(Scroll further down for Don Campbell forecasts for Calgary and how they panned out)
Ah, statistics are such pesky things. Verifiable, quantitative, and easily referenced and tracked. Obviously then, statistics have no place in such an emotional asset class as housing.
That’s the gist according to Don Campbell who said in the Calgary Herald today that people who try to guess what the real estate market is doing by looking at housing statistics are “doing the equivalent of driving across the city staring at their rear-view mirror.”
The full quote from his blog is this:
Many people and pundits use housing market statistics to comment on the health of a housing market. This is like trying to drive across Canada while staring into your rear-view mirror – you just can’t be accurate. GDP & Job Numbers and in-migration are the underpinnings of any property market – without these you will have stagnation or drops in values. This being said, those who do continue to use the housing stats will find their data to be even less accurate due to this new CREA agreement. Due to low barrier of entry for listings on MLS, there will be more listing coming on, so even if sales begin to increase or even stay flat the market will look like it is underperforming. Key housing market ratios will be skewed and will be an inaccurate indicator of market health if compared to statistics from ‘pre settlement.’ Sales-to-Listing ratio will decrease even as sales increase, average days on market will slowly increase (as unsophisticated sellers leave their properties on for long periods of time).
When the statistics are not looking good according to your point of view, it’s time to jettison them. It seems that an investor on his blog agrees, posting:
Great analysis Don. I shy away from a the statistical tools. Properties values are extremely local. The municipal, regional and provincial stats are great for data-junkies, realtors who need to justify their existance and news media looking for something to do
You can be sure that if the stats were looking favorably at the moment, they would be touting them.
With regards to Alberta real estate, his viewpoint on pre- and post- CREA/Competition Bureau settlement stats is wholly inaccurate. A real estate investor should know that Alberta already had a “low barrier of entry for listings on MLS”. Flat-fee listings were always available. In fact,today there are actually fewer new listings and total listings than this time last year.
And those that choose to use the even lower cut-rate offerings from out-of-province agents – guess what? Since they aren’t part of the Calgary or Edmonton Real Estate boards, the listing (or subsequent sale) wouldn’t even show up or be part of our statistics.
Forecast Record
Some of his previous reports:
October 2006
“Fundamentally speaking, Alberta’s economy is as good as it gets. High energy prices, rapid population growth, low unemployment, an abundance of jobs, improved infrastructure and affordable housing costs translate into Alberta being the No. 1 region in Canada — if not the world — in which to invest.”
“From a homeowner’s point of view, Calgary and Edmonton homeowners are going to do incredibly well over the next five to eight years.”
Whoops. Understandably, investors would be upset if they were following the 5-year timeline that he was pitching. That would take us into 2011 where we are currently thousands of dollars off our peak (See blog post: Peak Buyers, Today’s Sellers)
Prices for Calgary SFHs and condos since the peak are down 5%, 10%, 25%, even up to 50% in some cases. Where were the warnings about investing in a market that was approaching its peak? Just think of the millions of dollars worth of equity lost by those that bought during the peak and are selling today. Will they be able to recoup all their losses if they hold on for a few more years? Only time will tell, but it would make for quite an anxious journey.
Regarding Edmonton in the same report:
“Economic diversity provides economic stability, meaning that Edmonton is no longer prone to major upward or downward swings,” he writes.
Whoops again.
July 2007
Continuing oilsands development and the accompanying secondary industries means the real estate outlook is very bright in many parts of Alberta for years to come.
It was summer ’07. The market was hot, record levels in sales and prices seemed to be increasing indefinitely, reaching highs each month. No warnings.
In fact, In December 2007, REIN forecast that Calgary average prices would increase by 12% in 2008. Yes, 12% (!)
Fast-forward to the spring of 2008:
Record numbers of homes are for sale, with inventory rising to close to 12,000 single-family and condominium homes as of the end of April.
“That clearly shows speculators who had been in the market are trying to sell now,” says Don Campbell, who heads up a real estate investment website and has written a couple of books on Canadian real estate.
“That will also dramatically affect the ability of builders to sell new homes.”
And then, just a few months after that:
In 2008, the market is making a predictable (albeit soft) correction resulting in slightly more affordable housing compared to recent years.”
“Fear and emotion have entered the market, but the economy in Calgary is stronger than it was two years ago,” Campbell says. “That’s not reflected in housing.”
“The economy is slated to be the best in the country in 2009 and 2010 and the fundamentals are strong.”
