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B's Blog

Comprehensive, thoughtful and intelligent real estate market analysis that's loaded with practical, factual information, lots of useable graphs and, best of all, timely commentary and insight from one of Calgary's most experienced REALTORs...

March 4, 2010

Spring is in the air and all is right with the world! How can we make such a bold statement? Simple, as I sit here ruminating over the state of the Calgary real estate market and yes, our place within it, I am listening to Renee Rosnes play the livin' daylights out of the piano and...as I peer out of our office window, I can see blue sky, Rocky Mountains and grass; still somewhat brown I admit but...grass nonetheless! Now sure, we Calgarians know that we are likely to get at least 1 and possibly 2 more whoppers (as in snow storms) before this thing we call winter (in polite conversation only!) is over but hey - there is, at last, a light at the end of winter's tunnel.

Now, as for that other tunnel, that myopic tunnel through which I mostly peer at our real estate market, things seem to be progressing along a similar path as last year except that sales are at a somewhat faster/higher pace than we saw in '09 - not that this anything to brag about, mind you as last year, we were all staring over the edge financially speaking.

However, with another crises seemingly averted (for now) it seems to us that we are still on track for a robust real estate market this year and, worldwide issues and problems aside, it pays to remember that we here in Alberta are indeed a lucky bunch, given our unique position as major supplier to North America's future energy needs. Therefore, our longer term horizon also remains positive through to at least 2014 and we continue to foresee significant price gains for our Calgary marketplace within that time frame.

Feb. 26, 2010

Some things scare me to death and today, I'd like to share just one if I may. It is a small excrpt from John Mauldin's newsletter, "Thoughts From The Frontline" which he shares with 1.5 million of his closest friends every Friday. This is from from his Feb. 19th issue:

"How Much Is Too Much?

And to close, I want to show a chart from today's Wall Street Journal, from a column by Daniel Henninger.

This is the definition of an unsustainable path. Spending has grown 7 times as much in real (inflation-adjusted) terms as median household income over the last 40 years. Like Greece and Spain and much of the rest of the developed world, we will be forced to make hard choices. We cannot afford to do everything that even conservatives would like, let alone liberals. We cannot fight two wars, increase spending on health care, stimulate a faltering economy, and fund a 20% explosion in federal employees in just one year, etc., etc.

Pay attention to Greece and Spain and especially Japan over the next few years. Unless the US gets its fiscal house in order, we will be next. It will not be any easier for us in five years than it is for Greece today."

Now, I know we're not the U.S. and I know we're not the basket case that is Europe but we are, after all, a nation of just 33 or so million and what happens elsewhere will certainly impact us; esp. if that elsewhere is the U. S. of A. so...while I'm not ready to head for the hills just yet, charts like the one above do deserve to be paid attention to.

Feb. 25, 2010

I wasn't going to but...my dear wife & partner, has been demanding me to say something about The Feds changing the rules regarding insured mortgages and their qualifying minimum standards so, here goes:

Firstly, and realising that politicians like to give the impression that they are "solving" problems, it came as no surprise that Jim Flaherty, late of "I'll never touch The Trusts" fame needed a new problem to solve, given that unemployment is over 8% nationally and given that they have just bailed out the car companies and given that, The Greens have been all over their case of late (remember Copenhagen?). So who better to deflect to than the mortgage industry; ie., banks? Like, everybody hates banks...right? So off he went...

Problem is...he couldn't really find a problem, so he created one; a dastardly trick, I know but one that I am sure he thought would do "the trick". Now sure, we all know that there are pockets of real estate unsustainability in the land, and Vancouver does come to mind for sure. But think about it for a moment... The average price in the Lower Mainland, at over $900K; while certainly extreme, in our mind at least, does not exactly lend itself to being a candidate for CMHC High Ratio financing! So...while there may be a problem there, we think it is not one The Feds can solve. And as for the rest of the country, their so called "tightening" was, at best, laughable and irrelevant. For instance, the vast majority of first time buyers already qualify at the 5 year rate, so changing the rules in that regard was really meaningless; esp. if they really wanted to take some steam out of the market. Secondly, changing the ceiling on home equity refinancings from 95% to 90% is again - of little or no consequence. Finally, the change in the rules for rental/investment properties is the only one that perhaps makes some sense and indeed, we have always thought (and still do!) it was a dumb idea for ANYONE to use high ratio financing for that purpose, simply because the fees are so onerous.

