Edmonton Real Estate Blog

Weekly Update - Don’t be tricked by a bad economy, many treats await for the Edmonton housing market

Here is our update on the Edmonton real estate market. (Previous week's numbers are in brackets). For the past 7 days:

New listings: 373 (467, 367, 567)
# Sales: 149 (177, 211, 237)
Ratio: 40% (38%, 57%, 42%)
# Price changes: 375 (471, 326, 429)
# Expired Listings: 279 (166, 223, 211)
# Canceled/withdrawn/terminated listings: 33 (47, 38, 36)
Net loss/gain in listings this week: -88 (77, -105, 36)
Active listings for single family homes: 3362 (3436, 3390, 3433)
Active listings for condos: 2285 (2299, 2251, 2275)

Happy Halloween!! Hope everyone is enjoying lots of Halloween treats today. The sales have cooled with the weather, so far this month there have been 1174 sales which should put us close to 1200 for the month. We'll have the average sale prices with the monthly update tomorrow!

Edmonton Neighbourhoods: Queen Alexandra

The Queen Alexandra neighbourhood is located just south of the University of Alberta and has a number of well maintained older executive-style homes. Just over half of the homes in the area were built between 1961 and 1980.  This area is attracting a number of new condominium developments, perfect for professional couples and families. Daily conveniences are in close proximity to the Queen Alexandra neighbourhood; however you do not see the traffic hassles of the downtown area. Many of the streets are lined with beautiful mature elm tress - the area has good road access to all ends of Edmonton.

Queen Alexandra is a popular area for students because of it’s proximity to the University of Alberta campus and the commercial and cultural centre of Whyte Avenue. This popularity makes this nieghbourhood the perfect place for an investment home. 

As of the 2005 Municipal Census there is a population of just over 4000 people with majority of the population are between the ages of 20 and 34. About 80% of homes are occupied by renters. Low rise apartment buildings account for about 1418 of 2772 dwellings in the area, whereas single detached homes account for 852. The median income for the Queen Alexandra area is $59,759.

Once part of the town of Strathcona, Queen Alexandra is bordered by Whyte Avenue to the north, 104 street and 109 street to the east and west, and 70 avenue to the south. The closest neighbourhoods are among the most popular in Edmonton including Strathcona, Garneau, McKernan, Belgravia, Park Allen and Allendale.

Parks
Joe Morris Park – 10820 78 Avenue
Rollie Miles Athletic Field – 10480 73 Avenue
Southside Athletic Grounds – 7103 105 Street
Tipton Park – 10849 81 Avenue

Schools
Queen Alexandra Elementary School (pictured right)
Grade K-6
http://queenalexandra.epsb.ca/

Our Lady of Mt. Carmel Catholic Elementary/Junior High
Grade K-9
http://www.ourladyofmountcarmel.ecsd.net/

Strathcona Senior High School
Grade 10-12
http://strathconaschool.ca/

Sports Facilities
South Side Arena - 10525 72 Avenue
Strathcona Leisure Centre – 10450 72 Avenue

The Long Play

  I currently sit on an advisory board that oversees millions of dollars of investments for an insurance company. The rate of return on our investments has gone up 4.1% since the beginning of the year, even considering that the market average of the world’s stock indexes have gone down 20 – 30% in the last few weeks. 

This brought me to my thought de jour.  The Long Play.

Have you ever played chess with a partner of equal ability and you come to a point in the game where you go could go one way of the other?  This used to happen to me playing risk as a kid as well.  What do you do? You take a little longer to figure out which way you are going to go.

The markets are like that right now. I know at first I was like “damm, that’s a lot off my RRSP’s!” But then it started to dawn on me that there are opportunities available to me that I haven’t seen before, with very high quality companies. 

So then I started to think about what’s next? Inflation, deflation and other variables. So it's taking me longer to make some moves in terms of total adjustment. But the big picture is my horizon - I am in this for the lon term. That makes the world of difference and now I know what my play is.

