Saturday, September 29, 2007

Weekend Open Thread

Thanks to all of you for a wonderful week of useful discussion, informative links in the backdrop of a changed real estate market in Alberta.
Some thoughts for the weekend:
  • The rental market has changed so much that the nouveau 'landlords' are now calling potential tenants for viewings. This is based on first hand experience. Apparently, the 'investors' can't sell or rent these properties. And remember, these are still great times for Alberta, at least on paper.
  • Despite that, fewer people are moving to Alberta and net migration to the province has been way below levels seen last year. Yet, they are still building in both Edmonton and Calgary as if tens of thousands of people will be moving here every month.
  • An interesting theory challenging 'peak oil'.
  • Inventory continues to climb. Comfree in Edmonton has stagnated at around 3100, while MLS continues to grow and is now reaching around 9800. Calgary is pretty much the same with over 12,000 properties for sale.
  • It still makes no sense to buy. Typical properties are selling(or not selling but on sale for!) for 250 to 300 times monthly rents. This is despite the 'massive' increases in rent and other positive factors in Alberta.
  • If you go back just six months and what were discussing here, or to Calgary Contrarian site before that, you'll find that it's playing out pretty much as we had all expected. It's a classic bubble in Alberta, although a more fragile one, as compared to the one in say Vancouver. And it is not unexpected. Prices went up by over 100% in so many cases in less than 2 years. And now when they are falling, a lot of people are shocked. Expect this shock to multiply several folds when the January/Spring/Summer turnaround does not arrive.
  • Why do people call the bears as pessimists? While reading comments on Sheldon's blog, I was characterized as a pessimist. Why is that the case. Is hoping for lower prices being a pessimist. We all are very happy when we experience a drop in prices of things we might buy. As per the Austrian school, prices of goods and services should fall in an economy where sound monetary policy is in place and productivity is improving. Yet, we continue to experience modest central bank created inflation in normal times. But in times such as these, when real estate or other bubbles are created to fuel the economies by injection of consumer spending and debt, the masses are actually robbed of their wealth, with very few people actually even realizing the bigger story. They are too busy participating in the buccaneering of cheap debt, flipping and making money using their 'investing talent'. On the human side of it, a lot of families are still cramped in 30 year old townhouses and they would love to move to better places that are more affordable. Hoping that they can get a better place to live in- Is that pessimissm?
  • Have a wonderful weekend everyone!
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