However, I guess Jim did get himeslf some press and I guess he was able to fool some folks into believing he was doing something positive (saving us from ourselves?) but, when you scrape away the floss & gloss of this "intervention" what we really find is...BUSINESS AS USUAL.

And that, Dear Reader, is a good thing!

For our "Chart Of The Sometimes Every Other Week" this week, I've decided to show sales activity per 1,000 of population for, if you think about it, a 1,000 sales at 800,000 population has considerably more "impact" than say, 1,000 sales at a million population.  If you have a look, you'll see our market is anything but too hot. In fact, it clearly shows that sales here - in Canada's fourth largest, and we would argue, most dynamic city are, if anything...downright dismal. So, try as I might, I can see no bubbles in sight for at least 4 or 5 years, but of course, by that time the rules will have changes again to help a sluggish economy!!!! 

Feb. 14, 2010

Two things: Firstly...

I heard my old Vancouver friend, and ex-Melton REALTOR, Ozzie Jurock, state on Saturday (Feb. 13th) that the "average price" in Metro Vancouver was now $936,000.

Now...Oz doesn't joke about such things...but the news, well...it made me laugh. And out loud, at that!

If the number is correct,. and I do believe it is, that market is, as they say, a bubble in search of a pin. And, we do hope that the explosive "pop!", when that pin is found, will not be heard or felt in Calgary.

Secondy...

I've been plowing my way through Peter Bernstein's marvelous book "Against The Gods, the remarkable story of risk" and have just finished his chapter on the discovery of the economic concept known as Reversion To The Mean, which many to this day feel is a valid measure of value.

The reason why I bring such a "dry as toast" topic up today is simply this: I've been trying to calculate the "end point" for the Calgary market now for many years and this "reversion to the mean" concept has been one of the many tools I've used in trying to calculate "The Number".

However, when we start to think about the "mean" or long term average, the concept starts to blur for; if we think about it, which "average" is more pertinent? The longest term possible; which for Calgary means 1967 - 2009? or...should it refer to the full cycle of say, peak price to peak price or conversly, trough price to trough price, or...just the trough to peak price? And then again, should we consider the whole of MLS or...just the single family segment or...just condos and, when you think about it, all variables do have a "point", so to speak and so...all should be considered; which is why we are slowly crunching numbers and creating averages which, when lumped topgether will hopefully lead us to a "true mean" for the city of Calgary.

Are we there yet? No...but we're workin' on it as time permits so stay tuned. The long term Real Calgary Mean is coming close, at which point we'll have an even better handle on "value" for our fair town...

Feb. 01, 2010

At the beginning of every month I wait for the Calgary Real Estate Board's monthly stats package like a dog waiting for a bone or, better yet, a commodities trader waiting for the latest USDA numbers and sadly, this month I was wont to ask: "Could we have a little truth in advertising here?" For indeed, right there in the opening gambit of the press release was the statement: "The number of single family homes sold in January 2010 in the city of Calgary was up 39 per cent from the same time a year ago, while condominiums sales saw an increase of 67 per cent from the same time a year ago".

Wow....things must be booming, eh???

Well...compared to what? Last year? You bet!!! Lots of folks were staring into "The Precipice" 12 months ago and yes, we were all "very concerned" about "The Future" so therefore, it was very easy to make a positive year over year comparison in Jan. 2010. However, when we strip away the "floss, gloss and loss"" of the last few years to say...2004, the numbers start to make more sense, for at that time, January sales were 1140 units or...49+ percent HIGHER than they were last month! And those numbers, dear friends were the lowest in the last 6 years!!! So, when compared to all but last year, this year's sales are well...dismal.

Now, as for the Average Price number, it is true, we are still up over this time last year and 2008 but...are barely, in percentage terms, over the level of 2007; however, our hope springs eternal that, with $70 - $80 oil we will hold and begin the long march higher in 2011.

In short then...it is time, yet again, to "Clutch The Bible" & pray!

Stay tuned....

Jan. 26, 2010

Day 26...wow...time's flyin' by and I'm way behind so "pitter patter, let's get at'er"! Speaking of which, the market better get "at'er" too, because listings are still coming in below the level of last year while sales are ahead (by quite a bit); all of which means that, if things don't change soon, and if the spring market, with its much higher demand arrives as usual and on time, we'll be back down to less than 2,000 listings in a month, or two at the most.

As for mortgage rates, our fav mortgage broker, Mary Priestner, sent us her rate sheet this morning and we see 5 year money is now at 3.89% with a further discount for 30 day closings.

Wow...

Our Chart this week, is of the market activity noted above, with ytd data compared to last year and the pre boom, pre silliness year of 2005.

