Monthly Archives: October 2010

House Price Index (HPI): August 2010

Posted on October 27, 2010 | 6 Comments

Calgary house prices were down 0.5% between July & August according to Teranet-National House Price index released today.  Year-over-year in August, house prices in Calgary were up 5.0%.

For the Canadian composite index as a whole the monthly increase in August was 0.2%, the smallest since the index began climbing 16 months ago.   The uninterrupted string of 16 monthly gains exceeds the 14-month run of August 2005 through September 2006. Year-over-year, the index was up 10.4%.

“Looking ahead, prices are likely to fluctuate without tendency over the next few years. At the national level, current market conditions, close to the boundary between balanced market and buyers’ market … herald a deceleration in home price inflation,” said National Bank senior economist Marc Pinsonneault.

House prices are being buoyed by low mortgage rates, but at some point people will realize rates are heading up sooner or later, he said. “When that happens, preference for renting instead of buying should increase … This should reduce the pressure on house prices.”

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The Teranet–National Bank House Price Index™ is estimated by tracking observed or registered home prices over time using data collected from public land registries. All dwellings that have been sold at least twice are considered in the calculation of the index. This is known as the repeat sales method; a complete description of the method is given at www.housepriceindex.ca

All indices have a base value of 100 in June 2005. For example, an index value of 130 means that home prices have increased 30% since June 2005.

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The Economist: Canadian Real Estate Overvalued By 23.9%

Posted on October 25, 2010 | 9 Comments

Canadian house prices are overvalued by 23.9% according to the latest study by The Economist.  (In December 2009‘s survey, Canada was overvalued by 20.6%)

Other countries are ranked worse still:

  • Australia: 63.2% overvalued
  • Hong Kong: 58.1% overvalued
  • Spain: 47.6% overvalued
  • France 42.5% overvalued
  • Sweden: 41.% overvalued
  • Britain: 32% overvalued

The United States is now undervalued by 2.1%.    Other countries that are currently undervalued include:

  • Germany: -12.9%
  • Switzerland: -6.4%
  • Japan: -34.6%

The Economists measure of “fair value” in housing is based on comparing the current ratio of house prices to rents with its long-run average.

Not everyone agrees on using that measure to determine value. Gregory Klump, the chief economist at the Canadian Real Estate Association said in a recent interview that he’s “not a fan of the price-to-rent ratio because it’s so skewed by the fact that rents are subject to rent control.”

His conclusion? “Maybe that’s just telling us that rents are just too low.”

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Weekend Mashup

Posted on October 24, 2010 | 3 Comments

I hope everyone is enjoying their weekend. A few topics I wanted to touch on today:

FindCalgary.com now Iphone/Ipad/Android Ready

Search MLS quickly by phone. If you have your Location Services on, you can use Map-Based searching to check out the details of that home for sale you just drove by (Not while driving!) I find it pretty handy – I hope you do too!

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Condos & Presales

There have been a few presale launches recently and I just wanted to remind prospective buyers of some important points.

While the standard AREA forms agents use for resale purchases were drafted for the mutual benefit of both sellers and buyers, developers use contracts that are stacked heavily in their favor.

For example the fine print for the University Condo pre-sales states:

The Developer reserves the right to make revisions it deems appropriate at its sole discretion, to floorplans, unit configuration, and finishing. Unit sizes are estimates only and subject to revision by the Developer.

As presale buyers of the Gateway Midtown know first hand, the contract also usually allows the developer great leeway regarding completion date. In the meantime their deposits are tied up.

If you’re thinking purchasing a presale condo, have the contract reviewed and explained to you by your real estate lawyer. It also wouldn’t hurt to watch this CBC Marketplace episode from a few years back as well: Condo Crunch

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2009 Headlines

I was browsing news clippings from 2009 and it’s amazing how much things can change in a few short months.   Here’s some of what was making headlines last year around this time:

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Riverfront Customer Default Sale

If you browse the Calgary Herald online you would have noticed the following banner appearing:

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During the boom, buying presale and selling upon completion was a quick, sure profit.   In these current market conditions it’s not so certain as developers have no qualms slashing prices to sell off the remainder of their inventory for less than others purchased for.

In yesterday’s paper there was an ad from a builder that stated:

“Our Guarantee…Your agreed upon price will never increase”

A better guarantee today would be, “We will not sell similar homes for less than you purchased it for.”   ;)

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Globe & Mail: The Long Shadow Over Canada’s Housing Market

On Friday, the G&M published the above article.  Skimming through the reader comments it’s obvious that everyone has a different outlook on where the market is heading.     Economists are just as divided.

And while supply and demand are keeping prices firm, few expect that to last over the next two years. CIBC World Markets has suggested prices could fall as much as 10 per cent in the next two years, as has TD Bank. CREA suggested at the end of July that prices could slip 1.2 per cent by the end of the year, and fall 0.9 per cent next year.

