Metro-Calgary Single Family Homes
- Average price increased 3.86% from last month to $458,254. (Up 10.27% from February 2009)
- Median price increased 3.26% from last month to $411,000 (+9.6% from February 2009)
- 1035 sales recorded (February 2009: 825)
- Inventory increased 23.75% from last month to 3106 (-28.5% from February 2009 month-end)
Metro-Calgary Condo
- Average price increased 0.08% to $282,880 (+5.17% from February 2009)
- Median price increased 0.35% from last month to $265,900 (+6.4% from February 2009)
- 536 sales recorded (February 2009: 343)
- Inventory increased 24.5% from last month to 1741 (-15.7% from February 2009 month-end)
Taking a closer look at the vacant/and or new construction levels of condos currently on the market – we see it accounts for 39.9% of what’s currently listed. Over 1 in 3 condos that are listed are currently unoccupied, and it has been that way for several years now as seen below:
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After a volatile few years, condo prices seem to have been holding quite steady within the last 12 months or so with the median barely deviating from the $260k’s.
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Last year condo inventory peaked in February with 2065.
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Canadian Real Estate & Calgary Condos
Stats released today show that the Canadian economy continued to expand in the 4th quarter, increasing the odds that the Bank of Canada will raise rates this July. The HST will be introduced in BC and Ontario at this time as well, reducing affordability levels even further. Not to be forgotten are the tightened mortgage rules coming into effect next month. I doubt there would have been nearly as many vacant condos in the Calgary market if the 20% down rule on “speculative” properties was introduced at the peak of the buying frenzy. Instead it comes at at time when many investors are trying to sell.
What needs to be pointed out is that Vacant/New construction numbers I post daily only includes those that are listed on MLS. According to the Altus Group, there are about 2000 unsold units.
“Some larger projects that are completed or nearing completion have large numbers of unsold units, and in some cases had few or no sales in 2009,” said the report. “Based on average monthly sales in 2009, the unsold inventory would take almost three years to absorb.”
AltusGroup said a big contributor to the unsold inventory is the large number of projects started with less than 50% of units sold. (Source: February 10, 2010, Calgary Herald)
The fact that condo prices have remained steady with little or no gain might be cause for concern with the various affordability reducing events that are due to come in the next short while.
-no more 5% down investors – 20% minimum
-increased rates + must qualify at 5-year fixed (still yet to determine which rate is to be used)
-Glut of new units competing against resale
-Over 1 in 3 condos on MLS unoccupied
Then again, we are just coming out of a recession whereby prices shouldn’t be expected to be increasing anyways…
What are your thoughts on the Calgary market, specifically condos, in the coming months & years?
I’ve been keeping a steady eye on the market as I’m looking to buy, or maybe not…
I can’t help but to think that 4% increase in a month is not sustainable. Nobody’s paycheck went up 4% in February, so why would home prices?
It would be interesting to see what the historical price increases are per month, for the last 10 years. That would really give a good idea on whether a market is acting right or not.
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Mike Fotiou says: Going back to 2002, the SFH average price has increased an average of approx 0.83% per month, the median at 0.82%. You can view a quick chart I made of the average percentage change MoM here
I agree with you Will, however I do think things are starting to get better in the job market. I think we are going to see a stable price market till July, then it could take a dive it is all in that interest rate.
That’s a great chart Mike – thanks!
One of a kind – that’s all I’m waiting for – a stable market. When you hear all the hoo-rah about 10% annual increases, I get nervous. Stuff like that is just not sustainable. A point or two above inflation though, now that’s something that’s more acceptable…
Guess that from April, with the speculators stepping out of the markets, the price will be more reasonable for the real buyers. Now, the market is very volatile; lots of houses are overpriced. Those sellers asking higher prices will risk the rate-increasing point at the middle of the year.
I think way too much is being made about any year on year stats for the period November-February. Last year many people felt the financial system was collapsing and noone in their right mind was buying. Volume was tiny. This applies to stocks/ real estate, gold, oil, you name it. Wait until later this year and that 10% y-o-y number will come down.
I guess it’s like if a huge meteor was going to hit the earth, and we all found out about it, obviously people would not buy houses. Then the meteor passes by and misses the planet, people start buying houses again. Well now we are comparing ourselves to that time when the meteor looked like it would hit. It’s really not truly representative of the market trend in my mind.
That market is just not sustainable, people are buying now because they want to “get in” on the cheap cheap cheap borrowing rates and not thinking about the future. Bringing forward demand is a sure way for sales to lose out and prices to drop more than usual.
Once interest rates raise this year affordability drops, period.
Houses should not go up faster than incomes or it’s simply a growing debt trap for familes.