Finally, we quietly introduced our new video presentations for our listing clients last week and we're pleased as punch on how it all turned out. We know we're not perfect yet but we do think that being able to view a home "live", so to speak, will become the norm as time goes by. Have a look at our YouTube and other links on the front page and see if you don't agree.

Jan. 15, 2010

In my Jan. 11th missive, I said we had a great foreclosure listing and well - it lasted for about 1 day and sold for $2100 over the list price.

There will be others so...if you missed the first one, give me a call to let you know about the others as they appear.

Regarding my "Bubble" comments below, it would appear the Conference Board of Canada also agrees so perhaps our politicians will start to concern themselves with more important matters...such as the unemployment rate in this country, for instance. Or, the punishing levels of taxation at all levels for another.

Jan. 13, 2010

Housing Bubble? Not Bloody Likely!

For the past while now, we've all listened to Big Jim and any pundit you'd care to name, wax eloquently on how, just maybe, the government would have to shortly tighten up lending standards to cool off the housing market in Canada because it was close to, if not already in, "bubble" territory. We say, "Housing Bubble? Not Bloody likely"!

When we first came here back in the dark ages (1974) I stood in line to get into show homes and then, stood in line again to buy one and, if I'm not mistaken, it was a Wednesday night! Now THAT is a bubble. In this city, we've got prices that are still below their 2007 peak and we have interest rates that are also well below where they were at that time.

"Ahhh", you say; "But rates are going higher", you say. Well perhaps. We say the jury is still out on that one for this year and who knows, perhaps next year as well.

We say that because, for the past number of years now, we've had extremely low interest rates, so much so in fact, that there are folks out there today who can't imagine 8% money, let alone 10% money! In short, our society has become addicted to low rates and, we fear, any major move up in same would send shock waves through the economy and, if you are a politician and if you want to get re-elected, raising rates is NOT the way to your happiness and re-election.

In any event, and while we would agree with some that certain benchmarks seem to be "out of whack"; for example, the Price to Income Ratio, it is also true that others, such as the Payment to Income Ratio, are not. The reason for the divergence? Interest rates. However, the last time this occurred (1970s) mortgage rates were in the 10 -12 percent range; now they're in the 4 - 6 percent range so a higher PI ratio would seem to be justified, and like we've said before, we just don't see interest rates moving up by very much if at all in the near to medium term.

In conclusion, take a look at the 4 charts we put up on the newsletter page today which show the 5 year Canada Bond, the "posted" 5 year mortgage rate and the 2 ratios I just mentioned (The Price to Income and the Payment to Income ratios). Then, have a look at our Average Price Chart on the second page. Don't look like a bubble to us...won't to you either we suspect.

Jan. 11, 2010

First of all, some shameless advertising because a) we just listed a foreclosure that we think is a screamin' deal; namely a 726 sq. ft. 2 bedroom suite in Bankview for $129,900 and b) our Springbank listing is being completely redecorated - top to bottom so, for those who may be in the market for an upscale adult oriented walkout bungalow, this could be worth seeing next week when it's finished; especially if you want a great mountain view as well (this one is panoramic).

As I sit here this morning thinking of wonderfully cogent comments to make re: the Calgary housing market,  I do find it "interesting" as I gaze out my office window on to the golf course behind our house because it has had at least a foot of snow on it for the past month or more. Not only that, it seems most of North America and a big chunk of Europe are also similarly affected. And then, as I'm getting out of bed this morning, I hear that scientists now think we'll be in GLOBAL COOLING for the next 30 years!

We do live in confusing times...

One thing that's becoming less confusing though is the outlook for the Calgary economy and the Calgary housing market.

We say this because, oil refuses to slump and indeed is rising as we speak. Therefore, at some point, they're gonna start hanging out the Help Wanted posters again in Calgary. And then we have the Active Listing count. If it stays depressed like it has been of late, buyers are going to be hard pressed for choice - always a prescription for higher prices. Then we have interest rates. Everyone says they're going higher. Well, almost everyone. If so, and based on our way too many years of experience, this will bring in even more buyers as they try to lock in the great interest rates available today.

Now, I could go on but suffice to say that, short term (because of supply demand constraints) or longer term (due to an oil market and an economy that's heating up again), it looks to us as though we are on the verge of having a prolonged period of above average sales activity and price increases in the Calgary market; dare we say, perhaps even a "BOOM"?

