Edmonton Real Estate Blog

Housing Starts Continue Downward Trend in April

CMCH released their monthly report today, showing that housing starts were down again in April. For the year so far, starts are down 41% from '07 in the greater Edmonton area. If you compare April '08 to April '07 starts fell 60% in the greater Edmonton area, and 44% across Alberta (the only major city that saw an increase was Lethbridge).

"For the tenth month in succession, single-detached housing starts registered another year-over-year decline in starts in April. Home builders poured foundations for only 178 units last month, representing an 80 per cent slide from April of last year. For the year-to-date, single starts have fallen by over two thirds from the first four months of 2007 to 835 units, the lowest level of activity since January through April of 1996. “High levels of unsold spec home inventories coupled with an ample supply of resale listings continue to undermine new singledetached construction this year,” observed Richard Goatcher, CMHC’s Senior Market Analyst for Edmonton. CMHC expects single-detached starts to begin improving in the second half of the year once new house inventories turn the corner in the months ahead."

Multiple starts were also down - 38.5% - "Multiple unit starts are expected to cool for the duration of 2008 due to an expected run-up in new condominium apartment inventories and a relatively well supplied existing condo market,” added Goatcher.

At least things have slowed down, and the new homes aren't contributing to the overall inventory as much - I certainly haven't heard about anyone buying a new home to flip lately.

Edmonton Real Estate Market Balanced

After three consecutive months of a buyer's market in Edmonton, April saw some balance (barely). The new listings to sale ratio hit 42%, even with almost 4,500 new listings and inventory creeping over 11,000 homes.

The steep competition did affect pricing as the average sale price dropped slightly, falling just below last April's average:

As you can see, competition and inventory are closely related to the average price:

As we've seen in the weekly updates, the last two weeks of April saw the pace of new listings slowing, and we predict the inventory will peak sometime around June.

The one thing that seems normal in Edmonton are sales; they are following the normal annual pattern for our marketplace albeit slightly lower than average.

I haven't included any exact figures, since some of the data is still to come in. The Real Estate Association requires that all sales are reported within 2 business days, so we won't have the exact data until the monthly press release expected early next week. More analysis to follow tomorrow when we're not so busy with clients takeing possession of their new homes.

Housing Starts Down, Commercial Construction Skyrocketing

March housing starts were down 59% from March '07 and were down 31% for the first quarter according to a report released by CMHC today. Single family homes are down for the 9th month in a row, representing the lowest level of activity since 1996. Completions meanwhile are actually up 13% from last year - that means more inventory coming on the market now, but less in the future. Completed, unoccupied homes stands at 902 (a record) - although I'd have to disagree with this stat. By unoccupied I think they mean unsold, since there are clearly plenty of new, unoccupied homes listed on the MLS as resale that the builders would consider occupied.

The sale price for a new single family home is up 33% from last year, setting a new record of $501,499, but CMHC cautions that most of these prices were negotiated before construction on the home even began.

As for multi-family starts, they're down as well - 57% since last March. Units under construction are up 42% from this time last year though, and CMHC expects unoccupied inventory to increase from the current "normal" levels.

"Condo resale inventories were looking very well supplied in March and new units will face stiff competition from these existing units that are in many cases priced below the current cost of new construction."

Meanwhile there are new retail developments popping up all over the city. Retail vacany rates have been steadily decreasing while rental rates are on the rise, so developers have responded to the demand by building all kinds of new space.

Windermere in South West Edmonton will add about 1 million square feet of retail space on about 100 acres featuring Wal-Mart, Home Depot and Canadian Tire making it Edmonton's second largest outdoor shopping centre, after South Edmonton Common which continues to grow.

The Meadows in South East Edmonton has about 500,000 square feet of retail space planned with another Home Depot and a Superstore.

Existing malls are also expanding (South Gate and Kingsway) and there are also large developments in Spruce Grove, Sherwood Park and Leduc.

Makes me wonder if the commercial guys have learned anything from the residential guys about over-building?

Old Vs. New

Yesterday Sheldon talked about the number of new and vacant properties on the market, and it made me wonder - what's been happening with the prices of resale homes compared to new homes?

At the end of 2007, CMHC explained at the Housing Outlook conference that the gap in pricing between new homes and resale homes had grown quite large in the Edmonton area, and suggested that new home prices would need to come more in line with resale homes.

Now, my stats only include homes sold on MLS, and may in fact include a number of resale homes since I can only separate the sales values by the age of the home. Never the less, I plotted the average sale price of homes built in 2007 and newer, and those built in 2006 and older. Here are the results:

It seems the average price of new single family homes and older single family homes has dropped at approximately the same rate. When it comes to condos, the older ones have held their value better than the newer ones (and single family homes for that matter).

