Weekly Market Update – February 3, 2009

Can you believe it… January is already over… Anywho!

Over the past week, the listing count in Calgary has decreased.  This is a good thing, especially when it is mixed with the number of sales increasing.  The median prices for both condos and single family homes have stayed roughly the same as last week with condos at $248,000 (up $1,000) and single family at $377,500.  As well the average days on market have decreased and both condos and single family are sitting at 62 days on market.  With the prices staying where they are at, some would say that the market is starting to stabilize.  I do hope that this is the case, but we will need to have more than a couple weeks of data to see this.  If prices remain the same into the end of February time frame, the tides may have calmed.  We will have to wait and see.

Same as last week, many of the places that buyers are seeing are not quality listings, that do not show well.  This is one area that we try to stand out from the crowd in, and when buyers look at our listings we get many comments that the home viewed was in impeccable condition.

If you are considering buying in Calgary, right now is a great time to buy, as there are some highly motivated sellers out there.  But on the flip side, if you are needing to sell, you need to market your home a certain way, and price it properly, or it could cost you more in the long run.

Thanks for checking out our blog, and we hope that you find it informative and helpful in your real estate adventures.

Robert Shiller ‘Popping the Bubble’?

Financial Post

Jacqueline Thorpe’s interview with Robert Shiller sparked a lively reader discussion on the value of Canadian home prices. Shiller, an economist at Yale University and the namesake behind the Case/Shiller Housing Price Index, predicted both the tech and the U.S. housing bubble. He said Canada could see a similar housing bust, particularly in the Calgary and Vancouver markets.

Here’s a selection of some of those comments from readers, some slightly edited. You can find the original comments attached to the online story.

I would like to say that the first three comments below are exactly how we at The Calgary Real Estate Blog view the economy and in Alberta specifically.  We will be able to weather the storms that are brewing to the south as the economy/housing is different in Canada.  We have not had Sub-Prime lending and selling the mortgages out the back door to third party investors.  Our government has now taken the 40 year mortgages and zero % down away, which was a good plan, but on the flip side, would have never taken us as far as our friends to the south.

Summer6727: People like Mr. Shiller are the very people that create fear with the lack of confidence. Fear drives the markets, which is, sorry to say our own doing by the way of technology, via email, TV, word of mouth. I sometimes think people like Mr. Shiller love to watch people panic and worry. To see what is unfolding in the U.S. makes others look at the current situation within and adjust.

Rockie Bear: Summer6727 is dead on. The American economic wizards frequently don’t understand their own system let alone the country next door. This type of commentary shouldn’t be published in Canadian newspapers.

jscheema: Mr. Shiller: We didn’t do any sub prime lending in Canada as was done in U.S. House prices rose steadily not doubled in just six months as in many parts of California. Canada is far better than the U.S. on employment, wages, interest rates, financial institution liquidity. Please do not cause panic and … fear mongering among Canadian people.

vancouver guy: Here in Vancouver I am witnessing people with part-time jobs and not much in terms of income put 5% down on $300,000+ properties. And sometimes the 5% down payment comes from racking up the credit cards. How is this not subprime? And it is all with 35- or 40-year mortgages. How is this sound borrowing when those 40-year mortgages come at odds with basic human life-expectancy data? “Please God, just one more bubble before I die.”

IndexTrader: I can’t understand folks who think that the housing meltdown in the U.S. will mysteriously miss Canada. These bubbles are global. Blaming Robert Shiller for the problem is like blaming the water for a sinking ship that hit a reef. Global asset bubbles have impacted nearly every major and minor economy around the world. The greater that a market appreciated, the greater the correction it will feel. Unfortunately, the fact that we don’t want the meltdown has little bearing on the outcome.

What do you think?  Will the US melt down effect Canada, specifically Calgary and Vancouver?  In Calgary we haven’t seen super spikes in prices over extreme short periods.  If you look at a past post about the prices over the last few years, the graph there shows that since 2000 we have had steady growth with some small jumps, which will happen in a heated economy like Alberta.  The GDP of Edmonton and Calgary region is one behind China.  This is a strong economy.

What do you think?

Is It A Bubble? Or Is It About To Burst?

This is a great article from Macleans.ca, written by Jason Kirby in Dec. 2007, that talks about what is happening in the Alberta and Canadian Real Estate Marketplace… it’s a good read! It takes into perspective of what is truly happening, takes out thy hype, and looks at the fundamentals!

Enjoy!

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First-time buyers are wondering whether they’ll ever be able to afford their own place. Some wonder if they should buy now, or wait in hopes that prices will fall. Those who’ve already bought worry that they’ve paid too much — and will wind up overextended if interest rates jump — or that they’ll never be able to move up to something bigger. Even house-rich Canadians whose equity has soared in the frenzy fret that they can’t take advantage of their position — where could they afford to buy if they sold now? And what if you’re counting on your house to finance your retirement, and its value plummets? At the same time many fear the carnage in the U.S. housing market will make a collapse here inevitable. So with one eye on soaring prices here, and the other on the troubles south of the border, you can’t really blame Canadians for feeling like they’re living on the edge of a cliff.