Finally, our first Chart of the Week for 2010 is a pictoral for what we think could turn into a perfect Supply vs. Demand storm this year; well, it's 3 charts actually...of the Active Listing count relative to population, the Listing Activity count relative to population and finally - the Residential Sales count relative to population. have a look, we think you'll find it to be food for thought.

Jan. 5, 2010

Let's see now...we woke up this AM to find crude at $81 and change, we got a rate update from our broker last night and we see the 5 year is back down to 3.79% and yesterday, Fast Eddy & The Confiscators got a warning shot across their bow; which says to us that royalty rates may be coming down soon; which, if that happens, means that "The Money" will start to return to Alberta, as will increased employment and so on. Now sure, it may take another 2 or 3 members of the government to cross the aisle and sure, it may take some time for crude prices to stay above $80 but we may be on the cusp of another sustained move up for this province's economy. If so, get ready for greater housing demand and higher prices over the medium term (1 - 3 years).

Short term, we are now facing a shortage of listings, with just over 2,000 single family properties and 1,200 condos on the market.

To put those numbers in context, it will not surprise us if we see at least 1,000 SF sales and 600 condo sales this month. That's a 2 month supply in a market where "normal" is more like a 3.5 month supply. So, and failing a massive number of new listings in the first 60 days or so, we think prices are going up this spring... By how much? Let's conservatively say 4 - 5 percent for now; which means that, for the average single family house, we'll see its price rise by 18,000 - 22,500 by no later than May.

Caveat: If mortgage rates start to rise before May, we would expect prices to move even higher, as the threat of higher rates will pull more first time buyers into the market than we would otherwise expect and, given that we already have a tight supply situation, a few extra buyers will put even more pressure on the market.

We checked our property assessment yesterday and found it was down about 17% or so from where it was just a couple of years ago. If you are in the same boat, we wouldn't fret over it. That assessment is supposedly as of July 1st 2009 but, the data the city uses to calculate your assessment is from sales info in the 1st half of that year - so no wonder assessment numbers are down. The first 3 months of last year were when the Calgary market hit bottom. Since then though it's been in a strong uptrend so this year, we will find that most sales will be for more than assessed value.

Lastly, if anyone has a question or comment, please feel free to fire one off via email and oh yes, please do have a great 2010!

Dec. 20, 2009

Well now, there's 5 days left til Christmas, the farce that was the Copenhagen Climate Conference is over and the year is quickly fading away into the history books and...we are excited as all get out about the prospects for another great year in Our Town!

Apart from that we are also excited because our final newsletter for the year is now finished...(just click on the appropriate tab to read it). In this edition, we've taken a look at our predictions for this year (always an embarrassing chore!) as well as given you 7 more for 2010. We also have a few thoughts on the longer term future for Alberta and Calgary. Then, and to end the exercise, we close with a look at our new indicator which we've come up with to measure market risk. If you are like us (risk adverse), we would urge you to have a look at that, if nothing else.

Since this will be our final blog insert for the year I would like to wish our blog followers (yes, we know you're out there!) and our many faithful clients a most joyous Christmas Season and the best of all possible New Years.

See you in January!

Dec. 11, 2009

Geez, this weather makes me feel like goin' back to Georgia for the winter or...anywhere warm actually! However...such is not to be this year with lots of new business in the offing and yes, a bank account that needs refilling so, and instead, this faithful servant to Mr. Market has been thinking, reading and mulling over what has transpired this year in our local real estate markets. And, in so doing, I have updated our Long Term Index Of Leading Indicators and have now posted it on the Newsletter Page for you all to peruse. Suffice it to say though, The Index looks a lot better than it did last year at this time so perhaps next year will be another hum dinger. We shall see.

In the meantime, we are hard at work here putting together our last newsletter for the year. It should be ready by next week - if we don't freeze before then, that is! Then it's a bit of time off over Christmas with guests in from The U.S. plus our extended Calgary clan of kids + in-laws and outlaws, so Christmas Dinner should put our dining room, not to mention The Bird, to the test!

Dec. 1, 2009

Wow! December already! And here I thought it was still August...that is, until I woke up this morning and found an inch or two of snow on the ground. Welcome to Calgary! On a less cheery note, we (as in Wendy and me) just came back from Arizona and yes, we did get our eyes opened. Firstly by all the newly hatched Canadian investors, all looking for a nice piece of the American Pie and secondly, by just how bad things are down there; for it's one thing to read that stores are closing and it's easy to read the unemployment headlines but, when you see whole areas boarded up...that is quite another. Methinks it will be a long (as in decade) time before they dig themselves outa this one folks and I, for one, don't want to help out this time around. Why? That's simple. The grass is greener here and, with an ever declining American Dollar it seems silly to get a good deal then watch the "profit" get sucked down the drain if/when I want to bring it back home.