I also noted that the newer homes and condos were larger on average than the older ones - newer homes were 1800 square feet while older ones were 1365, newer condos were 1050 on average and older ones were 970. Now, when it comes to single family homes, some of that difference in size can be attributed to the different styles of homes; just by driving around a new subdivision you can see there are more 2-story homes being built these days than bungalows which tend to have smaller square footage.

Which leads me to price per square foot...

Before you get too far thinking about this chart, there is one fact to keep in mind and that is the larger the home, the lower the price per square foot. We know that the newer homes are larger on average, so it makes sense that their price per square foot would be lower for the newer, larger homes. 

I was surprised to see that older condos and newer single family homes are very similar in price per square foot, as were older single family homes and newer condos. I guess this is partly attributed to the fact that with a new home comes a lot of extra expenses like landscaping, fences and decks, and sometimes garages and basement development, while those costs are already built in on a resale home. One thing for certain, they've all come down over the past year, and all at approximately the same rate.

Stirring it up...

Some days you just need to stir things up.  Why not, since September I've listened to shitidiots cry wolf about crashes and other crazy musings as to why the market is going down. Unfortunately for most of them who can barely scratch any credibility out of there nose it hasn't happened. Oh but they do try... Then there's those hopless optimists who feel the market is full of helium thereby rising to new heights for ever and ever.

Fortunately I live in the real world. Certainly there is doom and gloom out in the world today; I can give you at least 15 reasons you shouldn't step out your front door in the morning.  A couple of weeks ago I could have given you -36 reasons.

I don't very often respond to threads but today (being the "awards" time of year) I feel like giving out some oscars and razzie's:

• Inventory plays a huge role in the market place and it does affect pricing.  The strength of sales in January,  (this is where I hand out the first razzie to the bonehead comment on the weekly market update) which was reported correctly by the Realtors Association of Edmonton as the second best January ever for sales - beating out January 2006 was nothing short of impressive.  It makes you wonder where the market would be if the inventory was half of what it is now.   Why was it so strong?  September 2007 sales sucked.  October rebounded.  November was so so.  December was actually impressive but January was blistering considering all the negative media happenings in the states and the sizeable inventory.  My thoughts on it are that many people are looking at the fact that the prices haven't tumbled like some have predicted and are looking at the opportunities as they relate to them.  I just sold a home for a family and they moved closer to their kids' school.  So all things relative they are and have been in the market for the long term.  So my razzie goes to the clown who said the REALTORS association was lying.
• My Oscar goes to the comment about the "ridiculous discounts" offered on another Edmonton blog. This is incredible acting - best supporting role in a farce for certain. Think it through - if 10 units sell for $150,000 whether or not the sales are reported on MLS their values establish the value in that complex.  If a buyer wants to buy another unit in the complex and the last 10 sales were at prices $60,000 lower they'd have to be crazy to buy.  Automatically if they had to resell they face a SERIOUS disadvantage in marketing their properties against the 10 other people who paid $60,000 less. In addition, what data will the appraisers base their values for buyers bank on?  Oh yeah - those 10 sales previous sales.  Seriously do you really think the developer will raise those prices?  I doubt it but I'm a skeptic. What happens if the developer doesn't sell them quickly enough? Will he reduce them 10 grand making the 10 people who paid 150,000 stuck? So hopefully common sense will prevail.  Quality and good value are irreplaceable, not even by gimmicks.  Shop wisely.  If you are a first time buyer or not immersed in the market use the services of a REALTOR.  They are in the market full time and can help you sift through the crap and give you information and advice that you just can't pick up reading a blog, this one included.

3 Investor Tips for Taking Over Edmonton...Then the world...muh ha ha

Some simple investment considerations for purchasing investment properties in Edmonton or just about anywhere else. 

Recently a young sponge for everything real estate told me a story about an investment seminar he attended. He said he didn’t really learn much because it was the free one, but they pushed another seminar saying you’ll learn more.  So he paid for the next one and sure enough the wizard peeled more away secrets away, apparently giving more information but still selling more seminars saying “we’ve given you just enough information to be dangerous.”

Lol.  Sounds like a typical seminar sales.

There are a lot of places you can find  information on investing in real estate. In some cases you might even be asked to get on a bus and tour some properties, or spend whopping sums of money monthly. One of our regular blog readers (Laura or LP) recently suggested another blog on one of our threads saying they're more respectful to investors. LMAO. It's funny to even think she's serious. 

I respect investing, fundamentals and research. However selling their own properties by providing "advice" and "insider tips" for a fee is a great racket, and buyers who get sucked in by these "investment gurus" aren't doing their due diligence properly, in my opinion.

