Edmonton Real Estate Market Weekly Update, Feb. 3/17

I like.

I have a feeling that this is going to be a huge year for housing in Edmonton. January was hot, and I feel that will continue into the spring.

Up around 5% so far year over year

Seeing many, many price reductions in January on zolo.ca. There's still buyers but only at lower prices explaining the slight increase in sales. It looks like Edmonton real estate is moving into the free-fall stage.

IMO one of the reasons the sales increased lately is because people are anticipating the mortgage rate will increase and they're trying to get in before.
This might continue for a while.

Tony- So what percentage are being reduced vs historical in January? What is the average sold price vs historical? How about the average sold/list price ration vs historical? How about the sales/inventory or sales/listings ratio vs historical? How about unabsorbed new home (i.e. spec) inventory? How about lot inventory? All I've ever seen you write on this board is your anecdotal observations- "lots of price reductions on zolo", "Zero-Hedge says the Chinese won't be buying as much CAN real-estate and that will tank the entire market".
I LOVE contradictory opinions, because if we all just sit around agreeing there's no point having a conversation, because we learn nothing new. But you need to put some sort of analysis into it- show some data, show a trend, base your opinion on something tangible, instead of what appears to be baseless opinions with no supporting metrics. I'd seriously like to see whatever data is pointing to a "free-fall", because that's info I can use to protect myself from losses or position myself for gains. But you need to provide FACTS. What you've written to date is useless to me, and probably many others on this board.
What I see is a small rise in sales yoy, and stable pricing. The same sort of pricing we've seen for 9 years. I also see a lot of multi-family projects in and around the downtown core set to come online in the next 12 months. These developers can put their money into any city in Canada (the world in fact), and they're choosing to invest it here. I see an O&G industry that has stabilized and is slowly recovering from near death. I see interest rates that are going nowhere fast, although a 25 basis point rise would surprise no one this year. I see stabilizing employment, and I'll bet money we see an increase in total employment and population this year, and a stabilization or even decrease in the unemployment rate by the end of 2017. None of this points to a "free fall", but to a very stable market.
If you're waiting for some sort of Black Swan event to change the market dynamics, well, that speaks to the integrity of your predictions and how useful they are for actual investment planning.

People assume that those who are building are safe. Those who have pre sold are fine. I know of 3 builders who are on the verge of bankruptcy but are still building. They are all sitting on a minimum 15 houses.

Stephen- So do you believe that those three builders' troubles are indicative of overall weakness in the housing market? Or do you think that perhaps they've overextended their spec inventory, haven't built the kind of house at the kind of price point in the kind of areas that are selling right now, and have potentially not controlled their costs the way all businesses need to in order to survive in the current market?
It ain't 2014 anymore- Times are tight, margins are down, and the herd will be culled for all industries. When the weak go bankrupt, it will mean less pressure on the remaining builders, and potentially higher prices for new homes as a result. When builders are on the ropes, it's the best time to buy because they're desperate for cashflow to pay bills...once they're knocked out and their 45 houses sold by the bank, the rest of the market will get a boost. I can tell you with absolute certainty that the developers (land developers) are not feeling much of a squeeze yet, as they haven't significantly dropped their lot prices. They have some, in some subdivisions, but fairly minor decreases. That means they are not yet on the ropes. And other than the price of land, there's only so much cost you can shave off the price of building a house. Trades are all working for less than they did in 2015, and about the same as 2016, and I know several who are putting prices up this year. Material costs in many cases are flat or even up due to the ForEx rate. Builders have gotten lean in the past two years. If the money isn't there, they simply won't build. This will keep the supply/demand in check, and keep new home prices from falling much if any.
I wrote on this blog sometime last summer that I believed the best time to buy a new home was in early 2016- the major builders where sitting on excess spec inventory, and some where reducing prices by $50-60K on certain models in order to clear the inventory and prevent an oversupply. This has now been done. The unabsorbed new home inventory peaked earlier last year: http://www.chbaalberta.ca/uploads/wp-content/uploads/PDF/2017/Economic%20Reports/2017-01%20Edmonton%20Market%20Update.pdf
Check out page 2 of that link, near the bottom: Unabsorbed Single Family and Semi Detached.

What it does show, now that I look at it, is a frightening amount of condo inventory, but that's due to the chart on the top left of page 2...a record amount of multi starts in 2015, and they're all coming on line now. Good news is starts fell by over half in 2016, so we should see inventories start to stabilize early this year.

Anyhow, my prediction stands- I think we're in for another year of stable prices and stable sales. I don't think there's much downside risk in SFH, but more in MF. I do think there's upside potential in SFH, but near zero in MF. Exception: if you've got guts and cash, finding languishing MF listings, doing your reserve fund studies before hand so you don't have to have to put document review conditions on the offer, and making aggressive condition-free offers to sellers struggling to get out amongst the huge supply of MF right now, and you can probably find a few deals.

Just to clarify because I'm a responsible human- I don't EVER suggest condition free offers, unless you've satisfied all due diligence conditions before the actual offer. For example, standard condo offers would include financing and document review. But if you have cash, financing is not an issue, and if you access the condo documents prior to the offer and review them with your lawyer before hand, then you've satisfied that condition without making it a condition, if you know what I mean. But if you take care of EVERYTHING before hand, and can make a condition free offer with a two-week possession date on a vacant place to a stressed seller with an old listing paying multiple mortgages, or whose been listening to guys like Tony, you make be surprised what you can get.
And yes, in many cases you can access those documents before hand in the right situation, but there are times you can't. In such cases, reviewing condo documents is a mandatory condition.

Very Nice! How Much?

I am not saying Wow Wow Wee Wa yet, hopefully Edmontons markets will improve and be glorious.

If Trump brings in tariffs interest rates will increase in Canada or the Canadian dollar will fall below 50 cents U.S. Still the lag period of time will be 6 months to a year for rates to increase. Tariffs will increase wages in America and prices pushing interest rates higher. Tariffs will also produce millions more jobs for Americans.

I don't know Trev. I try not to assume to much. It's bizarre out there. I know a couple who just bought a 5 bed, 3 bath home that was built in early 2000's for $235,000 in Blackfalds. I do realize that Blackfalds isn't Edmonton, but, it's go me wondering why I live in Edmonton. Hehe
That being said, there are still lots of new houses sitting and even more row houses. There is also still a fair amount of building going on. I also believe the banks will be holding the bag on a few more houses over the summer. Much like the home builders, the oil and gas sector has cut their wages back quite a bit. There's not as much disposable money to go around. Either way, I'm sure most people will get by.

Stephen- will readily agree that living outside the expensive metro areas can be the best thing you do for your finances and mental health. You have to be at the right life stage though. I've lived in the boonies in the past; key considerations:
- you need a job. If you happen to be a govt employee (education, health care), you're laughing. Big city wages, small town house pric s
- your kids need an education and access to extracurricular activities. Some communities are great, some are brutal
-how often do you need to leave town? My general rule of thumb is the town should have a walmart and a superstore, otherwise you'll be burning gas and time
-how healthy is your family? Healthcare in small towns, or even medium size cities, just doesn't stack up against Edmonton or Calgary.

If you can make it work, smaller centres can be very low cost, low stress places to live.

When mortgage rate go to 5%, people pay $2000 monthly will need to pay $4000. Hopefully this won't happened.