CMHC is the lone dissenter among the market watchers, saying only that average resale prices are “expected to edge lower through the end of 2010 and then rise modestly in 2011.”

“The next decade will be weak,” Mr. Tal concedes. “In the next year we should see negative growth, with places like Vancouver maybe even seeing a 20 per cent decline. Maybe we will see prices moving with inflation across the country after that, but no more. I do not think it will be a crash that will send people jumping out of windows, but the housing market of the future will be a very boring place.”

Some argue that the article is speaking of Canada as whole and that their market is different.  It’s true.

It’s different in Edmonton.
It’s different in Calgary.
It’s different in Vancouver.
It’s different in Winnipeg.
It’s different in Ottawa.
It’s different in Montreal.
It’s different in Toronto.

So…where exactly in Canada is this correction some economists are forecasting going to take place when it apparently doesn’t apply to any city?

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October 1-21, 2010 – Calgary Real Estate Market Update

Posted on October 22, 2010 | 5 Comments

Activity edged higher in the 3rd week of October as pending and firm sales increased from the previous week. On a year-over-year basis, SFH sales are down 37% while condos are down 48% month-to-date.

SFH Sales (click to enlarge)

MTD SFH sales have now pulled ahead of 2008 levels (+2.6%), while condo sales are down 24%.

Condo Sales (click to enlarge)

SFH Weekly Sales (click to enlarge)

Condo Weekly Sales (click to enlarge)

SFH pending sales have taken off in the last week or so, indicating another uptick in sales in the week or two to come.

SFH Pending Sales (click to enlarge)

Condo Pending Sales (click to enlarge)

Inventory continues to grind downwards, with both SFH & Condo listings now back to levels seen in April.

Inventory (click to enlarge)

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October 1-14, 2010 – Calgary Real Estate Market Update

Posted on October 15, 2010 | 16 Comments

We continue to hear that sales are down when compared to last year’s frenetic, unsustainable pace. Unfortunately sales are still down even if we were to compare against October 2008 – the month where 0/40 mortgages were banished and the financial markets continued their meltdown.

SFH month-to-date sales are down 34% from 2009 and down 7% from 2008.

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Condo sales are following a similar pattern, except even more pronounced.    Sales for the first two weeks of October were down over 50% from 2009 and down 33.5% from 2008.

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For more Calgary real estate statistics including average and median prices, please visit my website at www.FindCalgary.com

FindCalgary.com

Or if you would prefer detailed statistics on specific communities or areas in Calgary (including addresses and sold prices) sign up for my Market Snapshot.

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Mortgage Fraud – The Ideal Crime?

Mortgage fraud is easy, common and lucrative. And in Canada, more often than not, it is left unchecked according to MACLEANS.  Some highlights from the article:

  • the fact that many of the riskiest loans are likely to be insured by the CMHC, which says it has a policy of paying 100% of all eligible costs on fraud claims made through its automated system (with the notable exception of cases where the lender or its staff are involved, which may be why BMO decided to pursue the case in the courts), and it’s easy to see why [lenders] are willing to take the risk.
  • CMHC paid $1.1 billion in net claims last year, up from $372 million in 2008 (not all fraud related)
  • People who buy in neighbourhoods where mortgage fraud is rampant are at risk of paying more than necessary for their houses and, subsequently, more in property tax. And they can suffer further when a wave of foreclosures hits, causing property prices to plummet.

You can read the entire article here

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Realtors keep grip on MLS® in deal with feds

As more and more details emerge, it’s becoming evident that nothing has changed. I think an eager and well-meaning Competition Bureau plunged headlong into the fray without fully understanding how the real estate industry & MLS® operates in Canada. Flat-fee listings have existed for YEARS across Canada, and will continue to be offered for years to come. The reason not many offer such services is because more often than not, it’s simply not a financially viable option.  It’s a business model that relies solely on high volume. It had nothing to do with CREA’s rules.

Riding the wave of publicity the “new rules” have garnered, more agents/brokerages will offer such services. However, the settlement also states that listing agents will still be responsible for the integrity of each listing, which means they could be held legally responsible for any errors or problems that arise later. By means of lawsuits & hefty fines down the road, agents that accept listings by fax/email and don’t do their due diligence in order to save time & money will be weeded out.

I don’t see any reason why any informed industry members would vote against this “settlement” next week as all they are doing is consenting to the rules they had agreed to abide with in the beginning…

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Drake Sales Centre Opening Tomorrow

The city’s newest residential tower will introduce 135 new homes to the 17th Ave. and Beltline neighbourhood with the opening of the project’s sale centre this Saturday  October 16, 2010.

  • 135 units
  • Located on the corner of 7th Street and 15th Ave. SW
  • Square footage ranges from 398 sq ft studio homes to town homes averaging 1200 square feet
  • Prices start at CDN$159,900
  • Developed by Grosvenor Americas

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If you have any questions or are interested in buying/selling real estate, please feel free to contact me.

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