This does relate to real estate:

• Go for quality and value. Realize that like the stock market not all stocks are good investments and not all of them are bad.
• Plan ahead. If you’re thinking about buying your first or next home, start planning ahead so that you know what your options are and what its going to take to accomplish your goals.
• Get expert advice.  Just like the advisory board I’m on - We have a professional fund manager who gives us advice and helps guide us with their expert knowledge. The same goes for real estate.

A Call to Regulate Edmonton Home Builders

Everyone has opinions on why the supply of real estate is so high in some markets. I often hear that the problem was speculators, and 0 down mortgages and the like. Well that’s great but I didn’t sell  a single speculator a property.  Sold many for people looking for a good agent on their way out, and I had maybe one zero down that I can think of. Sorry if that deflates the image of an REALTOR for some of you.

Anyway, I think for the most part the way we do things in Canada is sound. The banks here are regulated and are better then most in the world. We have a mortgage insurance provider that is the envy of the world. In Alberta you have one of the most highly regulated real estate industry’s in North America.  What is wrong then?

I’d like to suggest that there is a problem with the way Alberta home builders do business. As prices heated up some larger builders stopped building for people and start building on spec. Many suggested to me they were not selling to investors which they clearly were, and clearly they are paying the price for it now. Not that it’s the builders fault that people tripped over themselves to buy these properties that now sit empty with many inevitably heading through  the judicature process (foreclosure). 

My solution for the next time around is to have the builders and their sales forces regulated by the government.  Yep. They’ll hate that, but when someone comes into buy they should be disclosing to the person buying that they don’t owe them any fiduciary duties, they don’t truly represent them, and if they are buying a new home as an investment they should be doing a risk assessment or at least disclosing the risks. Especially disclosing that investments require timing, and that it is impossible to forecast the market conditions at the time of completion.

I have no problems with investors who are educated and who are made aware of the risks of investing.  Think about it, you can’t walk into a bank and invest $1000 (let alone hundreds of thousands) with out signing a disclosure statement and the representative of the bank doing a risk assessment.

Consider this:

• Most builders said they weren't selling to investors here during 2006 and 2007.  Yeah right.
• In my opinion mortgage fraud is rampant by a non-regulated sales industry
• There is no code of conduct.  No Mandatory disclosures.  No accountability.

What I’d recommend:

• Minimum disclosure criteria
• Required notices to buyers that the sales people do not represent them and have no fiduciary duties to them
• Investors should be required to sign disclosures that they are aware of the risks involved
• More oversight on their buyer financing activities.

I had a client who took possession of their condo just recently that was started 2 years ago. They were told at the time of signing that completion would be around 8 months from signing the contract. There’s been a big change in the market the last two years, and had the buyer known they were being lied to about the length of time to completion they probably wouldn't have invested. That's just my 2cents on the situation.

U-Haul Moving Box Exchange

U-Haul has set up an online message board for finding and getting rid of used moving boxes. I think this is a great idea! It seem like such a waste to buy new boxes when you have to move, and to just get rid of them after you've moved. Now you can find people who have boxes they're giving away on this message board, and if you have boxes to give away you can post them here for free. Way to go U-Haul!

Weekly Update on the Edmonton Real Estate Market

Here is our update on the Edmonton real estate market. (Previous week's numbers are in brackets). For the past 7 days:

New listings: 467 (367, 567, 479)
# Sales: 177 (211, 237, 255)
Ratio: 38% (57%, 42%, 53%)
# Price changes: 471 (326, 429, 457)
# Expired Listings: 166 (223, 211, 699)
# Canceled/withdrawn/terminated listings: 47 (38, 36, 68)
Net loss/gain in listings this week: 77 (-105, 36, -543)
Active listings for single family homes: 3436 (3390, 3433, 3382)
Active listings for condos: 2299 (2251, 2275, 2200)

Those cool fall breezes may be cooling off more than just the temperature in Edmonton. So far there have been 990 sales this month, which should still put us around 1300 sales for the month. The average price is sitting at $314 (up slightly from last week but still down from $324 for September), single family home average is $359 (also up slightly from last week and down from $362 for September), condo is $234 (also up slightly from last week but down from $252 for September).

