Monthly Archives: March 2011

Investors Find Opportunities

Posted on March 30, 2011 | 7 Comments

Real estate investors in Calgary continue to find opportunities, even in today’s market.

The boom days are long gone.  No longer can you hold onto a property for a few months without doing any work and realize gains of tens of thousands, or even hundreds of thousands of dollars.   And I’m not exaggerating those gains.

Again, from properties that sold during the past month and half – take a look at those that also had sales in 2005 & 2006:

2005 to 2006 price change


In those days multiple bids above asking was becoming the norm with buyers lining up outside the home to present offers. Crazy.

While the market isn’t anywhere as hot as it was then, investors with a keen eye and willing to put some time and money into a property can still make some money.

For the purpose of this post, I will be using examples of properties that have sold between February 18-March 29, 2011 that had a previous sale sometime during the last year.

The following are the 5 top properties with the largest percentage gain during that time period.

Elbow Park

This Elbow Park home was sold this month for $2,560,000. It last sold for $1,450,000 in April 2010. (+43.36%, +$1,110,000)

Falconridge

A Falconridge home sold for $280,000 earlier this month.  It was purchased for $180,000 in September of last year.  (+35.7%, +$100,000)

Brentwood

This Brentwood bungalow sold for $605,000 on March 10th.  It previously sold for $394,000 on January 28, 2010. (+34.9%, +$211,000)

Hillhurst

This two and a half storey home located in Hillhurst sold for $800,000 this month.   It last sold in August 2010 for $540,000. (+32.5%, +$260,000)

Penbrooke

This attached home in Penbrooke sold last week for $197,000.  It previously sold for $135,900 in October 2010.  (+31%, +$61,100)

And below are the rest during the same time period with gains of at least 15%

(click to enlarge)

Of course what these figures don’t take into account are actual renovation costs and other expenses such as carrying costs, agent and lawyer fees, etc. But it does show that, at least on the surface, real estate investors are still finding ways to turn a profit in Calgary today.

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House Price Index (HPI) : January 2011

Posted on March 30, 2011 | 2 Comments

Canadian home prices in January were up 0.4% from the previous month, according to the Teranet-National Bank National Composite House Price Index™ released today. It was the 2nd consecutive monthly rise.   The composite index was up 3.9% from the previous January.

In Calgary, the index was down 1% from the previous month.  It was the 5th decline in 6 months.  Year-over-year, prices were down 3.4%.   Again, Calgary was the only city tracked that was showing an annual decrease.

The report states that:

Relative to the average, conditions in Calgary were better for buyers and conditions in Vancouver better for sellers, a finding consistent with the movement of the Teranet-National Bank indices for these markets. The Toronto market is no longer tightening. Between January 17, when the federal minister of finance announced that the maximum amortization period for an insured mortgage would be reduced to 30 years from 35 years, and March 18, the announced effective date, the resale market may have been influenced by the prospect of this change.

Source: www.housepriceindex.ca (click to enlarge)

Source: www.housepriceindex.ca (click to enlarge)

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Peak Buyers, Today’s Sellers

Posted on March 28, 2011 | 13 Comments

Part One: Single Family Homes (SFH)

Canadian housing values are at their peak with many cities continuing to mark new record highs with each passing month.

Calgary, however, peaked nearly 4 years ago.   SFH median prices recorded their high in June 2007 with $439k.  A month later the average price peak was reached at $505,920.

Prices then dropped to a post-peak trough in January 2009:

SFH Prices (click to enlarge)

Prices have rebounded since then, but have not surpassed the levels seen in 2007.   At February 2011′s month-end, average prices were still down 8.7% from the peak while the median was down 8.9%.

There is a lot of data to mine with the repeat sales history I’ve been gathering for the past month, so for this blogpost I’ve focused on homes that had a previous sale during the peak (2007).     This will give us a clearer picture of how much home prices have already corrected during the time the rest of Canada was still showing increases.

Single Family Home Repeat MLS® Sale Statistics

The following repeat sales history is taken from homes that sold between February 18, 2011 – March 27, 2011.

There were 744 homes with a previous sale on MLS® from 2000 onwards.

