The Runaway Prices Have Begun To Ease In Canada
The Star Phoenix reports from Canada. “Canadians’ seemingly endless appetite for buying and selling houses will continue the resale market’s ‘astounding momentum’ from the second quarter through the end of the year, according to a report released Thursday. ‘The most profound story in Canadian real estate today is the extraordinary interest that people across our country continue to have in buying and selling homes,’ added Phil Soper, CEO of Royal LePage Real Estate Services. ‘The sheer number of homes trading hands this year has far exceeded consensus expectation.’”
“All regions are expected to enjoy the same growth conditions with average house prices hitting double-digit gains in Edmonton, Calgary, Winnipeg and Regina, according to the report.”
The Leader Post from Canada. “Regina’s red-hot housing market isn’t just breaking records, it’s shattering them. Fuelled by strong demand and brisk sales, the city’s residential housing market broke a number of records last month, said the Association of Regina Realtors on Wednesday.”
“With demand still rising, the market should stay bullish throughout the summer, the association said in its monthly market report.’We’re seeing unprecedented levels of demand and buyers in the marketplace,’ said Gord Archibald, executive officer of the association.”
“The average house price in June was $169,729, a 24-per-cent-jump from last year. Archibald said this reflects the multiple offers many sellers receive, driving sale prices upwards. ‘Homes routinely get 10 or 15 offers,’ he said. ‘So prices are routinely going above listed price because of competing buyers.’”
“And despite soaring prices, Regina’s residential prices remain less than half the national average, Archibald said, attracting out-of-province interest. ‘I had three requests from Alberta buyers just this weekend,’ said broker Kelly Wilson. ‘And that’s just me. There’s 280 other realtors in the province.’”
“Paradoxically, the record-breaking month comes despite an increase in the number of houses up for sale. New listings rose slightly during June, but were overwhelmed by the fast pace that homes sold, Archibald said.”
“However, Regina’s strong housing market is not all good news. Wilson said some over-ambitious sellers have begun pricing themselves out of the market. As word of Regina’s hot market spreads, sellers who overprice their homes can find they don’t even receive an offer.”
“‘If you overprice your property, you’re going to see people unwilling to pay,’ he said.”
The London Free Press from Canada. “An exodus of people escaping the traffic, construction gridlock and dizzying home prices of boomtown Calgary helped push home prices in Saskatchewan to record levels, a trend expected to continue through the end of 2007.”
“Saskatoon recorded Canada’s largest property jumps in the second quarter: with bungalows costing an average $281,250, more than $100,000 over the same period in 2006. Two-storey homes were even more expensive, going from $196,500 to $305,000. Regina bungalows sold for $204,000 over $143,250 a year earlier.”
“Still, the runaway prices that have characterized Edmonton and Calgary for the last 18 months have begun to ease.”
“‘As home prices have escalated, it’s made the relative cost of living in a city like Saskatoon very appealing,’ said Royal LePage’s Phil Soper, noting the market will begin to level off at some point. ‘The price hikes in Saskatoon, and to a less degree, Regina, are completely unsustainable.’”
The Edmonton Journal from Canada. “Edmonton house prices fell almost $9,000 in June compared with May, as the number of listings continued to soar. Average prices in the Edmonton area for single-family houses dropped two per cent to $417,265. Condo prices dipped 0.3 per cent to $265,172, while duplexes and row houses fell 1.3 per cent to $342,836.”
“Meanwhile, 4,982 homes were newly listed in June, following the 4,850 listings in May, compared with 2,440 in June 2006.”
“‘Our members have reported a number of price reductions and fewer multiple offer situations than we have faced in the recent past,’ Carolyn Pratt, president of the Realtors Association of Edmonton, said today.”
“In this healthy market, ‘there is less desperation buying,’ Pratt said. ‘Sellers will have to price homes more realistically for a quick sale.’”
“She added that many new homes have been completed recently, causing buyers to list their previous homes. Pratt conceded that ‘investors may feel this is a good time to be selling.’”