Now befoere y'all start writing to tell me to mind my own business, I do realise that everyone has their own reasons for picking over some admittedly very good U.S. deals. My point here is that, what lloks like a good deal may not be so great when the smoke clears so, before y'all rush out with your hard earned Loonies in hand, be very careful for, in our opinion, the prospect for monetary losses still looms large in The Land Of The Free And The Brave.

As for the Calgary market, we'll have lots more to say on that in our upcoming newsletter; however, we are growing ever more bullish (some would say bull headed!) regarding the prospects for higher prices and yes, perhaps even lower interest rates in the months to come; which brings me to this:

I read in The Post over this past weekend that some deep thinker at TD Canada Trust is now of the opinion that (and I quote) "the Canadian Real Estate Boom" is about to end. In fact, he even went so far as to say that Canada's real estate market is just about in "bubble" territory. Really? What boom? What bubble? Has this guy been anywhere in Canada lately - other than Toronto, that is? We doubt it...

Now sure, if he were talking about Vancouver or perhaps even Victoria, we might buy the story but gee...doesn't this guy know that real estate markets are always "local" in nature? We suppose not. Anyway, our market here, after a 15 - 20 percent decline since the 2007 peak is nowhere near being in bubble territory. If it were, guess what? We'd be selling!

Our Chart Of The Week is still a mystery at this point but hopefully we'll get a new one posted in a day or so.

Nov. 15, 2009

Real estate is, if nothing else, a supply and demand business, and right now we are running short of the former and, come 2010, we could be swimming in the latter; all of which, if it comes to pass, will translate to a hot market with rapidly rising prices - at least for the "Spring" market. Longer term though, we continue to cling to the belief that Calgary's real estate fortunes will be tied to the energy markets and, since we also cling to the belief that oil and gas will eventually soar again within a year or two, we also believe that the same prospects are in store for the Calgary housing markets.

In any event, it seems quite likely that we will end the year with only 2500 or so houses for sale and...in a market that is easily capable of producing sales on the order of 1500+ per month it doesn't take a genius to figure out that, with only a 1.7 month's supply (or even less), the demand for good homes will be high and therefore, prices will rise across the board.

For our Chart Of The Week we have the Month's Supply Indicator for just the city of Calgary, as opposed to that which also encompasses the cities of Cochrane, Airdrie & Okotoks. Calculated by taking the number of active listings at month end and dividing by the number of sales in the preceding 1 month, the resulting chart gives a very accurate reading on the next 3 to 6 month period and right now, it is telling us that supply is gonna be tight and that prices are going higher. 

Nov. 8, 2009

Back in the day, I used to be an avid viewer of Wall Street Week with Louis Rukeyser and on that show, one of his regular panelists (whose name escapes me) kept a set of 10 Leading Indicators for the stock market. When one of the indicators was negative he would assign a -1 to it, when it was neutral, a Zero and, when positive a +1 and so on with each indicator in turn. Then, he simply did the math by adding up the total and "The Elves Index" was born. In addition, and for the index to give a "buy" or "sell" signal, the index had to have more than 50% of the indicators either positive or negative - otherwise the index was neutral.

After we became computerized (1988), I decided to do the same thing with real estate and came up with 10 items that affect the real estate market; namely, supply, demand, mortgage rates, "real" interest/mortgage rates, inflation, population growth, price trends, affordability and, last but not least, the Listing Activity/Sales Activity Ratio and, its derivative, our Momentum Oscillator which is too involved to get into here.

In any event, we did the same thing with these indicators as was done on Wall St. Week and then, to test for accuracy, went back in time (to 1967) and plotted the results on a spread sheet. Now, what I was looking for, of course, were those main "sell" signals that would warn me that the market was about to crash because well...1981 - 1986 was fresh in our memory banks. Well, and to my great delight, the index gave me the "sell" in 1980 and the "buy" in 1987!

Needless to say we've been using it ever since.

Over the years we've added to the indicators list and, we've kept it on a monthly (short term) and yearly (long term) basis so that now we have a 17, a 12 and, the original 10 indicator index. The short term index is what we use to try and add "perspective" to the pricing analysis which we perform when asked to give someone a Market Evaluation because well, these exercizes are, by definition, backward looking and past sales stats do not take into account, market condition; nor do they foretell what is likely to happen over the next 2 - 3 months. Our Index does.