All in all it's that time of year, sales and prices are cooling off as they normally do - I don't think there is anything to get too excited about here.

Last year at this time was the first time we published weekly stats...check out these numbers:

# New listings: 662
# Sales: 202
Ratio: 31
# Price changes: 603
# Expired Listings: 134
# Canceled, withdrawn and terminated listings: 247
Net loss/gain in listings this week: +79
Active listings for single family homes: 3930
Active listings for condos: 3002

Looks pretty familiar eh? Pretty surprising considering the stock market fluctuations.  More on that later.

What's Up With Mortgages?

We're getting a lot of questions lately about mortgages, so we thought we'd get an expert to answer some of them. Gord McCallum, the Broker at First Foundation Mortgages here in Edmonton has provided some answers below, and will be contributing to the blog periodically to update us on what's going on with mortgages.

Is it harder to get a mortgage these days?
The short answer is yes! If your credit is beat up, you're buying a beat up house, you've got too much debt, no down payment, or you can't prove your income it's tough to get a mortgage.  Otherwise, it's easy! 

The nature of the current mortgage market is that credit is more difficult to come by for lenders - therefore, they're stingier than they have been in the recent past because they can't afford to take any more risk.  The good news is that, for 80% of people out there, they'll still qualify easily for a mortgage.  There is always demand for qualified applicants and good homes. That is simply being accentuated because of the current economic environment.  Don't forget, lenders make money by lending money...so they want to lend it to you.  You just have to be able to pay it back.

I heard that rates have shot up!  Is this true?
Actually, not really.  Without getting technical, rates have both decreased AND increased - at the same time.  From a technical standpoint, rates have decreased...however, borrowing has gotten much more expensive, so the spreads between the true cost of borrowing and what lenders are paying have increased.  The net result is a slight increase in some rates - but nothing serious.  In fact, interest rates are still very low on a historic basis and we're likely to continue to see rates that are affordable for Canadians who have good jobs and are not carrying too much debt. 

What happens if a lender goes out of business?
We've heard this question a million times. The reality is that some banks, trust companies, and brokers have gone out of business in the US and the same could, theoretically, happen up here.  The good news is that the possibility of that happening up here is small, and it doesn't have to affect your decision making or prevent you from getting a mortgage.  If you're afraid of a bank or mortgage-specific lender going out of business then this should put your mind at ease:

• Most Canadian banks and mortgage lenders have very little exposure to the US sub-prime market
• Most of the lenders we deal with that aren't banks are capitalized with money from large banks and or large institutional investors
• The Canadian banking / financial system is the strongest in the world
• Even in the US the failure of several banks represents only a small fraction of the entire banking system and has not caused the foreclosure of homes.  (That was caused by people not making their payments)
• Most importantly these financial institutions are lending YOU the money - not the other way around.  Best case scenario?  You get a free house (not likely).  Worst case scenario?  Someone else buys the mortgage and you continue to make payments - just to another company.  Same terms.  Same contract.  No risk.

What should I do going forward?

• This too shall pass.  Always remember that we've been through tough times before and will probably go through them again some day.
• Stop reading the newspaper.  It only makes things (seem) worse and it won't make your payments for you.
• Live within your means.  If you can afford to spend or invest, there are bargains to be had out there.  If not, reduce your spending and consolidate your debt (you can refinance to do this, and it can drastically improve your cash-flow and/or reduce your interest rates).
• Most importantly, make your payments so your credit stays strong and don't panic.  If you want to buy a home, buy one.  If you're thinking of investing in real estate or the equity markets, this is your time machine - you can buy now for prices we haven't seen in a long time.

