http://riverliferealestate.com/blog Tue, 01 Jun 2010 22:51:05 +0000 http://backend.userland.com/rss092 Toyota isn't the only one having problems with acceleration these days. It seems as though the Calgary real estate market isn't sure whether to slow down or speed up. In May, we saw a decrease in the number of sales at the same time as both the median and average prices were increasing. Unusual? I'd say so. There was a deluge of new listings, but it seems as though buyers were making up their minds and were willing to pay top dollar for the house they want. Sellers, don't get too excited though. Though the monthly numbers were strong, the buying activity seems to be slowing down. In the first week of May, there were 320 single family sales. In the second week, 328. Third week, 301 and the fourth week saw only 237 sales. Another reason we may start to see downward pressure on the marketplace is the recent announcement by the Bank of Canada that they increased the overnight lending rate by 0.25% to 0.5%. This means monthly payment increases for variable rate mortgages and you may see lenders increasing their fixed-rate products as well. For the average buyer, a 0.25% increase in their mortgage rate won't have a huge impact on their lives, but rate increases can have a bigger impact on consumer confidence and willingness to purchase at today's prices. These are definitely interesting times out there and the information available can be hard to decipher. Yes, the market is stable and has shown significant price increases in 2010 (over 5%). However, the absorption rate (how many months worth of inventory we have, at the current rate of sales) has increased from the low 2's late last year to over 4 (the higher the number, the slower the market). Let's hope that, like Toyota, we will continue to see growth and confidence despite our acceleration problems! For advice about your personal situation, whether buying or selling, please contact me. I will work with you to help you achieve your financial and lifestyle goals and interpret the important data for your benefit. http://riverliferealestate.com/blog/?p=66 The mild temperatures that we've experienced so far in 2010 have made me wonder at times if spring has arrived early this year. I've already seen a few green blades of grass and some buds on the trees. Likewise, Calgary's real estate market has started to show signs of life springing from the ground. [1] March, April and May have been the busiest months (most sales) for almost every year this decade. Last year, after a dismal winter hibernation, the market took a little longer to get up and running and we didn't see the busiest months until May, June and July. So far in 2010, however, the ground is already starting to thaw. For the first six weeks of the year, the number of sales (single family + condo) increased every single week.  The first five weeks of the year averaged 276 sales/week. The second five weeks averaged 388 sales/week. Last week we reached 479 sales in one week. Prices are showing similar growth, traveling from a single-family median price of $398,000 in January to $411,000 in February and $422,000 so far in March. For those who are wondering, that puts us at only 4% off the market peak of June 2007's median single-family price ($439,000). There is much talk in the news these days of imminent rising interest rates and upcoming mortgage rule changes that may put downward pressure on our marketplace. The mortgage rule changes that take effect April 19 (see http://www.cbc.ca/money/story/2010/02/16/mortgage-flaherty.html [2] for details) affect a small demographic of homebuyers. The biggest change is to those purchasing non-owner-occupied properties (rental properties).  We may see a small rush trying to get in under the existing rules but most potential home buyers and sellers will realize that their dreams of home ownership (or "larger-home" or "nicer-home" ownership) have not been dashed. Regarding interest rates, as long as the increases are small and gradual, they won't likely cause any sharp dropoff in demand for new and resale homes. Raising rates, for example, by 0.25% this summer would have a minimal effect, especially on those in 35-year mortgages. This category comprises a large sector of buyers, especially first-time buyers who many have predicted will fuel the real estate growth this year. A $300,000 mortgage at 4% over 35 years has a monthly payment of $1,322. At 4.25%, that payment is $1,367, a difference of a few less visits to Starbucks each month. Birds are chirping, the sun is hanging around longer each day and optimism is in the air for home buyers and sellers. Spring is here and I'm happy to help you make the most of it. Let me know if you are looking for the right time in 2010 to make your move. [1] http://images.google.ca/imgres?imgurl=http://lh3.ggpht.com/_dbNot2iwM5I/SDK1HdwfXrI/AAAAAAAAAMg/814WF4jO5NA/Blades%2Bof%2Bgrass2.jpg&imgrefurl=http://www.woot.com/forums/ViewPost.aspx%3FPostID%3D2547704&usg=__qBVKHVmSBcOoFUJySwPP0XdN7L8=&h=768&w=1024&sz=92&hl=en&start=5&um=1&itbs=1&tbnid=zUUzaNsNQL1knM:&tbnh=113&tbnw=150&prev=/images%3Fq%3Dblades%2Bof%2Bgrass%26um%3D1%26hl%3Den%26sa%3DN%26rls%3Dcom.microsoft:en-us:IE-SearchBox%26tbs%3Disch:1 [2] http://www.cbc.ca/money/story/2010/02/16/mortgage-flaherty.html http://riverliferealestate.com/blog/?p=57 Yes, we are still emerging from what many consider the worst recession since the 1930s, but if you looked solely at the Calgary real estate statistics from the last 12 months, you sure wouldn't think so. Let's start with single-family homes. We started 2009 with an average home price of $413,000 - the last time we saw a number that low was in December 2006. Prices made a steady climb all the way to $464,000 in November before tailing off in December to $451,000. December is historically quite a slow month, so that number isn't shocking. However, even taking December into account, that is still a 9.2% increase through the year. The total number of sales for the year was up 7.3% from 2008 to 14,440, but still lower than the three previous years. The condo market tells much the same tale. January 2009 saw an average condo price of $270,000. That number wiggled its way upwards, making it all the way to $294,000 in November before dropping to $288,000 in December. Again, at 6.7%, still a significant price increase for the year. The total 2009 condo sales were 6,328, up 11.8% from 2008, but again, lower than the levels we saw in '05, '06 and '07. I'm sure you all remember the days of 2007's boom. The market peaked at an average single-family home price of $505,920 in July 2007. That puts us currently 10.8% off the peak (only 8.2% off if you take November's numbers). But, chin up, we were 18% off at the beginning of 2009. So what does all of this mean? Like most economic reports say these days, we're not out of the woods yet, but things are certainly looking up. I'd say if you owned a home in 2009, it probably appreciated more then many other investments. We haven't seen the market pick up yet in these first two weeks of January but with the threat of interest rates on the rise, it's likely that we'll see more buyers enter the market in the weeks to come. http://riverliferealestate.com/blog/?p=47 In the midst (or hopefully toward the end) of a global recession, the most expensive house ever to sell in Calgary passed hands at an impressive $10,300,000 recently, as I'm sure many of you have heard in the news. To put this in perspective, the second most expensive sale ever in Calgary was not too far behind at $7,500,000. But, the third most expensive home sold was way down at $4,812,500, less than half of the $10.3-million home. Interestingly, all three of these sales happened in the past 18 months, not during the boom times of 2006-2007. There have only been nine sales in Calgary’s history over $4 million and three of those were for land value only (multi-property development). I would guess that anyone who has $4 million (or $10 million) to spend on a home in Calgary has money to spend on a home elsewhere (Maui? London? LA?). And they’re probably not under pressure to work 9-5 anymore. Which makes me wonder… why buy in Calgary at that point in life? We know the climate leaves much to be desired compared to tropical destinations. The arts and culture scene is getting there but still doesn’t compare to the great cities of the world. Traffic is getting more and more congested and public transportation lacks efficiency. Sports teams? Not bad. Rocky Mountains? They’re great, but if you’ve got $10 million, why not buy in Canmore instead? There is one thing, however, that Calgary is to many people: home. Your friends, your family, your memories, your long-time coffee shop, the restaurant where they know your name, your season tickets to the Flames or the CPO, your favourite walk along the river. It may very well be this city that made the $4-million purchase possible with its opportunity aplenty. As mentioned in my post last month [1] about the value of houses, a property is worth whatever someone is willing to pay for it. So now Calgary has joined the ranks of the cities of the world with $10-million homes - cities where at least one (wealthy) individual does feel it's worth it. For those who are wondering, the $10.3 million home is 8,588 square feet (above grade, plus another 4000+ in the fully finished basement) with a triple car garage. There are six bedrooms and six bathrooms. It is located on a 15,000-square-foot lot on the banks of the Elbow River. There is even an indoor floor hockey arena. Oh and one more thing, the annual property taxes are $51,056. Even if you don’t have $10 million to spend, I’d be happy to help you find the house of your dreams... Drop me a line! [1] http://riverliferealestate.com/blog/?p=19 http://riverliferealestate.com/blog/?p=33 An article was posted on CBC recently about home affordability dropping across Canada throughout the recession and RBC claiming this could be its lowest point, as housing prices across the country have been stabilizing and even rising in recent months. The reason I felt compelled to comment on this article was in response to several reader comments posted about the article at http://www.cbc.ca/money/story/2009/09/09/housing-affordability.html [1]. For example, one reader said “Houses are just a bit of wood, plastic, brick and labour. Why is the average cost even anywhere close to $325,000?” The writer forgets about two important factors: land and the market. I will get to land values later. Markets are based on supply and demand. The principal reason house prices increased so sharply in 2005-2006 was that demand was extremely high while supply could not catch up. As builders poured hundreds of new homes into the Calgary marketplace through 2006-2007, net migration (total population moving to Calgary minus total population moving away) softened. This helped shift the balance of supply and demand in the other direction and we saw Calgary turn into a buyer’s market. With recent record-low interest rates and less new houses being built, we have seen the market really balance out in 2009. Of course, houses are only worth what someone is willing to pay for them. The same is true for any resale items. Anyone could post a used coffee mug on Kijiji for $1,000 but I’m sure they won’t find a buyer willing to pay that amount. Home sellers can list at whatever price they choose but the house only earns that value if a buyer is willing to pay that amount. One of the reasons that buyers have been willing to pay the amount that they are is the value of land. Anyone who works downtown and lives in the suburbs can tell you how their daily commute affects their quality of life. For those who can afford to do so, a home close to your workplace means more free time to do whatever it is you love to do. Calgary is a hub of entrepreneurial energy, high-paying oil & gas jobs, now two universities (with Mount Royal’s upgrade from college) and opportunity aplenty. Surely a piece of land here is worth more than one in Lemberg, Saskatchewan (I can say that… it’s my mother’s home town, population 350) where you would be happy to work at the four-room hotel or maybe the Chinese café. Calgary’s consistently high average income means many individuals and families can have a comfortable quality of life even when purchasing a $400,000 home. Even when it may be a bit of a financial stretch to move from renting to owning, I believe many home buyers (including myself) can attest to the pride that comes from owning your home, the freedom that comes from making whatever changes you desire to it and the value of investment that comes from building equity over the long term. If you want to discuss more about land value, supply & demand or how home ownership can benefit your lifestyle, please drop me a line. [1] http://www.cbc.ca/money/story/2009/09/09/housing-affordability.html http://riverliferealestate.com/blog/?p=19