Our Chart Of The Week then is, you guessed it, our Monthly Index of 10 Leading Indicators. Currently sitting at a neutral +2, I should also note that at least 2 or 3 items are on the verge of going positive so, we could easily see a +4 or an outright +5 "buy" in The Index in the next couple of months. Click on the Newsletter Tab to see it.

Nov. 3, 2009

First of all, this month's newsletter is now posted on the Newsletter page so please have a look. It has all the usual stuff and, of course, lots of opinion from me. The BONUS though, in my opinion at least, is our new study on what has been the better investment over time; real estate or gold. We crunched numbers for at least 3 days straight putting this one together so, if you do read it, we hope you like it.

Apart from that, we heard today that The Feds are after our industry again. Good luck guys! It never ceases to amaze me how much these wanna be REALTORs at The Competition Bureau think we're all a bunch of money grubbing bums and cheaters and, it never ceases to amaze me that, after 18 years or so of putting their greasy little fingers in our business, they still have no idea of what we do or how we earn a living. As Cramer would say, "They Know Nothing". Anyway, they are definitely "at it" again by trying to confiscate our MLS system.

Frankly, my attitude is "Go For It Guys". MLS is a great tool but - it is nothing more than that - a tool. It never has and never will sell a house. REALTORs sell houses. However, the fact that they can "appropriate" a system that has been bought and paid for by our organization (CREA) and its members, does make me shudder to think what might be next. Our cars? Our houses? One can only dream....

Oct. 26, 2009

Wanna play "Let's Pretend"? Ok - let's pretend you're the Governor Of The Bank Of Canada. Now, let's pretend that you wake up from a long winter's nap, say around Feb. 1 or 2 (isn't that Groundhog Day?) and wowza! one of your many aides tell you The Dollar has gone ballistic and is now back to its lofty heights of  $1.10 U.S. And that's not all. You are also told that inflation is at 2.5% and rising, unemployment is stuck around 8% or so and gee willickers, our trade surplus with the U.S. has...disappeared.

Now listen up...going back to bed is not an option here. Something must be done; and quickly. Ontario is in The Economic Dumps and, with oil at $100 per barrel, Alberta is booming. Gee...talk about being between the rock and the hard place!!

But that, dear reader, is exactly where Mr. Carny is today. He's got interest rates at all time lows. Inflation, while not rising yet, is bound to do so next year. He's got a Loonie that refuses to decline and therefore, has a manufacturing sector that is crying UNCLE!again because of it.

Now sure, he can stem the tide by printing a ton of new money but that is a dangerous game for, if he does it for too long, the bond market will cry foul and long term interest rates will rise and, once he stops there is nothing to say the dollar won't rise again.

What to do, what to do...that is the question; and frankly, there is probably not much he should do (our opinion). However, we're glad, just this once, that the job is his because, from where we sit, Mr. Carney and his cohorts at The Bank are dangerously close to being in a "No Win Nohow" position.

As for the Calgary Market, we are becoming even more convinced that we are being set up for yet another spike up in prices come January because, the active listing count continues to dwindle (it's down a whopping 44% from Oct. '08 as of today) and the economy continues to improve. Can new hires and new Calgarians be far behind? We think not...so therefore, we see much higher real estate prices in our near term future.

Oct. 9, 2009

Something's going on...no...let me amend that...A LOT is going on.

First of all, we have the Reserve Bank of Australia. It raised interest rates a few days ago. Next? Gentle Ben? he says not but me thinks he's joshin' us. Thirdly, look at gold. Now there's a story to the upside. Fourth...mortgage interest rates are going down, down, down. Go figure eh!

On another note, we hear the new status symbol in Vancouver these days is an $800K mortgage! Like...have we not learned anything these last few years???? Markets that get priced to "perfection" scare me to death and that, dear reader is o0ne great example of what we mean. Party on dudes!!!

And, on yet another, if anecdotal note, let me introduce you to my two good friends Mike & Mike. One lives here, the other in B.C. They both own small businesses and they both tell me "business is booming"! Hmmm...I thought there was a recession going on. Guess not eh?

Finally, look at that U.S. Dollar which is on its way South for the winter it seems. Poor thing...nobody seems to want it anymore. It seems the "new currency" is gold, oil, copper and all those other things that hurt when you drop them on your foot; which brings me to my last and oft repeated point that, if this be true, can a hot Calgary market be far behind? We think not but...more on that later.