Of those 744 homes:

  • 538 had a higher sale price than its previous sale (72.3%)
  • 196 had a lower sale price than its previous sale  (26.3%)
  • 10 had the same sale price as its previous sale (1.3%)

Of those 744 sales, 116 had previous MLS® sales in 2007.

The following figures focus on just those 116 sales.  Every repeat sale was included – even those that were substantially renovated or foreclosed.

  • 22 had a higher sale price than its previous sale (19%)
  • 92 had a lower sale price than its previous sale  (79.3%)
  • 2 had the same sale price as its previous sale (1.7%)
  • Biggest gain: +$458,500  (Mount Pleasant, new home on lot)
  • Average gain: +$75,259
  • Biggest loss:  -$822,000  (Springbank Hill)
  • Average loss:  -$65,327
  • Median loss: -$50,000

This Springbank Hill home sold for $2,450,000 in 2007. It sold this month for $1,628,000 - $822,000 less (Judicial Sale)

Here are the statistics in percentages:

  • Biggest gain: +58.41% (Mount Pleasant, same as above)
  • Average gain: +10.3%
  • Median gain: +5.4%
  • Biggest loss: -64.5%  (Douglasglen, unremediated grow-op)
  • Average loss:  -15.5%
  • Median loss: -12.9%

Including all 116 repeat sales from 2007:

  • Average price decreased -10.3% or -$37,538
  • Median price decreased -9.9% or -$38,000

So the month-end statistics as well as the repeat sales history for the past month confirm that SFH prices have already fallen between 10%-18% from the peak.

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Part Two: Condos

Condos prices also peaked in 2007, shortly before single family homes did.  In May of that year, condo average prices hit $332,237 with  the median maxing out at $309k in April.

There were 313 condos that sold on MLS® between Feb 18- March 27, 2011 that had a previous sale since January 2000.

Of those 313 condos:

  • 180 had a higher sale price than its previous sale
  • 132 had a lower sale price than its previous sale
  • 1 had the same sale price as its previous sale

Of those 313 condos, 63 of them had previous sales in 2007.   Of those 63, only 1 sold for more than it was purchased for.  It was a lowrise condo in Richmond which sold for $362,450 – previously bought for $360,000 in 2007.

  • Biggest gain was  $2,450 (Richmond lowrise)
  • Biggest loss ($): -$262,000 (Bankview townhome)
  • Average loss ($):  -$64,965
  • Median loss ($): -$58,250

This Bankview townhome sold for $262,000 less than it was purchased for in 2007 - a 34.8% drop.

Percentage-wise:

  • Biggest gain: +0.68% (Richmond lowrise)
  • Biggest loss: -55.81%  (Mission lowrise)

Including all 63 repeat sales from 2007:

  • Average price decreased  -18.5%
  • Median price decreased -16.18%

This Mission condo sold for 55.8% less than 2007's sale price.

At the end of last month, condo average prices were down 12.7% while the median was down 13.6%.

Again, using both the month-end figures as well as the repeat sales history for the past month, condo prices have already come down between 12-18% from the peak.

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If there  is a housing correction Canada-wide, will the impact be less felt here since we’ve already been in a correcting real estate market for almost 4 years already?

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Follow the Calgary real estate statistics daily on my website:

FindCalgary.com

If you have any questions, or whenever you’re ready to buy or sell real estate, please feel free to contact me.

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March Update: Rule Changes Impacting Market?

Posted on March 18, 2011 | 30 Comments

So far this month SFH average prices are down $7,500 from February’s month-end, and down $17,000 from March 2010.  The median is down $5,000 from last month and down $28,000 from last March.

Similar story for condo prices. Average price is down $7,700 from last month and down $14,000 from last March.  Median prices are down $11,000 from last month and down $19,000 from last March.

Normally, I purposely refrain from posting prices during the mid-month reviews because a lot can happen in the final two weeks.   But the reason I’m looking at prices this morning is because of what some are asserting regarding the market – that the rule changes are having a minimal impact.

But that may not necessarily be the case in Calgary, where the impact of more stringent lending rules may have been overstated, said Sano Stante, head of the local realtors organization.

“I’m not convinced that new mortgage rules have been that significant in impacting our market,” said the president of the Calgary Real Estate Board.  “Honestly, we don’t think that it’s going to have a huge impact,” he said.

