP? I thought that was just the cost of a new house. GDP went up in the US and Canada a while ago so it probably isn’t that closely linked.”
You would recall from ECON203 that the price of new homes is included in the investment function of aggregate expenditure when calculating real GDP. Since the NHPI is an index on the price of new homes it allows us to see how new home sales contribute to real GDP growth. So to answer your question, they are very much related. Also considering that interest rates (mortgage rates) are expected to go up in 2010 you will also recall that the investment function is the component of real GDP affected the most by fluctuations in interest rates.
According to StatsCan Canada did emerge from recession in Q3, however at a much lower growth rate than expected (<1% y-o-y real GDP growth). That does not mean however that the regions that make up Canada have all emerged from recession, or that we are completely free and clear of recession. I'm not saying that in Alberta we are still in recession or that we entered into recession at the same time as Canada as a whole, just pointing out that moving into recovery as a whole can still mean the parts are lagging and the small growth could still mean that we dip back into recession if not nationally then possibly regionally.
I cannot emphasize enough how important it is to get all the Condo Documents reviewed before purchasing a condo. If the property is in foreclosure, no condo documents will be provided and unless you are prepared to face the greatly increased risks involved, stay clear.
A 46 suite Bankview condo building located at 2121 17th St has been condemned by health officials. (Source)
There are currently 11 units for sale in the building (all tenant occupied) (view)
2 units that were in foreclosure sold in October. (Interesting, neither buyer had their own Buyer Agent)
I’m confident that a thorough review of minutes & financial statements will have yielded clues as to the condition of the condominium and how well it was being run by the property management company.
Hey Mike this might be off topic , We currently live in a Town home rental , the landlord is trying to sell. What are his legal responsibilties to tell prospective buyers of the next door crack house confirmed by the police? My girlfriend and I feel bad as we are getting out but the new owner will be sorry once they find out . At a price of 339,000 I would expect they will be sorry .
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Mike Fotiou says: RECA has some info on material latent defects here. As well, is the townhome a condo? Police visits may also be captured in the minutes of the meeting if condo board members are aware of it. The Calgary Police Crime map tool is also great for buyers to research potential homes.
Jones:
I never took ECON203 and thanks for providing that insight. Obviously though if NHPI went down consistently for Q3 while GDP went up, then other factors were at play. What percentage of GDP is accounted for by NHPI?
You also made a remark about $70 oil being a problem. I’m quite sure that oil was below 70 on average until 2008 so that’s actually good news. Remember how bad things were in 2006 when oil was averaging $62?
If oil is $70 in what I agree may be the worst recession of our time what do you think that means for the future?
http://inflationdata.com/inflation/inflation_Rate/Historical_Oil_Prices_Table.asp
Natural gas is another story of course.
Mike not Mike F:
Listing price does not equal sale price.
Sale price is usually considered market value.
This year the average sale price:list price ratio has been 96-97%.
When you list a house and you can’t sell, you do not raise the list price, so if you watch list prices, you would never think that prices go up over time.
Million dollar plus house list prices always go down over time, even in a boom, so if you are looking for a “bear market” I guess you will always find one there. Good luck and I hope you find your million dollar home one day. 5 years is a long time to be looking. I wish a could have bought a million dollar house in 2004.
CT:
NHPI is only a small percentage of total expenditures for the economy and calculating GDP. I only refer to NHPI as an indicator to the investment activity which is most susceptible to changes in interest rates, expectations of the future and wealth etc.
I say $70 oil (being WTI) is not necessarily a good thing since I think this price is somewhat inflated due to a depreciated US dollar (the currency that WTI is based) and an excess of production being shut down (OPEC). Given time it will be interesting to see what happens when the OPEC countries either run into financial difficulty requiring them to ramp up production putting downward pressure on oil prices if demand remains low.
I agree natural gas is a whole other issue, low prices are helping with affordability, though Alberta’s tax revenues rely heavily on oil and gas royalties. Thankfully Stelmach is finally going to try and stimulate the natural gas sector (http://www.edmontonjournal.com/news/world/Shale+forces+Stelmach+shift+royalties/2353717/story.html).
If you’d like to read up some on economics read Keynes to get a good idea of how markets react in inflationary and recessionary gaps.
“A 46 suite Bankview condo building located at 2121 17th Ave has been condemned by health officials”
I couldn’t find 2121 17th Ave SW which is strange as our Scarboro home was quite close to there. There is a condo building at 1919 17th Ave and 2 apartments close to where a “2121 17th” which are on 18th ave and 19th street. The issue is 2121 falls into the old childrens hospital address as it’s odd. But the condo at 1919 17th ave SW always had for sale signs (usually 4-6 of them) out front, even in the boom days.
CoffeeTims – “Million dollar plus house list prices always go down over time, even in a boom, so if you are looking for a “bear market” I guess you will always find one there. Good luck and I hope you find your million dollar home one day”
Thanks, although we have been looking in that market as we are in that milllion+ market. We have owned homes in that time frame when we were looking. If the timing is semi-right we will plunk down the cash in 2011.
I agree with you, 2004 was a great year to get into the upper end RE market; now, no; unless you want a home, not an investment and you won’t be checking the MLS each year.
Plus as I can tell you from experience it is MUCH easier to sell a starter home than a million dollar home.
Mike F – “I don’t go to Bob’s site or use his information as I find it unreliable and too bull biased.”
To be honest it mostly isn’t 100% Bob’s fault, he is using Data from just one source and when a researcher uses data from just one source it’s biased. Also when the one source (mls/AREA) is designed as a for profit business… I think you see my point… We could really use a fully 3rd party, unbaised, regulated gov’t agency here for housing price data.
Mike
Mike Fotiou says: Thanks – although the Sun article and the listings I pulled had the right address, I had written “Ave” instead of “Street” in my post.
Finally some rational thought from our government about national mortgage debt this year:
http://www.theglobeandmail.com/report-on-business/flaherty-warns-on-mortgage-rules/article1407223/
We’ll see how the details play out but I think this can only be a good thing for real estate sustainability. Also we might see a rush of buyers trying to get in before these rules kick in.
In a way it’s a shame that the people who saved will now be forced into more restrictive agreements, while buying more expensive houses than a year ago