Our Chart Of The Week for next week is a quarterly snapshot of average daily sales activity. When the average stays consisently above 60 per day, higher prices generally follow and when they are below 40...look out below. As you can see we poked our heads above 60 this last quarter so..if it lasts through to the end of the year...prices will surely take off as supply is continuing to contract.

Oct. 3rd, 2009

Ok ok, I lied. In our 29/09 comment we said there was nothing to worry about; which I admit...was not true. In fact, the thing that worries me the most is those conflicting signals we're getting right now from various of our technical & fundamental indicators. Therefore, and on the one hand, I'm worried that sales activity seems to now be on track to follow last year's drastic performance through to the end of the year. Yet, on the other hand, I'm worried that I may be wrong, because some of my technical charts are waving "All Clear" and, in addition, the Active Listing count continues to decline - as do mortgage rates so, to say the least the B. is "conflicted" (as to the short term at least) right now so, when asked for opinions the temptation is to play "economist" and talk out of both sides of my mouth; therefore, please accept my apologies to y'all if that's what I'm doing right now!

To illustrate, I've put two charts up on the Newsletters Page this week: the first is the 10 day moving average of sales activity for 3 different years; this one, 2008 and the near perfect year (for sales) of 2005. It is this chart that tends to make me nervous. The second one is a weekly version of what I call the List/Sell Oscillator. I'm not going to bore you with the details of how it is constructed (call me if you need to know) but suffice to say, it has been "dead on" right for years now so, while I do tend to believe this indicator more than most others, I also know nothing is perfect so...I worry.

Finally, B. is holding an Open House this Sunday, October 4th from 2:00 - 4:30 PM at our acerage listing in Springbank. So, even if you're not looking for any real estate, why not drop by and say hello? And, if you are looking for something, you may want to consider this property...we think it's super and who knows... perhaps you will too.

Just head West from Sarcee Trail on Hwy 8 to Lower Springbank Road, then...follow your nose on the Lower Springbank Rd. til you see our sign(s). 

See you there!

Sept. 29, 2009

Two days before Sept. stats are out and nothing of signifigance to worry about - at least in the short term so...let's enter B's "Dream Time" and ponder the following...

1) Since 1967, the first year for which our Real Estate Board has reliable numbers, the Average MLS Residential Price has risen at a compounded rate of 8.11% per year.

2) Since 1967, the Calgary population has risen at a compounded rate of 2.79% per year.

3) Since 1967, oil prices have risen at a compounded rate of 7.3% per year.

We could go on, however if we stick with these 3 facts and extrapolate out for just 5 years, here's where we'll be at:

a) Our city's population (not counting the acerages and smaller centres) will increase by 157,000 souls to more that 1.22 million. Such an increase would amount to roughly 71,000 households and at least 46,500 new houses and condos. Over the next 5, that means we will need a minimum of 9,300 or so new units built every year.

b) Oil prices will average $83.11 per barrel and...

c) The Average MLS Residential price will increase by $100,000 to $647,000 or 41% higher than its level today.

Do we think these numbers will come to pass? Perhaps...but if they do it will likely be just a coincidence. We actually believe the above extrapolation is a rather conservative outlook and that oil could easily be over $100, our population could be 1.26 million and as regular readers know...prices could be near the $700,000 mark.

In any event, suffice it to say we think the next 5 hold better than even odds that Calgary is once again poised to be an engine of growth for the province and yes, the rest of Canada so fasten those seat belts y'all...we may have yet another wild ride ahead in the Calgary real estate market.

Sept. 26, 2009

A few months ago, I said the summer would tell the tale for the balance of the year and that, perhaps we would see a strong fall market.

Well, perhaps we will but...it's sure not showing up in the stats, as sales have declined and seem destined to repeat their 2008 trajectory, albeit from a slightly higher level. And, in line with this thought, it seems as though perhaps we're in for a correction in the oil markets which have enjoyed a nice rebound since March and, since we believe our housing markets are tied to the oil market, it could well be that we see a period of weakness as we wend our way through to the end of the year.

Prices? Well, oddly enough, we may get lucky there because, as is usually the case, it is likely that the active listing count will also decline from here to Dec. 31 so, while sales may decline, good houses may also become more scarce; therefore, prices for "good" property are likely to remain solid over the short term.

Our new Chart Of The Week is of the 10 day moving average for daily listings and sales activity so please have a look at the current newsletter page for that.

Sept. 16, 2009

At last...our Sept. letter is now posted on the newsletter page so please, have a look. We hope you enjoy it.

Sept. 15, 2009

Here's a few facts:

1. Oil prices have risen about 80% since the lows reached in February.

2. Mortgage rates are on the decline again.

3. Residential real estate markets are on the incline for both activity and price since March and show no sign of slowing down.