Although I have worked extensively with investors in the past, selling entire projects, retailing projects out (in what seems like a life time ago) and even the odd office building, the majority of my business now is working with people buying and selling their primary residence. I just prefer working with people on something more personal. In fact, in the past two years I've only helped one buyer acquire two investment properties (unless you count parents who rent properties to their prodigies then I've sold considerably more investment properties in the Edmonton area). At the same time I have sold numerous properties for investor clients. It's not that I couldn’t have sold more properties to investors, it's not  that it was too easy either. It simply comes down to working with people that we fit with.

The buyer investor I did work with is one that I’m obligated to as he’s been a very good client and said he really wanted my help. I agreed since the investments were going to be for a long term hold and were based on solid fundamentals and good value.

So it's not that I don’t respect investing in real estate, I respect it enough to not treat it lightly. It's not  something that someone can just decide to do one day and then change their mind three months after the fact when it's not working out.  In Edmonton it seems that everyone forgot the risks that come with investing in real estate.   Alright,  enough yada yada yada. When I do talk to people about investing in real estate here are a few things I tell them to consider.

So without further adieu here are a few things to consider when investing in Real Estate in Edmonton or anywhere else:

1. Don’t fall in love with your real estate investment. This doesn’t mean be a slum land lord. It does mean that you shouldn’t get so attached to it that you won’t be able to make rational decisions.
2. Know your investment characteristics. Liquidity, marketability, leverage, manageability, taxation, risk, yield, cash flow and required capital, etc.  Books have been written on almost all of them but you need to know what characteristics your investment has and which ones are going to make your investment successful.
3. Understand your measurement for a successful investment. Most amateur investors will talk about cap rates, and rates of return.  While these measurements are important towards measuring your investments, they can be overly simplistic and they may not take into account such things as taxation, appreciation, costs and so on.  .

Now, I would be negligent if I didn’t discuss a simple thing like basic economic laws.  Like the law of supply and demand.  This much debated economic law is the basis for  3 appraisal approaches to value: market, income and cost.

One other thing you should understand is the relationship between time, value and money. This can help you can compare any investment to another investment.

Last but not least: work with experts, especially if you don't know what I've been talking about in the preceding paragraphs. 

And by the way, the above is my opinion only,  and if you’re lucky you’ll see it republished on some other blogs word for word (except for my name of course). No shit. The other day I found one of my articles copied and republished word for word in another blog by a C21 agent in Ontario. He didn’t change a thing. (It was my article on walk throughs).

So just in case you didn’t already know this...We write our own stuff here or we reference the source. Maybe some other bloggers should try that (sorry for the end of blog rant).

Urgent Edmonton Distress Sale - Must Be Sold!

$60,000 below recent sales! Seriously ill seller must sell in days!

Once in a lifetime you get an opportunity to buy a property that is a true distress sale.  This home must be sold. Seriously ill seller has to sell and has priced $60,000 (minimum) below recent sales to get the property sold immediately.  This is a far superior unit to many of the recent sales. Current active listing of the same floor plan, in similar condition, one floor lower is $329,900. The seller has a short time to get this property sold and must - I repeat must - get it sold. List price $249,800.00. Don't hesitate or this opportunity will be gone.  (This sale is solely based on the sellers immediate condition and has a limited time to get it sold). 

Fantastic 2 bedroom condo, with 2 full baths in awesome complex with underground parking moments from downtown. Full details at www.MustBeSoldEdmonton.com   

Call us or your Realtor for sales information on St. Lawrence Court and to view today.

ALL REASONABLE OFFERS CONSIDERED.

Simon says..Take a Sneak peak at the stats for June

I don't think there has been a day this week that Sara and I have finished before midnight.  Even as I type this I'm on messenger with our associate Lisa discussing details of the day and what's coming up.

I noticed a listing came on the market that we had competed for, and I had to chuckle that the agent they had selected had his own company spelled wrong on his web page. So I guess marketing isn't that important after all.  I'm sure they pay more attention to details on other things. 

The day started when I pulled the hotsheets (I seldom do this but since my daughter wasn't in school this am, I had a few extra moments):

• about 4500 homes and condos for sale in Edmonton (not incl surrounding areas)
• about 1470 sales since June 1 Edmonton only
• about 400 price changes (I think 1 or 2 were actually price increases but I didn't audit them) over 7 days.  Don't ask me why I changed from 30 to 7 days.  Not enough caffeine I guess.

It made me wonder when most agent's websites (which actually all say pretty much the same thing except for ours I'm happy to say) will change their headlines from "New Listings" to "Hot Deals of the Week." Funny thing about Sara, with her background in marketing and training is that she is completely consumer centric.  She tells me that people don't want to see my mug on everything and I whine that thoust is the wayst it hath been done since God purchased the third rock from the sun (true story my dad has actually been selling real estate so long the he handled the transaction - he almost backed out when he found out it was mostly swamp land).  That is why you don't find my mug shot all over our home page. 