Ah yes, a “predictable (albeit soft) correction.” I wonder why this predictable correction wasn’t relayed aforetime? (Did he forget about REIN’s forecast of 12% increase for 2008?) And according to him in the quote above, even economic indicators alone don’t necessarily dictate the housing trend. Yet, he’s basing his newest forecast not on current economic indicators, but on future hoped for expectations:
Average house prices in Calgary could flirt with record levels within the next two years due to a commodity boom in the province, says a real estate industry analyst.
Don Campbell, president of the Real Estate Investment Network, said house prices could increase five to seven per cent this year and another five to seven per cent in 2012.
“And then after that, we’re going to be back in a bit of a frenzy,” said Campbell. “A frenzy as in a seller’s market. Now I hope it’s not as hot as it was in 2007 and 2006 but I’m telling you by looking at the job market and the population growth expectations I wouldn’t be surprised if it was in the double digits in two years.”
You can read the entire article here
So apparently looking at past statistics is useless, but making up optimistic projections is a much more valuable method of predicting the future of the housing market.
Frenzied seller’s market. That sure sounds healthy and sustainable, doesn’t it? But it’s music in the ears of speculators. Will emotion drive the market once again?
Agree with Don? Disagree with him? Have you found following Bob Truman’s and my statistics valuable in your home buying/selling decisions or has it felt like “driving across the city staring at the rear-view mirror”? I would like to read your comments.
In the meantime, I’ll be “justifying my existence” and updating the sales figures for yesterday 
March 2008 – Don Cambell – calgary herald article quote
“International investors are definitely buying. Calgary and Edmonton real estate is hot in Europe and the U.S., more than I’ve ever seen before in all my years involved in real estate. The top banks in Ireland, for instance, are buying here. They see it as safe, secure and good for the long-term, compared to other options.”
This guy has worse predictions than garth turner! Based on this sort of commentary and his corny books, I would have to say Don has been discredited in my view.
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Mike Fotiou says: I wouldn’t say they’re worse than Garth’s predictions – they’re just polar opposites.
Lol @ the Ireland banks quote, thanks for digging that up. Here’s the link to the article and another quote from it:
Loved the post Mike. This Don guy sounds like some sort of preacher and real estate seems to be his religion. I’m sure the plate Don passes around to his sheep provides him with a handsome living. He’ll continue to spread his message of hope as long as the cash and the praise continues to roll in.
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Mike Fotiou says: What are your thoughts on his earlier comments on the Edmonton market?
So apparently looking at past statistics is useless, but making up optimistic projections is a much more valuable method of predicting the future of the housing market.
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Mike Fotiou says: Why does this sound familiar…
I personally have found this website and bob’s to be outstanding resources. We have been looking for a new home for a while and will be calling you when we finally identify what we are looking for. What separates you and bob from other realtors is you are willing to entertain views that are not always favorable to your industry. Realtors we have dealt with in the past are only concerned with selling us a home rather than helping us to get a fair deal. I like to do my own research first and your stats and site make that possible. Thank you.
With respect to Don, presumably as head of a real estate investment network he has a vested interest in seeing prices go up, so it is interesting that the media gave him an outlet to try to influence prices.
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Mike Fotiou says: I appreciate your comments! When the time comes, I look forward to working with you
Mike – Keep up the great work, this is truly one of the best real estate blogs in Canada. Great balanced insights into what’s really happening on the ground.
Are you going to be treating us to your thoughts on what’s happening with pending sales? Based on recent data I’m predicting the median SFH price will hit $1.2 million in August but only from 9 sales.
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Mike Fotiou says: Thanks CDU! It’s currently just a different sales mix caused by the influx of lower priced homes selling prior to the rule changes.
Good post Mike. I would like to add one from 2007:
“Campbell said he expects Edmonton home prices generally to rise nine per cent in 2008 and 12 per cent in 2009. Homes that benefit from transportation improvements will outperform the market by an additional 10 to 20 per cent, he said.”
http://albertarealestatewatch.blogspot.com/search/label/Don%20Campbell
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Mike Fotiou says: Thanks Bearclaw! I appreciate the research you continue to do on your blog.
mike,
I’m with Superjer2000.
your hard work will hopefully be rewarded when people using this site will call when they need to sell or buy a place.
When the fixed interest rates eventually go up, i will be looking to buy.
I’m tired of competing against homes that are worth 700K+ with kids making 70K/yr with no equity.