Yet step back from the real estate listings for a moment and things start to take on a different hue. Yes, prices in Canada have risen dramatically in the last few years, but those gains are nothing compared to what’s been experienced in other countries, or even here, in years gone by. What’s more, thanks to continued low interest rates and new types of longer-term mortgages, housing affordability in some big cities remains decent compared to what we’ve seen in past booms. In fact, the evidence suggests that in Canada, if anything, we’re not at the top of the market and there’s still room for house prices to move higher in certain parts of the country.

There’s no question the housing market has been on a wild ride. The average Canadian family has seen the value of their home jump more than 10 per cent a year for three years in a row. Prices overall are up 60 per cent in the last five years. But national averages never tell the full story. While prices in cities like Ottawa and Montreal have grown slowly, house prices in Toronto are up about 86 per cent over the last decade to an average of $394,000, while the average home in Vancouver, at $570,000, has jumped 73 per cent since 2003 alone. In Oilberta, the average Calgary home has doubled in just four years to $432,000.

To buy at those prices, Canadians have had to pile on mounds of new debt. Between 2000 and 2006 the total amount of outstanding residential mortgages ballooned by 62 per cent to $694 billion, according to the Canada Mortgage and Housing Corporation, and many expect that figure will top $800 billion this year. It used to be said you couldn’t talk to a Vancouverite for more than five minutes before the topic of real estate came up. Now that applies to just about everybody.

But as Canada booms, America’s housing pain hangs over the party like a dark cloud. Across the U.S., house prices declined between the second and third quarters for the first time in 13 years. In specific markets in Michigan, Ohio, Florida and California, home prices fell as much as five per cent. There are some who predict — or is it pray? — the drop is just a brief pause before bidding wars erupt once again. But they are increasingly in the minority. Moody’s, the debt rating agency, predicts U.S. prices will fall by 15 per cent over the next two years as the market softens. Once-hot urban centres in California and Florida could even tank by more than 30 per cent. “In the United States, they basically went from double-digit price growth to an outright price correction in about six months,” says Craig Alexander, deputy chief economist at TD Bank. “That’s a classic bubble bursting.”

What’s driven things in the U.S. was a parlous mix of overheated financial markets, a culture of debt accumulation, and a heaping dose of pure speculation. The problems began a few years ago when Americans with poor credit and no cash for down payments were lured into the housing market by lenders offering subprime mortgages. Lenders had many tactics, but the most popular involved offering adjustable-rate mortgages with absurdly low initial payments. Many buyers jumped in, only to run into trouble once rates were cranked up. Borrowers eventually began to default on their mortgages. As many as two million Americans may lose their homes and pull the rug from beneath the housing market. As Mark Zandi, an economist at Moody’s, said recently: “This is the most severe housing recession since the post-World War II period.”

No one would dare claim the U.S. meltdown doesn’t pose at least some threat to the Canadian economy and, hence, house prices here. Our two economies are closely linked. If America falls into a deep recession, it could bring global economic growth to a standstill. But that’s by no means inevitable. Emerging markets are still strong, and that’s driven commodity prices. With its bounty of minerals and resources, Canada has seen record low unemployment. Even in Ontario, where manufacturing has been hard hit by the high loonie, the province has added jobs over the last year. The situation bodes well for continued strength in the housing market, assuming employment remains strong.

But the biggest difference behind the situation in Canada and the U.S. has to do with fundamental differences in the two markets. At the peak of the U.S. housing market, sketchy subprime loans accounted for more than 30 per cent of all American mortgages from 2004 to 2006. In Canada, they never made up more than five per cent of the mortgage business. That’s largely due to the buttoned-down style of Canadian financial firms and borrowers. But it’s also because Canada’s big banks control so much of the lending market. Absent the aggressive competition America’s financial services sector is famous for, there just never was the urge up here to pursue the riskiest slices of the market.

Instead, the main driver of our boom has been this country’s firmer economic fundamentals, say analysts. There are speculators in the market — there always are. But a tight labour market has led to rising incomes, allowing people who never thought of owning a home to claim a plot of land for their very own. “I can understand the concerns people have about the Canadian housing market,” says Alexander. “But I think what’s driven things here is fundamentally different so the risks are far less.” Adds real estate analyst Frank Clayton: “There is no bubble.”

Click Here to read the whole article!

Would love to hear your thoughts on this market place, as well as this article!

Regards,

Jared Chamberlain
www.ChamberlainGroup.ca

http://www.adminor.info