“The 4,982 listings in June far exceeded the 2,203 sales in the same month, leaving a month-end inventory of 6,367 homes. That approaches the record inventory of 7,747 homes in July 1994.”
“This gives buyers more selection and encourages competitive pricing, but does not signal a market slowdown, Pratt says. Although unit sales in June were down 22.4 per cent from May, the strongest month in several years, they exceeded the average of the previous 12 months by 11.7 per cent.”
The Edmonton Sun from Canada. “Edmonton realtor Mike Onofrychuk wasn’t surprised to hear the housing market dipped slightly last month. ‘I could feel it. It started in early June,’ he said.”
“Carolyn Pratt, real estate board president, said Edmonton’s market is still strong and prices should continue to increase over time for all classes of property. The average residential price has risen nearly 74% in the past 18 months.”
“The only sellers affected by the June price decrease, suggests Jon Hall, real estate board marketing and communications manager, would be those hoping to ‘flip’ a property. ‘(Lower June prices) will make it a little harder to make a quick buck.’”
“Hall said several factors could have contributed to last month’s dip. For example, he said, more inexpensive residential options can bring housing prices down. Another likely scenario, Hall said, is more listings took some of the pressure off buyers to find a home.”
“Onofrychuk suspects the citywide inventory spike resulted from builders completing construction of prospect homes purchased by investors last year. He said those homes began coming onto the market a couple months ago.”
“The realtor guesses prices will hover around current rates for a few months until supply goes back down. At that point, he said the increase should resume. Hall said June prices certainly shouldn’t cause owners to sell in desperation.”
I can vouch. Sudbury Ontario. 250 miles north of Toronto. Not the end of the world but on a clear day you can see it. Land for hundreds of miles all around. The mines are doing exceptionally well so there are some fundamentals associated well but otherwise 26% increase last year probably the same this year. Nice 3/2 brick homes to be had for $90,000 3 years ago are now at $230,000. Lakes homes for $500,000 now over 800k. I don’t know where this will end but I am sure it won’t end nicely.
I guess money means nothing these days. It’s just a bunch of electronic numbers or paper with ink on it. I just can’t imagine at todays wages that people can afford to pay so much for a home.
They can’t. They never could. The system the banks had for qualifying people worked very well until they threw it out the window.
I think one of the problems is that people don’t know how to value a house, especially after the boomers collective experiences with real estate. (You know the “I stretched and paid $28,000 for this house in 1974 and it’s tripled in value when I go to sell 25 years later” - type of experiences.) Anything over the price of a car is just a ton of money so hardly matters how many zeros are attached. If they “stretch” now, in a decade it will be worth more money, regardless of the price they actually paid.
Hi Ben, thanks for covering the Canadian angle of the bubble on your blog. Being in Vancouver BC we have a very real bubble simmering away here too. A townhouse in the municipality of Surrey, roughly 25 miles east of Vancouver going for half a million. WTF!!!! MLS.CA >>>>>> F2709289
Anyhow, many here speculating that Vancouver hosting the 2010 winter Olympics is helping to fuel our bubble among other things. Also a Canadian credit bubble to boot. IMHO
Check out this graph for Edmonton inventory.
Up, up, and away!
i really like that graph. to me it shows everyone running for the exit at the same time…
Seattle is a year behind CA
Canada is a year behind Seattle
Picture a line of dominos…stacked up and ready to fall…in slow motion.
The bubble has made it’s mark on just about every country.
“Saskatoon recorded Canada’s largest property jumps in the second quarter: with bungalows costing an average $281,250, more than $100,000 over the same period in 2006. Two-storey homes were even more expensive, going from $196,500 to $305,000. Regina bungalows sold for $204,000 over $143,250 a year earlier.”
- I didn’t realize that the Saskatoon economy was so great! 300k houses! WTF! When word leaks out in So Cal about the booming economy in Canada - our illegals are going to head up there.