Mike
Just an update on the rental market from the RentFaster.ca data:
The median price of rent has remained pretty much identical since the fall months, nothing new or exciting there.
One thing I have noticed is a drastic drop in inventory, about 20% by my estimate. It seemed to happen suddenly, near the beginning of January, and hasn’t come back.
Perhaps this is something that occurs every year, I’m not sure.
2 Bedroom Apt (median)
————-
[2010]
03: $1095
[2009]
12 – $1099
11 – $1099
10 – $1100
09 – $1150
08 – $1150
07 – $1200
Calgary SFH (median)
———–
[2010]
03: $1600
[2009]
12: $1550
11: $1600
10: $1600
09: $1600
08: $1600
07: $1650
Price/Rent ratio is 257, or about 22% too high in my opinion.
Thanks CM. I own several rentals. 2 of them became vacant in November. I had a very hard to to rent them out, by reducing the price like crazy.
After they were all out, I did one thing. I didn’t delist the rentals, rather, I changed the price back to the original and let them sit on the kijiji and rantfast.
For two montths, nobody bothered me.
Only recently, for about 3 weeks, my phone went off hook 3 times a day almost every day. Mind you, that is based on the higherr price.
I had to create reasons not to rent out.
Definetely, the rental market is back. But I have already had my long term renters, at a much much lower price. I can’t do anything, neither do I want to.
I waited and waited and then bought in Nov. Thought prices would drop but couldn’t wait any longer. Prices still haven’t dropped. They need to, even if I lose out, but there’s a saying “The market can stay irrational longer than you can stay solvent.”
A bit on rentals , funny we started looking at rentals back in Jan. this year as we were going to move by the end of March. We noticed a lot on the market which made us happy as the last time we moved it was so hard to find a decent place within our budget. So in Jan this year rentfaster stood about 3400 listing on average , so today I checked the site there was 3656 total listings.
We have rented and our moving into a nice 4 level split close to downtown @ 1700 a month . To buy this would of cost us a lot more monthly.
CM, thanks for keeping track of the rental stats. I appreciate it and I know others do too.
Angler, I think Keynes quote can be updated to todays real estate market to state: “The market can stay irrational longer than you can stay patient.”
OneofAKind, do you know by chance what the Price-Rent ratio on your property would be?
Today’s cover of Canadian Business Magazine:
http://www.canadianbusiness.com/canadian_business_magazine/index.jsp
Wow, the title…. “Why buying a house is a bad investment” is point blank, in your face, unbiased truth Canadians need to read and hear.
The writing is on the wall. Read it or ignore it, it’s there.
Mike
Mike Fotiou “Angler, I think Keynes quote can be updated to todays real estate market to state: “The market can stay irrational longer than you can stay patient.””
This quote is in reguards putting puts to a fast paced, volitile stock market, something RE is not. Unless you can short housing, which is not possible. Maybe they should allow RE puts on other peoples homes? Say, a neighbours you put a put for it to be $100k lower in a year, if it goes down, the neighbour pays you.
Might as well use the quote “Eating bread crusts curl your hair”
Both have no meaning outside of their original context.
Mike
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Mike Fotiou says: Relax, it was a facetious comment in view that many buy even though they believe prices to be high and are expected to drop.
Posted by Bob today…
”
We’ve not only turned the corner, but inventory is now racing full speed ahead. The SFH inventory is 63% higher than it was in December.
Over the previous four years, inventory has risen an average of 37% between Dec 31 and Mar 31.
Buyers have not had much good product to choose from, but that is changing quickly.
”
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Mike Fotiou says: Keep in mind that on March 5th of last year there were 4414 SFH’s on the market, compared to the almost 3400 today…It may be rising faster percentage-wise, but still behind year ago levels.
RE: Canadian Business article link posted above.
Interesting & informative article, but very poor use of statistics comparing housing returns to stocks. A large graph on Pg 28 shows the % of stock returns towering over residential real estate returns. (13.9% return for the S&P 500, and 8.6% return for the TSX compared to 3.1% for Calgary, 5.8% for Toronto, etc)
Taking a closer look, we see the writer based the stats on data between the following years: 1978-2003.
2003.
I wonder why he stopped at 2003, and not say, 2006, 2007, 2008 or 2009? I guess the graph wouldn’t look as convincing then.
Regardless, the article just rehashes what we’ve gone over extensively on this blog: high debt-to-income ratios, tightened mortgage rules, the obligatory Rosenburg & Shiff quotes, etc.
In any case, real estate should only be a part of a diversified investment portfolio and shouldn’t be expected to always go up. I think the last few years have shown a new generation that weren’t around in the early ’80s of that fact.