Ok enough side tracking...back to the stats. It's too late for me to work it out now, but I can honestly say we've changed our marketing strategies. No longer will it be a given that every property on the MLS will sell. Even with the spattering of multiple offers there wouldn't be 400 changes in price in a month if everything was selling.  And as I found out today, if you do get a seller who understands the new reality in Edmonton, their friends and family will tell them they sold too low. Plus, the buyer's family is saying "are you nuts?" for buying right now. 

Ah things are almost back to normal...We just have a supply issue to deal with and then its all good.  Market adaptation can be a hard thing.  Sellers have become very complacent...The time of the buyer is upon us again. At least until the July surge in sales eats all the inventory...lol...Schools out folks...This is a good time for people who bought good properties in good areas to congratulate yourselves...You will be less affected.  Do I still believe that things will correct themselves and then return to more normalized growth? I sure do but I've been wrong before...Hell for as often as I'm right I could be a Sun columnist - at least then I wouldn't have to check my facts.

On a somber note.  A year and a half ago my best friend since kindergarten passed away.  Today I was at the same funeral chapel for the funeral of his 27 year old nephew. It's unfortunate that it takes events like a funeral to make us really think about what's important.  Like hugging your kids, calling that friend you haven't seen in ages for lunch or letting your parents know you appreciate them. (sniff)  So to Troy and all the family my heartfelt sympathies for such a tragic loss.

Edmonton Rental Market Report

Canada Mortgage and Housing released their rental market report today and it contains some pretty interesting stuff:

• Alberta's vacancy rate is the lowest of all Canadian Provinces
• Alberta's average monthly rent was is $847/month, second only to Ontario.
• Calgary's vacancy rate remains unchanged at .5% since April of '06
• Edmonton's vacancy rate has dropped from 1.3% to 1.1% since April of '06
• Three cities in Alberta reported 0% vacancy - Canmore, Okotoks and Wetaskiwin
• Wetaskiwin also has the lowest average rent
• Highest rent for a 2-bedroom - Wood Buffalo at $1681 and Grande Prairie at $1094
• Calgary rent for a 2-bedroom - $1037, Edmonton - $877.
• Alberta's economy expanded at 6.8% in '06 - the fastest in 9 years
• Employment grew by 86,000 jobs in '06 - a record for employment growth in Alberta
• Alberta drew a record 86,000 net-migrants to the province in '06, 73,000 are expected this year

You can read the complete report here.

Fear mongering a full time job for some!

Some people couldn't care less about real estate. They never want to own it, and they want the government to protect all aspects of their interest in someone else's investment. To many, higher rents brings the rallying cry "Rent Controls needed!" We know that this is a failed experiment waiting to happen. 

These same people can give you every reason why the current real estate market in Edmonton is a bubble.  Besides being a simplistic overstatement, a "real estate bubble" assumes that the market has no support.

What is certain is that we are in uncharted territory in Edmonton. Some will be heralded as wise or prophetic for their investments and some will be broken and debt-ridden for mis-reading the signs.  Whatever the case it must be sad to live in a negative state where everything is always nearing its zenith and doom is always impending.

The truth is there is both good news and bad news as we move forward.  Sure we have oil, but the cost of extracting it is getting more expensive as inflation rises.  There are jobs, jobs, jobs everywhere.  Not all of them are great, and many don't pay well enough to handle increasing costs in a hot economy. Infrastructure is strained and services are stretched.  All the while the economy in Alberta chugs along and according to the dooms dayers the heart of Alberta's economy - oil - will just stop beating.

Until that happens I hate to break it to the negazots (my nickname for the robotic naturally pessimistic people) but there is no bubble here. Let me repeat there is no bubble here. Prices may swing but this market will not collapse. I do expect price corrections in a broad range of products and areas in the near future. I do expect some speculators will get burnt, and that is their risk, and if they are insane enough to put all their eggs in one basket they may just deserve to loose it all. 

There are few of us who really truly follow this market (20 years now I've been involved in real estate), and there are many recent spectators who by fear or shear excitement now have an opinion on all things real estate.  The best is when I see or hear people say "I have a friend who..." and then recklessly and without full knowledge of the facts, give their spin to someone else's incredible success or dire circumstances. These people are dangerous as they don't dispense expertise but their own agendas.

Not every type of Real Estate investing is for everyone, so my advice is: work with professionals.  Find a Realtor who knows the market and the product, along with a lawyer, an accountant, and other professionals and make decisions based on your personal goals, needs, and situation. Remember, even when real estate is going down in price the negazots are going to tell you not to buy. It's a good thing I didn't listen to these people when I bought my first property or I might not have had the freedom to do many things that my home and investments have allowed me to do.