(Mike Fotiou says: This is an opinion article.)
To quote Mugatu in the 2001 critically acclaimed blockbuster, Zoolander: “I feel like I’m taking crazy pills.”
This time, it’s CBC News at 6 (December 10, 2008) that wins the “objective journalism” award. If anyone saw the piece last night and has the link to the video, please post it. In the meantime, here’s a transcript:
CBC Host: The Bank of Canada key lending rate is now at 1 1/2 %, the lowest it has been in half a century. Mark Carne is trying to jump-start the sluggish Canadian economy, and as Peter Ackman tells us, that strategy appears to be working in the Calgary Real Estate Market.
CBC Reporter: For the last 5 weeks new mom Christine Baine has been focused on her son. Investing hasn’t been a priority, but now with falling interest rates, Baine is seeing an opportunity in real estate to secure (her son’s) future… Real Estate agent KM has been run off her feet. Instead of the usual winter slowdown, December has been the start of a real estate frenzy.
Real Estate Agent: Our phone is ringing off the hook. People seem to be getting off the fence and they’re ready to buy.
CBC Reporter: Property values have dipped over the last year in Calgary. 6% for SFH’s and almost 10% for Condos. But Agent KM says that’s not the only reason for the resurgent in sales. She says the BoC cutting interest rates has opened the doors for buyers.
Real Estate Agent: Whether you’re an investor, or just wanting to get out of being a renter, moving up, trading up, this is awesome time to purchase.
Mortgage Broker: Our rates are the lowest they’ve been in years and we’re anticipating that to get even better.
CBC Reporter: This mortgage broker says unlike markets in Eastern Canada, he expects a HUGE rebound in Calgary’s real estate prices this spring. And says if they shop around buyers can even find mortgages at lower than advertised prices.
Mortgage broker: The stock market isn’t the place to go right now. A lot of financial planners wouldn’t like hearing that too much, but I mean that’s a fact. If anyone has any liquidity right now, they are looking at real estate.
CBC Reporter: Now both mortgage brokers and real estate agents agree the safest investments are still right here in Alberta. They’re telling their clients to avoid some Canadian cities and most of the US because they say they still haven’t hit rock bottom.
Where do I begin? I’m going to update the daily MLS stats. Maybe pending sales, and sales spiked yesterday and I was just unaware of it.
For the record, I was not polled when the reporter made the blanket statement: “Now both mortgage brokers and real estate agents agree the safest investments are still right here in Alberta.”
(more to come…)
Alright, I’m back and I have just finished updating the Calgary statistics for yesterday.
I was wrong, sales did surge yesterday. Condos sale rose by an incredible 37.5% on Wednesday over Tuesday, and over 400% percent from Sundays sales total. (Total sold yesterday: 11. Tuesday: 8 )
It’s too early to say what effect, if any, the rate reduction that happened just this week has had on real estate. In any case, there hasn’t been a “real estate frenzy.”
Month-t0-date (December 1-10, 2008) 173 SFH have sold. Last year at this time, that number was at 305.
Month-to-date (December 1-10, 2008) 82 condos have sold. Last year, that number was at 141.
It’s shaping to be one of the lowest sales level that a December has seen in Calgary.
“This mortgage broker says unlike markets in Eastern Canada, he expects a HUGE rebound in Calgary’s real estate prices this spring.”
StatsCan, New House Price Index : Edmonton recorded a 12 month drop of 7.7%, which was the largest annual decline since May 1985, while Calgary recorded a year-over-year decrease of 1.6%; the largest annual decline for this metropolitan area since November 1991.
Bank of Canada warns of possible mass foreclosures Calgary Sun, December 11, 2008
Calgary New Home Prices Record Biggest Drop in over 17 years Calgary Herald, December 11, 2008
Bank of Canada fears banks will tighten credit further Calgary Herald, December 11, 2008
Calgary Housing Slump has 18 month roots Calgary Herald, December 11, 2008
Canada in Recession, Job Jitters Globe and Mail, December 11, 2008
And those are just TODAY’s headlines. If we were to take the economy out of the equation, the sheer oversupply of homes makes it unlikely there will be a run-up of prices. Even if demand were there, buyers are having a much more difficult time getting approved for mortgages.
“If anyone has any liquidity right now, they are looking at real estate.”
I’m not an investment advisor or financial planner. But common sense tells me that, as an investor, you would not tie up liquid assets (cash) into an illiquid real estate market (Calgary) where properties aren’t selling. I’m not advising on trying to “time the bottom”, however it seems that we have some way to go before that is reached.
Mortgage rates are awesome right now, but with a little patience, I believe you will see home prices that will soon be equally attractive. When that time comes, feel free to call me 🙂
If you’re planning on selling, and won’t be upset with an honest assessment of today’s real estate market, I would be happy to answer questions or assist you.
Mike Fotiou, First Place Realty is a licensed Realtor, Accredited Buyer’s Representative, Certified Condominium Specialist and Commissioner for Oaths in the Province of Alberta.