Here’s some Canadian predictions from the article:
Benjamin Tal (CIBC): 7% overvalued
TD Financial Group: 12% overvalued, could increase to 15% this year.
David Rosenburg: 15%-35% overvalued, and could drop 20% from current levels.
“A drop that steep would wipe out virtually all gains made in the past year”
Probably not the cataclysmic plummet some of the (schadenfreude?) non-real estate owners are hoping for, but substantial nonetheless.
That CB Article gets a fail. It’s an obvious fudge, like that guy who wanted to cut out all the home prices for the top end so the average would be lower. I’m glad that CB Magazine is giving us great advice for 6 years ago though.
It’s really funny to think that if you had followed that great advice in 2003, you’d be far behind the person who invested in real estate.
TSX in 2003 : about 6500
TSX in 2010: 11975 (180% gain, minus taxes)
S and P/NASDAQ: even worse because you lost alot of money from US currency depreciation -I’m guessing they didn’t mention that either
Calgary 2003: 230000
Calgary 2010: 458000 (200% gain, no taxes and you got to enjoy your house)
I’m guessing the article didn’t account for rental income from investment properties, or the delisting of stocks and the consequence that “index” investing does not match the index. If you’re wondering what this means, think Lehman and Enron, Nortel. Those folks who bought Nortel over 100 lost pretty much everything.
Schadenfreude comes to mind frequently when I read this and other real estate bl0gs. It might be mean but it sells really well! CB magazine knows this.
Financial Advice Disclaimer: Like Mike F, I also believe in diversifying and would not encourage anyone to pretend they are better off going 100% real estate or stocks or cash/money market. It’s obvious that year on year, the stock market has outperformed the real estate market recently but that trend is also not always true and some years cash is “king”. Lastly, do not read this blog ever to get financial advice, even from me.
CoeffeeTims: The fact is that the high-end houses contributes most for pulling up the average price in Feb, which is my point. see the news: CREA’s president D. Scott’s comments on activity about surging deals on million-dolloars houses.
It has nothing to do with cutting out all top-end houses from the average calculations.
CoffeeTims “That CB Article gets a fail.”
That’s unfortunate. For me, the CB Article was a A+ and one of the best articles in 12 months.
It was quite unbiased listing both sides of the fence and truely was educational. In fact, I forwarded it to all my RE and Stock investor friends to recommend read up on it was that good.
You need to take away these messages:
“If you’re going out buying a home today, understand that you’re not following the doctrine of buy low and sell high,” Rosenberg says. “You’re doing the exact opposite.”
and
Housing has undergone painful corrections in the past. The current crop of homebuyers is likely too young to remember the housing bubble that burst in 1981, and the slow recovery that followed. According to data from the Centre for Urban Economics and Real Estate at the Sauder School of Business in B.C., the average real home price in Vancouver took more than 10 years to get back to its peak, before dipping again in the mid-1990s. Calgary fared even worse. Home prices didn’t return to 1981 levels until the first quarter of 2006. Toronto homebuyers experienced a similar pain when a speculator-driven bubble burst around 1989. In real terms, prices didn’t recover until 2007.
Overall and outstanding article, one that I was eagarly awaiting Canadian Business to print online.
CB is a great magazine, you should read it. We subscribe to it.
Mike
There was nothing “unbiased” about the CB article, and definitely did not list “both sides of the fence.” Besides the final conciliatory paragraph which was just anectodal, it did nothing to attempt an even-handed approach of the issue.
It states that housing is a bad investment, yet not once did it venture into the aspects of rental/investment properties. Instead, it compared stock returns to primary residences. And still, never was the issue of capital gains or taxes raised up. Not once. Sure it mentions the “egregious fees” associated with real estate like commissions and appraisals, but nothing about taxes, or investment fees associated with stocks.
Try selling all your stocks at once and see what you’re taxed at.
Then sell your primary residence and see what your taxes are on that (zip) minus of course the the egregious fees.
Now compare actual returns.
It speaks about how those that purchased 1981 (a small % of total homeowners) had to wait until 2007 for prices to recover – in real terms. Again, no such comparison for stocks at the top of their different bubbles.
It compared stock returns to home prices based on data from 1978-2003. If the author could include the bubble of 1981 and it’s subsequent drop to pad its numbers there’s no reason not to include the price increases after 2003, since in the “real gains” graph he had data until 2008.
It spoke of rental mobility, but nothing about renter insecurity when a landlord can sell with 3 months written notice.
Take what you want from it, but it wasn’t a “fair & balanced” article.
I’ve reviewed both pro and anti real estate articles, and this one was just as bad as a RE/MAX “report.”