Repair or Rebate?

When looking for a home, many people find a home that is almost perfect for them. Great location, great floor plan, great price...but there are always a few things that aren't perfect.

Common examples:

• The furnace is old
• The carpets are stained
• The appliances are old
• A window needs to be repaired or replaced
• It needs to be re-painted
• The roof needs to be replaced
• The water heater is old
• The electrical needs to be updated

I could go on and on and on...

A lot of buyers do not want the hassle of fixing these problems, and want the seller to fix it for them. Often they will have a term written into the purchase contract to have an item replaced, repaired or improved in some way.

This can be very problematic.

Lets use replacing the roof as an example. If you were selling your home, and the buyer added a term to the contract to have the roof replaced, what would you do? Would you find the best quality roof, and the best roofers you could possibly find? Or would you find the cheapest roof and the fastest company around? Perhaps you'd give a few buddies a few cases of beer to help you DIY it one weekend.

As the buyer, you probably don't want to fastest, cheapest fix possible. So, maybe you think you'll be more specific in the contract - you want a 25 year roof done by a professional roofing company. How do you really know for certain what you've got when you buy the home?

Often a much better solution is to ask for a price reduction, or a rebate from the seller. That way you can use the money whatever way you think is best.

Don't Rent Out a New Home!

We've written about this before, but many people don't believe it will happen to them. Well, we've put together some photographic evidence of what can happen to a new home, after tenants have had their way with it.

Example 1: These floors are only 6 months old:

The tenants in this home not only destroyed the hardwood, but they also ruined the carpet, the kitchen cabinets, the lino, broke the screen door and wrecked the paint job. All in 6 months! Estimated damge - $8,000-$10,000!

Example 2: Last September, this home sold on the MLS, it was in picture perfect condition. Now it looks like this:

 

It's hard to see, but there are actually three shopping carts in the front yard with garbage in them. Note the strange colouring on the garage door - I don't know what it is or how it got there but it looks a bit like rust. The grass is not just weed-ridden, it's dead. There are sheets stapled up in the windows. I can only imagine what it looks like inside.

Don't get me wrong....there are properties that are meant for tenants, and there are also good tenants out there who won't destroy your property. But 99% of tenants won't take nearly as good care of your home as they would their own. The point I'm trying to make, to all those people in Edmonton who own brand new homes that they intended to flip and now stand to lose money, don't rent out a brand new home! You will end up losing more money since you're going to have to replace and repair half the things you just paid to have brand new!

Weekly Update on the Edmonton Real Estate Market

Here is our update on the Edmonton real estate market. (Previous week's numbers are in brackets). For the past 7 days:

New listings: 367 (567, 479, 434)
# Sales: 211 (237, 255, 274)
Ratio: 57% (42%, 53%, 63%)
# Price changes: 326 (429, 457, 441)
# Expired Listings: 223 (211, 699, 209)
# Canceled/withdrawn/terminated listings: 38 (36, 68, 49)
Net loss/gain in listings this week: -105 (36, -543, -98)
Active listings for single family homes: 3390 (3433, 3382, 3651)
Active listings for condos: 2251 (2275, 2200, 2428)

Either the market is in a post-turkey-trytophan haze, or the global economic conditions have finally affected our market - listings, sales, prices, and inventory are all down. We did have a long weekend this week, which does tend to slow things down a bit, and seasonally the market slows the closer we get to the end of the year.

Average prices are down - overall average residential selling price is $313k (down from $324 for September), single family home is $357k (down from $362) and condos have taken the biggest hit at $236k (down from $252). As you can see from the chart below, this is not just a case of fewer high end listings selling, as the average price per square foot has dropped.

Sales are also down from the near record highs in September - so far this month there have been 694 sales, which should put us around 1300 sales for the month. This actually isn't out of the norm, if you remember, back in July we predicted October sales would be around 1300. Obviously we were WAY off for September, but July and August went as expected and it looks like October will too.