I would love to hear an informed opinion about what the hell is up with the real estate industry in BC and the rest of CA for that matter. I have extended family that seem to have jumped on the real estate bandwagon full bore after a realtwhore married into the family. I’ve been warning them of what will happen when the house of cards collapses but to no avail. Then the whole debacle down here in the states ensures but still its like they’re completely divorced from the laws of physics north of the border. There is NO way canadian salaries have kept up with the cost of housing so the whole thing stinks of the same mortgage games we had going on down here before it all collapsed. Any ideas?
BC Toronto and Alberta are most of the bubble spots. The rest of Canada remains quite sane at the moment.
Saskatchewan is getting bubbly. I think sakatoon is up 40-50% YOY
living in Alberta, I can tell you the market has stalled. The realtors keep up the happy talk with things like “the market is more sustainable, but next year prices will continue to rise” without of course mentioning a little think called “affordability”, where to now qualify for a 2-bedroom apartment you need an income of 120,000K/year. While the economy here is very good, the average family income is closer to 75K/year, so guess what, inventories are souring in Calgary and Edmonton… As an avid reader of this blog for the past 18 months or so, it seems to me like history rhyming…
Oh no, stalled market in Alberta? Which part?
A good friend of mine, heretofore sane and sensible, seems to have taken leave of those senses and bought an under-construction condo in Edmonton. I htink he just couldn’t resisit missing the boat while his reckless brother’s been buying and borrowing and buying and counting his appreciation chickens before they hatch.
The sales rep told him his condo is a no-lose deal, that even if he “decides not to sell it” for a big profit when it’s finished next year, that he will surely be able to rent it out at a profit. So far my friend says he’s “making” $5k/week in appreciation, and he’s all psyched.
This sounds to me like the same stage of the bubble that Miami was at just a year or two ago, and I’m not encouraged by his assurances that the economy is booming. I can’t disagree about the economy there, at least for now, but I think he is on for an unhappy surprise if things develop the way you say they are.
Tell me I’m wrong. Please?
living in Alberta, I can tell you the market has stalled. The realtors keep up the happy talk with things like “the market is more sustainable, but next year prices will continue to rise” without of course mentioning a little think called “affordability”, where to now qualify for a 2-bedroom apartment you need an income of 120,000K/year. While the economy here is very good, the average family income is closer to 75K/year, so guess what, inventories are souring in Calgary and Edmonton… As an avid reader of this blog for the past 18 months or so, it seems to me like history rhyming…
Oh it seems that the bubble is global, not just USA. Go rent in Cananda(I heard there is rent control, the landlords can’t charge above a certain price) and wait for the bubble to rupture like it is in USA. Whod pay those crazy prices to live in a cold, cold climate? The correction in Cananda may be more severe than in USA!
good idea, but no rent control in Alberta, however market rents are still about 50% cost of owning same property
I pretty frequently hear people here in Canada talking about how our own bubble just isn’t the same as the one in the USA.
I keep pretty close tabs on what’s going on in the states, and the primary argument everywhere in Canada right now for why prices won’t collapse is because “it’s different here”. You hear that line literally everywhere from Esquimalt in Victoria BC to Dartmouth Nova Scotia. There’s always an argument about why something like local market conditions or foreign investors will keep propping up prices from now until the end of time.
Most people aren’t aware that precisely the same arguments have been made all over the states for years now in precisely the areas that are starting to tank.
Ed Bear: There are some differences: you have to document your income, you have to have a down payment (5% CMHC), you cannot deduct mortgage payments from income tax and there are no interest-only mortgages. The banks offer adjustable-rate mortgages - they say if you want adjustable rate you can have it but if they had the borrowers’ interest at heart they would be very very careful about giving adjustable rates. The economies and the money are different although closely tied.
True, but the incredible price runups beyond fundamentals (ie, how much money people actually make) are pretty strikingly similar.
100% financing is out there now as well, in “creative” forms.
this was mostly true until 2 years ago. Now 0-down loans and 40 year amortization mortgages are becoming commonplace (at least in Alberta). Interest only mortgages are also becoming quite common (the usually require some equity however).