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Mike Fotiou says: Your sentiments were shared by some others that are in a mostly cash position that don’t want to be bidding against buyers that might be highly leveraged. They are patiently waiting as well.
Mike,
Its kind of demoralizing statement from Don for your extraordinary efforts… But my support is for you… Rear view mirror is very important for safe driving… Anyone will drive seeing rear view mirror is insane… I think Don’s views fall into that category… Your statistics is a valuable info for making my lane changes (renter to home owner)…
As BearClaw and other posters rightly pointed, Don’s report has vested interest in his business unlike Garth Turner who has nothing to sell but just to share his views (I know you are annoyed by some of Garth’s posts, but for me, he taught a variety of investment strategies through his blog…afree of cost).
Keep up your great work Mike… I will come to you as soon as I am ready to
buy a property.
Warm Regards….
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Mike Fotiou says: Thanks Saami! I’m looking forward to it
I am very thankful for this blog and your hard work to keep us informed. Although it is a fraction of the total data that CREA has within the MLS database, it is the best we have thanks to you and Bob Truman.
Do you have a “tip” jar?
Don is a clown – I deal with his types all the time in the oilsands. Ego.
Thanks again!
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Mike Fotiou says: Thanks, Yogi. Referrals are my tip jar, so if you know anyone looking to buy or sell, I would appreciate you directing them this way.
I am not angry against Don Campbell…He is a pumper and he is doing what he intends to do…I am angry with the Herald… What are they , Idiots ?? Don’t they see the conflict of interest in Don Campbell , asking for and publishing his comments… ???
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Mike Fotiou says: They also interviewed Garth Turner when he came to Calgary…they cover stories from each side of the housing market debate.
Hi Mike and posters,
I read your block daily and check for developments “on the ground”. I work as a researcher and in my daily dealings with people, I am amazed at the level of euphoria regarding house prices. Everyone has an opinion on housing and when I gently probe for the reasoning behind assumptions, expectations, etc., people don’t really have any understanding of the confluence of factors such as low interest rates, low barriers to get financing, mispriced risk due to CMHC backing of securitized mortgages, citing supposedly foreign buyers (where is the data?). I don’t know what the future will bring, no one does but…
Housing seems to have become a very thorny political and economic issue so we may see every and all attempts to keep the show on the road: increased CMHC balance sheet, interest deductions, banks getting around lending rules, multigenerational mortgages, etc. No one knows what arsenal they have at their disposal. Politicians and the financial elites could make this situation even more unstable via these and other policies.
I think it would be a mistake to keep this mania going as
further financialization of our economy may lead to a narrower and narrower slice of population benefiting (i.e., rentiers);
too much dead capital sitting unproductively in a costly asset that does not produce anything of value in aggregate;
no incentives to invest capital in other, more productive ventures since return on investment in housing is juicy and perceived as riskless;
increasingly greater portion of (stagnant!) income going to service costly, lifelong loans
add a reason of your choice….
I guess I would really like to see a discussion regarding the consequences of the current monetary and fiscal policies. Not just the constant rehashing of bull versus bear opinion I see everywhere. In the meantime, tangible gold and silver seem like a safe (er) place to be in terms of preserving value. But the rise in gold and silver price sure scare me and I wonder what they are signaling.
Long post but I am a bit worried and wanted to throw this out there for the crowd…
Mike, I am not sure if I will ever lock into buying a house here – too volatile for me but have been sending friends to your site all the time. Thanks for the great work you do!
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Mike Fotiou says: Thank you very much for your comments – hopefully some readers will respond to the points you brought forward. And I really appreciate you sending your friends to my site – thank-you!
Mike, it’s nice to see a balanced view from you. If I would be in Calgary you would be my realtor… We need more honest realtors like you.
Mike,
What your thoughts are about Calgary Housing Market Bust in newspapers and media nowadays? Are you concerned? Calgary housing market maybe heading for soft landing later in 2011 due to forward homes purchasing in March 2011. What do you suggest building a new home especially in new communities such as Sage Meadows NW of Calgary?
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Just an update on Don’s forecasts:
He forecast an increase of 5-7% in average prices in Calgary for 2011 (article quoted above)
Now that 2011 is in the books we see that SFH average price increased only 1%, while the median actually dropped. Not only that, but both the condo average and median prices dropped in 2011
He also said:
“Due to low barrier of entry for listings on MLS, there will be more listing coming on”
In 2011, new listings were down 12% from 2010.