President of the Calgary  Real Estate Board said the impact of the changes will be minor for most buyers.

To avoid higher monthly payments, the logic goes, many buyers tried to sign mortgages before the deadline, sparking a flurry of activity that drove up prices. Once sales die down, prices could slide.

Although this may be the case for the national market, Stante said it doesn’t have to be the case in Calgary, where the economy has been relatively strong.     (Source 1, Source 2, Source 3)

A job market report from the City of Calgary this week actually paints a completely opposite picture to CREB’s hypothesis.  From the report:

During the 2008-2010 period, Calgary entered the recession after Canada and has  still not recovered all of the job losses associated with the downturn.  Canada has however recovered all the jobs that were lost and is now into the expansion phase of the business cycle.

(click to enlarge)

What could be dragging the average/median prices lower so far this month?  First-time buyers, getting into the market before the rule changes.   Those that need to have a 35-year amortization would likely be purchasing homes priced on the lower-end.

I’m not the only one that thinks that 35-amortizations (and the end of them) is and will have a big impact on the market.

The following was taken from a RE/MAX agents monthly newsletter:

There’s no more 35-year amortization.  Period.  The new maximum amortization is 30 years.  And you must have an approved mortgage in place by March 18 at the absolute latest to get the 35-year.

That might not sound like a big deal and maybe it’s not for you.  But if you’re the type who wouldn’t think of getting a 35-year mortgage anyway, you will be shocked to know that MOST buyers have opted for the maximum amortization over the last few years.  The vast majority in fact!

That’s a reflection on our society I suppose.  The majority of people want to get the most house they can possibly afford for the lowest payments.

If you don’t think that the rush to get in on the 35-year mortgage is affecting the market, you’re wrong…  The only question is, “How much is it affecting the market?”  That’s still a very large unknown.

Interesting that the flurry of activity before changes haven’t driven up prices, but rather depressed them.   Have first-time buyers reached the limits of their purchasing power?

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March 1-14, 2011 Calgary Real Estate Market Update

Posted on March 15, 2011 | 13 Comments

With the first two weeks of March in the books, single family home (SFH) sales are up 8% and pending sales have fallen back in step with last year’s levels.

Sales (click to enlarge)

SFH Pending (click to enlarge)

SFH Weekly Sales (click to enlarge)

Condos sales were up almost 6% from the same time period in March 2010.   The early momentum seen in the first week didn’t hold.  (Sales were up 28% in the first week)

This is somewhat disconcerting as there was an expected rush to get in before the end of 35-yr amortizations.  Either:

a) too much hype about the end of 35-yr amorts and prospective buyers aren’t very concerned with it decreasing
b) this is the rush :shock:

Condo Pending Sales (click to enlarge)

Condo Weekly Sales (click to enlarge)

Buyers have until Friday before the rule changes so there is still some time and we may yet see a last minute surge by the end of the week.

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CREA February Report

Gains in house prices are likely to “recede” starting next month as shorter mortgage terms keep some buyers out of an already softening market, CREA said today after reporting on February’s numbers. (Source)

“When you take Vancouver out of the equation, the year-over-year increase in the national average price drops to 3.4 per cent,” said Gregory Klump, the association’s chief economist. “While that’s still stronger than in the past six months or so, national average price gains may recede after tighter mortgage regulations take effect in March.”

“The February data may be an early sign that existing home sales may be running out of steam,” said Pascal Gauthier, senior economist at TD. “Still, sales should continue to be well supported by a number of factors. These include a favourable backdrop in terms of employment and income gains, as well as the low interest rate environment. This last element will likely begin to weigh on sales as the Bank of Canada starts to raise its interest rate policy in the second half of this year, however.”

Calgary & Vancouver bucked the trend with sale increases in February, while two-thirds of the country saw sales decrease.

“Canada’s housing market is re-establishing its comfort zone after having experienced strong bouts of volatility over the last three years,” Mr. Gauthier said. ”Although sales are expected to ease in most parts of the country as interest rates rise – the Prairies could be the exception –, activity should be strong enough to provide a floor under home prices. By the same token, better availability of new and existing units will provide more balanced markets than seen in pre-recession years. This will make it hard for home values to outpace general inflation over the next couple of years.”

 

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