Lots of people stretching out of thier minds to get onto the “property ladder” because “RE never goes down”. IMHO, it is not so different, we’re just a couple years late to the party…
this was mostly true until 2 years ago. Now 0-down loans and 40 year amortization mortgages are becoming commonplace (at least in Alberta). Interest only mortgages are also becoming quite common (the usually require some equity however).
Lots of people stretching out of thier minds to get onto the “property ladder” because “RE never goes down”. IMHO, it is not so different, we’re just a couple years late to the party…
Rob: Is there any way to slow this thing down? Could you give me more details? Who is giving 0-down or interest-only mortgages? Does CMHC approve them? There should be legislation saying that the only recourse the lender has (in the case of teaser mortgages) is to go after the house.
interest only mortgages!??! had to look it up… yup.
http://www.truenorthmortgage.ca/index.php/screen/interest_only
Also 0% is possible and stated income/self employed just staring up too.
Earlier today there was a posting about a house in Florida that had been on the market for over 800 days. It hit me why a little while ago. That house must be waterfront property along the river Denial.
Thanks for the laugh! *hugs*
There has always been a rivalry between BC and Alberta. This time I think BC is losing.
Even though Albertans actually have better fundamentals in terms of family incomes, they seem to have a better ability to tell when the top is in. Alberta buyers are holding back and the sellers know the gig is up. With their oil economy, they know the roller coaster when they see it.
Meanwhile, in BC our overheated market can’t seem to stop on its own. The GFs keep coming, even though we have some of the worse fundamentals in North America. We’ve created too many dangerious myths, particularly about Vancouver and Victoria: the Olympics, the babyboomers, the rich immigrants, the rich Albertans, the scenery, and the weather. Did I miss any? We are not going to stop this insanity until something makes us stop, whether its a recession or increased mortgage rates or a massive oversupply of condos. We have no self-control.
How are they getting financing? suicide loans like being done in America? I bet the bubble is gonna burst soon as even with “creative financing” those fools won’t be able to afford once prices get high enough then all hell will break loose. I give it a year or two at most.
From a BC mortgage brokers website:
“Wells Fargo & Accredited Home Lenders (available through BC Mortgage Brokers)
Wells Fargo & Accredited Home Lenders are the latest entrant in the BC Market, offering up to 100% financing for home mortgages. These lender’s product line up are one of the most flexible in the industry. The mortgage amounts could be larger than traditional sources since they allow you to stretch payments up to 30 years (typically, most lenders are up to 25 years). In addition, borrower’s are allowed to spend up to 45% of their gross income on the mortgage and other payments (as against the usual, 40%). Lastly, credit guidelines are less stringent. Wells Fargo will consider credit scores as low as 600.”
How about this One FL?
Mixer Mortgage
A whole new way to buy a home
Vancouver’s housing market can be tough for first-time homebuyers. Prices are the highest in Canada, and lenders often make it difficult for first-time buyers. But our Mixer Mortgage can change all that. By letting you and a partner, family members or friends share the cost of buying a home, owning your own home suddenly becomes possible. Plus, our Mixer Mortgage gives you the flexibility to choose mortgage terms and the home that suits you best.
How’s that for a noose?
Also we have a certain ethnic community here that will do very creative financing past 100% also tweaking stated incomes.
Mixer Mortgage
why use a hook and line when you might catch the whole family.. plus a couple friends.. with a net..
the RE comedy continues!!!
the world is in the blow off top phase.
Rent control in most provinces is limited to the rate of inflation. Canada is a big place.
There are a few “bubblets” here and there, but the majority of the country is well grounded, requires savings and down-payment for home purchases, and is very conservative.
observer: I’ve lived in NS, ONT, AB and BC and not one of them had rent limited to the rate of inflation. At best they had conditions along the lines of “if the increase in rent is over x% then written justifaction of the increase is required” x usually around 4%. The LL could still raise the rent 50% if they wanted, but generally the tenant could take them to a government quasi-court/regulator. If there was a big change in the market, or if the LL was planning on making some renos it could be ok’ed.
US Economy on Life-Support and Global Financial System on Brink of Collapse ……………….
