I got this comment on my blog a few days ago.
"....That aside, I don't know how you can suggest that Edmonton is going to have massive price increases. Considering there is already loads of inventory, concerns about low gas prices, lack of affordability, wages have not kept up with house price increase, rent vs. buy economics are in favour of renting and brutal investor rental property P/E ratios. Really, why should someone buy? Come on and quit lying to us about further price increases.
By the way, Calgary house prices have NOT lifted out of a plateau. They have declined for past three months losing about $33,000 from their peak. Stats are at www.bobtruman.com
This is more like 1984 than 2004 with real estate agents STILL claiming massive price gains. The economic climate has changed as mentioned in my previous post. So quit equivocating what happened in 2004 to what is going to happen in the next year." Dustin
I think it is a common question/fear people have. My reply turned into a 4 page simple outlook of Edmonton and Calgary's real estate markets and Alberta's economy.
Hello Dustin,
Thanks for sharing. In summary what I'd say is that, without a doubt the Edmonton and Calgary markets will continue to rise steadily overall in the next 5 years plus. Yes, there may be months when the prices dip and months when they climb quickly up. A healthy market has these peaks and valleys.
Look at the graph for Calgary below, it's not a straight line up... nor is it a straight line down. With over $173B+ of projects already underway or committed for the next decade- you bet the growth will continue, Alberta has a population of only has 3.4 Million people and the highest growth rate, youngest population in Canada. Did you know that Alberta is estimated to grow by 80,000 people per year for the next decade?
Check out this link at the UOA regarding population.
http://www.uofaweb.ualberta.ca/govrel/news.cfm?story=57892
Are people leaving Alberta for sunnier shores? Yes, well you got me there... A whopping 800 people left Alberta for Saskatchewan this year. (At least those Saskatchewan billboards paid off)
The housing market it strong and that strength is based on the economy: the long-term view of it.
Hope this helps!
Calgary Real Estate Market Overview
INVENTORY HITS HIGHEST NUMBER FOR 2007
Calgary’s total MLS® month end inventory for the month of August 2007 was 9,634, showing the highest level recorded this year, according to figures released by the Calgary Real Estate Board (CREB®).
Single family Calgary metro new listings added for the month of August totaled, 2,837, a 9.75 per cent increase over the 2,585 new listings added in August 2006. This is an increase of 11.34 per cent over the 2,548 new listings added in July 2007.
Single family Calgary metro properties changing hands in August were 1,314, a decrease of 2.01 per cent from the 1,341 recorded in August 2006 and a decrease of 12.10 per cent from the 1,495 sales recorded last month.
The median price of a single family Calgary metro home in August 2007 was $430,000 showing an 11.40 per cent increase over August 2006, when the median price was $386,000 and showing a 1.15 per cent decrease from last month when the median price was $435,000. All Calgary Metro MLS® statistics include properties listed and sold only within Calgary’s City limits.
The Calgary metro condominium market showed a slight decline in August with new listings added totaling 1,186, an increase of 22.65 per cent from August 2006, when the new listings added were 967. This is a 6.18 per cent increase from last month when new listings added were 1,117. Calgary metro condominium sales in August 2007 were 598; a decrease of 11.93 per cent from August 2006, when the sales were recorded as 679 and a 0.83 per cent decrease form last month’s sales of 603.
“Our inventory has remained high through August; however, total MLS® sales have stayed fairly constant with a drop of only 4.2% from July. The market has shifted slightly to out of town properties and although the average sale price of single family homes in Calgary has dropped by about 3.9% from July, the median price has eased only 1.1% from July. Together it’s an excellent market for buyers and sellers, with sellers getting good prices for their homes and buyers having an excellent selection to choose from”, says Ron Stanners, President of the Calgary Real Estate Board.
The average price of a single family Calgary metro home in August 2007 was $485,914, and the average price of a metro condominium was $320,790. Average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighbourhoods or account for price differentials between geographical areas.
Source: Calgary Real Estate Board
Calgary real estate price increases:
Average Calgary Real Estate Prices for last 13 months
Average Calgary Real Estate Yearly Prices for 1985 to 2007 YTD
Please note - statistics reporting changed in May 2007 - comparing present data to data from before May 2007 is not accurate for the 2 graphs directly above.
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My comments to those individuals are (Are you buying an investment for 5-7 years or are you trying to steal something and sell in a year?)
Real estate is not a short term investment, and was never meant to be ... the speculators and flippers should be a small minority ... when close to 30% of homes are purchased for that reason the market responds and flattens or goes down.
Wish more people took economics.
What is the source of these statistics? I don't believe that they are accurate. I suspect that the number 20% is the percentage of mortgages in default that are subprime.
I'm not sure of the numbers but these stats do not look right. I'd be interesed in the authority.
Allen - Thanks for the comment. The length of your outlook is the difference between speculation and investing of course the exit strategy is crucial too. You could do a short flip in a certain market and be pretty savvy about it. Other times you may be playing with fire.
Lenn - The first statistic can be found here
"In mid-2007, more than 21% of U.S. mortgages were subprime compared with only 5% in Canada -- all of which are insured. According to the Canadian Bankers Association, a record low number -- 0.24% -- of mortgages are in arrears." National Post Canada
It goes on to say that 1 out of 8 subprime mortgages are in default.
"Recent subprime loans were rife with risky terms — interest-only payment options, penalties for paying off the loan early (which makes it costly to refinance into a better loan), and low documentation requirements, meaning borrowers needed little paperwork to verify that they could, in fact, afford the loans. (These so-called "liar loans" accounted for about 58 percent of all loans in 2006, according to First American LoanPerformance).
The second statistic - should read many of which are interest only. Thanks for catching that
Hi BearClaw,
Thank You for your comment. Here is an excerpt from Don R. Campbell`s article in the Financial Post.
"Subprime does not mean the interest rate is below the prime lending rate. It means the borrower is below what is considered a prime candidate for a mortgage. The confusion has caused many Canadians to panic unnecessarily that the so-called subprime crisis in the United States will spread to them because their mortgage is at a floating rate below the bank's prime lending rate.
They can relax. Canadians are not facing a subprime mortgage crisis. There, borrowers with little or no income, little or no equity and a history of not paying their bills have been handed variable-rate mortgages they cannot afford. These loans are high risk -- hence, subprime -- and in early 2007, one in every eight U.S. subprime loans was in default. Projections are this number will double by June, 2008."
To read the full article Click Here
I appreciate the way you responded to this person's negativity. Thankful and supported your thoughts with facts. Very professional. Have a fantastic day!
Thanks Christin,
People are often negative when they don't have all the information. I think it is human nature to say "That's impossible!" more quickly than "How can it work/ can I make it work for me?"