4. Unemployment is up (yes, we know it is a lagging indicator).

Now, we don't know what other may make of these facts but, for me, it is firstly a reflection of the underlying optimism of Calgarians. And, as far as interest rates are concerned, it seems that, at least for now, bond markets are not afraid of inflation coming back in the near term - though bond traders are a nervous lot so, this view could change rather quickly with just 2 or 3 negative cpi numbers.

Finally, and after way too many months, our latest newsletter is in production and should be on the Newsletter Page within in a day or so, so stay tuned for that; we'll have some prognostications for the balance of the year and, of course, lots of charts and graphs.

Sept. 11, 2009

Another month has gone by already? Yikes! And where to begin...?

Let's start with "the market" by saying, while activity did slow somewhat over the July/August period it was a much different market than we had a year ago and was, in our humble opinion, the pause that refreshes, for we believe now that the fall market will be brisk - bordering on - dare we say it - BOOM.

As to why, we point the reader to the fact that the lower end of the market is downright hot with multiple offers often being written on the same property and selling times often being measured in days as opposed to weeks. Next, we think it is not fair to say that energy markets are now on the way back, at least for oil and as we keep saying, "So goes oil, so goes Calgary Real Estate". Finally, rates are back down again, with some lenders now offering "sales" under 4 percent. How long they'll stay there is anyone's guess for sure, but buyers are out in droves to scoop up the mortgage rate bargains.

On another, although related note, our latest chart is of what we call the List/Sell Volatility Index and simply put, it subtracts the year over year percentage change in listing activity from the year over year change in sales - in this case - using a 3 month moving average to help smooth out the hills & valleys so as to better see the trend. The neat thing about this chart is that it often detects a change in the market before it becomes readily apparent. For instance, in 2007 this index NEVER became positive, even as prices were rising - until June. Have a look, we think all you stats cats who still have a memory will find it interesting, as it goes way back to 1991.

August 10, 2009

Here's a good question. It's one that's slowly being answered too so give it a little thought for, it may affect your future.

Imagine, just for a moment, that you own 1 or more suites in a run down apartment building and further to that, imagine that there is no management in place and, worse yet, no reserve fund inplace to make the necessary improvements or even to pay the ongoing expenses. All is not lost though cause you've got insurance. Now, the fact is, you really do not want to own this nightmare so...ring, ring...you call your fav REALTOR to get this dog off your books.

So here's the question: What's this thing worth? If you were a buyer looking for "opportunity", what would you pay?

We do not pretend to know the answer but, this is the dilemma many banks find themselves in today. As to how & why this is so, it is a sad reality that, for the past few years, we have become the mortgage fraud capital of Canada and, having loaned out millions to unscrupulous villians on property that was grossly mispriced in the first place, these suites are now spread all over the city, are mostly vacant and, sooner or later, will all be sold.

For example, take a look on our Listings Page at our 2 bed condo for $139,900. On the surface it's a good deal for sure but - it is still for sale. Sooner or later and at some price, an investor is going to pick it up, fix it up and, with a little patience and yes, a little luck, make a good return on his or her investment. So again...we ask the question; what would you pay for this "opportunity"? We for sure do not know but we are sure of one thing...the answer will likely surprise us all.

Our Chart Of The Week this week is of Oil Prices. Why? Because so goes oil, so goes Calgary Real Estate.

August 7, 2009

Ok, ok....I know...it's been a month or so but...The B. has been busy and...frankly...I've had nuthin' to say. Like...the market has remained relatively stable and mortgage rates have actually dropped a tad so...what the hey...B. has had nuthin' to say; besides which it's summertime so....cut a guy some slack...ok?

Ok.

However, this evening I got to thinking and...what got me in a  writing mode was this idea of "right" vs. "wrong" when it comes to making real estate decisions.

For example, many years ago, a client of ours purchased a home that we "knew" was grossly overpriced but which, in their words would be inconsequential in 15 years.

It was the home they wanted.

They were right, of course and, 22 years later they are still in that house...which has tripled in value since they bought it.

Then there is the other side of the coin...

For some folks, and my parents were in that camp; owning real estate represented "risk" and "risk" was something they avoided at ALL costs; so much so that, once they saw a profit they cashed out (in 1964!!!).

Were they wrong to do so? On the one hand, yes they were but...on the other, not at all; for the ability to mentally absorb risk is mutually distinct between us all and truly, what is good for the goose may not be good for the gander