“THE HOUSING BUBBLE SETS THE STAGE FOR THE U.S. COLLAPSE”
http://www.marketoracle.co.uk/Article1473.html
I vote Cook to deliver the next State of the Union address.
“He is author of the book - Challenger Revealed: An Insider’s Account of How the Reagan Administration Caused the Greatest Tragedy of the Space Age, is Richard C. Cook’s personal story of how he disrupted the cover-ups surrounding the Challenger disaster….”
God how I long for the days when the White House “cover-up” was simply a seedy affair…..
Cook is a really interesting and determined guy.
There’s a documentary I saw on the Discovery(?) channel on his efforts to uncover the details of the Challenger disaster…and all the political cover-ups. Riveting and heartbreaking stuff for the astronauts families, while the bureaucrats toe the political line.
Just sick!!!!!!!!
70 per cent of pre-tax income needed to buy home in Vancouver: survey
http://www.cbc.ca/cp/Money/070615/J061502AU.html
Out here in the Mysterious East (Saint John NB area) things are definitely frothy. There are lots of houses for sale and lots of sales going through. The weekend ads show lots of listings with “New Price” though. What may be contributing to the activity and the upward pressure is the expectation that Saint John will boom because of (1) the new LNG terminal (2) new Irving oil refinery (3) Lepreau II and possibly III (nuclear reactors). Of course if there huge projects don’t go ahead then I would expect prices to stagnate
I’ve been tracking prices from Nova Scotia via Tradewinds RE, a big outfit with a great web site, for nearly 4 years. They’ve been posting info on American buyers of oceanfront properties, many sight unseen, done thru the internet and phone. Other Americans priced out of Maine, and looking for much lower property taxes have been checking out the Maritimes. Asking prices have skyrocketed, and the volume of listings is way up…as if everyone is now trying to sell for top dollar.
“Canadians’ seemingly endless appetite for buying and selling houses will continue the resale market’s ‘astounding momentum’ from the second quarter through the end of the year, according to a report released Thursday.
Hmm….why does this story sound familiar? Where have I heard this before? Puzzling…..
It’s like a bar brawl from the old west movies…. It pours out onto the street and seems to go on forever. Maybe the fight scene from “The Quiet Man” is a better example. Everyone is so caught up in the excitement, most can’t remember why this all began. In the end though, it ends in a respectful handshake or manly hug.
This time, not so much.
And what a great position to be in for the Canadian news media. Their future, and the necessary/obligatory stories have already been written and archived by the HBB. Sweet!
Sometimes, despite being a regular reader, I am amazed at how consistent this bubble is! We have it all over the US, Canada, Oz, Britain, spreading down into the Caribbean, Central, and South America. We have posters from Denmark, and don’t forget that implosion of implosions waiting to happen, Spain.
This will be interesting…
And the band plays on even while the hedge funds cannot get dispersements (1st class has been locked out of the life boats).
Got popcorn?
Neil
don’t forget Dubai
“And despite soaring prices, Regina’s residential prices remain less than half the national average, Archibald said, attracting out-of-province interest. ‘I had three requests from Alberta buyers just this weekend,’
Locust Canadensis. Nuff said.
Another chuckle: Saskatchewan is the home of socialism in Canada (socialists in power today and 3/4 of time since WWII), and Alberta is Canada’s most conservative province. All those true-blue Albertans are going to p*ss away their oil money on overpriced RE in Saskatchewan, putting it in local pockets. Voluntary taxation.
All I can say is real estate really brings out the worst kind of stupidity of people.
All I can say is real estate really brings out the worst kind of stupidity in people.
you can say that again!
I first heard the term “flip” in Toronto in the early 70s, long before if became fashionable in the US. Toronto has had at least three real estate booms and busts since then, followed by long periods of stagnation. I personally know a number of people who lost homes there in the late 70s early 80s. And despite what you may have heard about socialism, Canadian banks are much more powerful than their US counterparts and among the most predatory in the world.
I’ve followed the Canadian real estate market for a long time and when you hear of places like Saskatoon having a housing bubble, it’s time to get very afraid. This is a province that has dropped in population almost every year for the last two decades.