Friday, November 16, 2007

Weekend Open Thread....

Some thoughts for the weekend:

  • We are living in interesting times indeed. On surface, everything seems okay with the Alberta (Canada) market still showing YOY gains. Of course, the MSM conveniently forget to mention how prices have been falling in Alberta for the last several months. That's obviously going to change at some point in the next few months if the 'bubbleheads' are correct and the first YOY declines are registered. But then it will passed on as a mere 5% fall in prices after several years of gains. can make the numbers sing on pretty much any tune you want if you have a musician who is skilled enough.
  • Meanwhile, the hopes for new year rebound are fervent, even though misplaced. My flipper friends have all rented their places (at steep cash flow losses) and will sell them next year when 'market corrects.' It's not hard to understand this hope based on the behavioral pattern (just look at last 10 years or so), but certainly difficult to follow if it's based on some facts of the dismal science that touts supply and demand as its core pillars.
  • Why? Because unless the number of expirations increases very significantly, both Edmonton and Calgary will be entering the new year with over 10,000 properties for sale. That will probably be amongst the highest inventories for January. To put this into perspective, we entered this year with fewer than 3000 properties for Sale in each city.
  • Edmonton inventory hasn't budged much despite a big seasonality factor that should have kicked in by now. Current MLS inventory is over 8800 and COMFREE has a stubbornly high number of 3100 or so.
  • Meanwhile, the biggest money shufflers on the planet, see heightened risks of US recession due to the continued credit problems. But obviously, Alberta is an island of its own. We have oil sands. Credit crunch, no worries. US Recession. Who cares? Rising costs, no hassles.
  • And attempts to sell the Canadian variety of junk are failing miserably. The ABCP market is still frozen and in the last few days drew bids of around 50 cents to dollar. But this is only going to increase the risk appetite of lenders to shelve out more money for buying a 1200 sq ft mansion in North East Edmonton for $400k.
Thanks again for valuable links, comments and other interesting insights.
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