Monday, August 13, 2007

Edmonton overvalued by 30%?

Well, given the recent turmoil in the markets and the sunny day forecasts by numerous banks and financial institutions in the past, should we really trust the Merrill Lynch study that says Edmonton is over valued by 30%?
May be 30% is the right number, but given the lack of actual link to the study and the basis on which they define the 'true value', it's a tough call.
Just for a little perspective, visit this site of an Edmonton realtor. For some reason she has properties from 3 or 4 years ago still listed at the then selling prices. Look at some of the prices. 1500 sq feet Semi-detached homes selling for less than $150k. Even going as far back as 2005 and early 2006.
It's just amazing how people tend to lose perspective on where things were just a year ago. Or two years ago, never mind going any further back. Here's a refresher on the Edmonton home prices again:

Will prices fall by 30%? Perhaps. Will they not fall at all and only remain the same for the next 10 years and let inflation do the trick? It's a possibility. Will they go back to the levels seen in 2005 or 2004? Why not?
Does the above graph provide any answer on how hard the fall can be?
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