We are experiencing the best of the times in this province. Looking around, there are signs of prosperity. Everybody is happily employed or has the best shot they ever had at getting some jobs. Some people have high paying jobs. Lending is still pretty lax and people are still getting their HELOCs based on elevated values of their ‘residential portfolios.’
Yet, the houses are not selling at the pace witnessed in 2005, 2006 or 2007. The sales to listings ratio is close to the lowest levels in many years in both
Perhaps, we are slightly past the best of the times in this province.
While the media and the usual suspects are trying desperately to make a trend of an almost statistical aberration in the change in median prices (average isn't the favorite of creb itself), the reality is that if you are a home owner trying to sell your property, you have to wait for a long time to sell your property, if you are able to sell it.
There’s nothing unexpected here.
I won’t spend too much time dissecting the numbers here because it has already been done and also because it’s easy to paint the numbers as ‘half full’ or 'half empty', based on your market perspective. There's nothing conclusive yet that the bubble is deflating.
However, as honest 'students' of markets and not paid shills or 'professional' salespeople , we can look at trends and try to draw some conclusions from them.
The most important trend that hasn’t changed at all is that of continuously rising inventory and falling sales.
As per old criteria, Calgary had only 3500 or so properties for sale in January 2007 and there were over 2631 sales. A hot market.
This year, at month end, Calgary had over 8093 properties and only 1800 sales. That's almost 4.5 months of inventory and it's only January. This is without counting properties on WeList or other FSBO channels.
The price movements do not adequately reflect what the sellers are experiencing as expressed in the days of market statistic.
One of the most unusual things about the
But the peak we reached in
The important questions are- How will things proceed from here?
The second scenario, the more likely one, is that there’s no major ‘oil sands shock’ and things just begin to implode-like we have been witnessing since last summer. As mentioned earlier, we still have the best of the times in the province, yet people are not lining up to buy homes. Last year, when the prices were this high, there were multiple bids and the ‘investors’ just couldn’t get enough of
We have been looking at renting a bigger place for ourselves and the last few days we have been checking out places for rent. We have been to over a dozen places and every single house was bought either as an investment property or as a consequence of an upgrade. It’s anecdotal, but it clearly indicates a lot of speculative activity and multiple ownership. Speculation that was (and still is in some places) a global phenomenon. In places as far away as Southern tip of New Zealand, to the bustling cities of china, suburbs of Indian metros, resorts and villas in Spain, flats in the UK, condos in Miami, houses in Phoenix and closer home in Vancouver, Victoria and Saskatoon, it has been the same story. Funded by lax lending standards, abetted by the almost non-existent checks and balances in the financial systems, fueled by the ‘getting something for nothing’ mentality of the crowds and the greed of almost everyone involved in the real estate value chain, we saw a massive real estate bubble globally. Yet, every place has its story to cover up the sordid tale of speculative mania. So you don’t need oil sands or anything else to be a part of this frenzy.
What we saw in
The number of properties under construction is still close to an all time high and they are still building more. The rental market is also getting pretty competitive but there’s no fear or desperation yet. People still have jobs so properties are still getting rented out, even at a monthly loss.
So, is it possible that a spring rebound can occur? Weirder things have happened. Nobody can figure the mysteries of Mr. Market. But based on the inventory levels, falling sales pattern, the extent of speculative activity and the ongoing credit cycle contraction, it doesn’t look likely.
Once again, this is not meant to be a prediction. Make your decisions based on your critical abilities and knowing fully well that you are making a 25/30/40 year commitment to live in frozen tundra (sorry couldn’t resist this after the weather of last 10 days). If you are professionals not dependent on the energy sector, there are better and warmer options out there!
I’m busier than usual and if anyone (bull or bear) would like to write a guest post, please feel free to drop a line to me at albertabubble@gmail.com.
Finally, a request to everyone to keep the tone civil and arguments logical. Remember, this is a forum to give bulls and bears 'equal opportunity' to make their case and present their side of the story without making any personal insults or ad hominem attacks. It will give the readers a good chance to make decisions without having to scroll through scores of meaningless diatribes and flame wars.