Not Everyone’s Home Value is Increasing

I wanted to shed some light on what is happening in the market place. Some of you may have seen this Calgary Herald article today about the number of listings in Calgary are higher by 43.3% than last year. Now granted last year Calgary was in a strong recovery mode with the rest of the world. After what happened in fall of 2008, and the US banking and mortgage system imploding, we were all in recovery mode. So with this stat of the number of listings increased by 43% shouldn’t mean much right?

Let’s look at it this way. Last year over Christmas there was nearly 12 months worth of inventory on the market and in March, Calgary was down to just under 6 months. As of March this year, we are under 4 months. In Calgary, a balanced market is between 2.5 months and 4 months worth of inventory. This is called the absorption rate. Anything above 4 months is a buyers market and anything below 2.5 months is a sellers market. So currently we are in a balanced market in Calgary, however if your looking to buy a home in Calgary, then there is plenty to pick from.

So we have a lower absorption rate than last year in March, however we now have an increase of 43.3% of listings than this time last year. Reason that the absorption rate is still low and hovering around the top of a balanced market and what makes the big difference is that there are sales happening. Compared to March last year there is an increase of 27.3% in the number of completed sales.

So why would I say that not everyone’s home value is increasing?

With the increase in the new listings over the past month or so, this has created some crazy competition for certain price points in Calgary. These price points typically sold very quickly and for good value in the past. However with the flood of properties in these ranges, if your wanting or needing to sell your home in Calgary, you are needing to stand out from the crowded dance floor.

Thus, not everyone’s home value is increasing.

As well, this isn’t just happening in Calgary either…

September 2008 Market Review

September has been a good and bad month for real estate.  What I mean by this is that the Single Family market has recovered some in the absorption rate to 4.7 months of invetory from 5+ last month, and the Condo market has gone over 6 months of invetory.  For single family, this is a good thing… what I mean is that it is now a strong buyers market and prices should not decrease and such great speed now.  But rather float around where they are currently at.  For Condos on the other hand, the prices will probably continue to drop much quicker.

The Condo median price has decreased 11.67% from September 2007 to $265,000 where as the Single Family homes median price has only decreased 6.06% to $395,000 from the same time last year.

Advice to Sellers:

My advice to sellers continues to be to emphasize the critical importance of pricing your property for the new reality. It is crucial to get ahead of the decreasing prices in this market. Most sellers instinctively want to be on the higher side when choosing a list price – it is natural to do so. To be honest, it is also a mistake in this market. If anything you want to be on the aggressive side with respect to list price in this market.  There are many reasons for this, but the biggest one is competition.  You as a seller will have a number of homes that you are competing against, and you need to make your home stand out to the potential buyer.  Most buyers the we work with day in and day out are looking for one thing… a good deal.  It is human nature to want to get a deal, and rightly so.  We all want a deal!  As I have talked about before as a seller, you need to put your foot in the shoe of a buyer, and offer what they are looking for.

Advice to Buyers:

BUY… Right now there are great opportunities to purchase.  With the banks starting to tighten their lending, and prices in single family homes starting to stabilize, but still remaining a strong buyers market, there are some great deals to be had.  If you are looking in the Condo market, prices will most likely continue to fall further, as the number of new condos coming on the market via builders, and speculative buyers will rise and in turn create a further downturn in the prices in condos.

Below are a couple graphs that you may find usefull.

Calgary Home Prices Drop, but Market Still Strong

A survey by a national real estate firm shows average house prices in Calgary in the second quarter of this year declined in three categories – detached bungalow, standard two-storey and standard condominium – compared with a year ago, while national averages all increased.

According to the House Price Survey and Market Survey Forecast report released today by Royal LePage Real Estate Services, the average price drops in the Calgary market were 4.7 per cent for a detached bungalow (to $438,122), 6.0 per cent for a standard two-storey home (to $437,744) and 5.0 per cent for a standard condominium (to $285,033).

The Edmonton market saw bigger price plunges by 14.5 per cent for a detached bungalow ($320,000), 12.4 per cent for a standard two-storey home ($348,571) and 14.2 per cent for a standard Condominium ($226,000).

Rest of The Article