It’s hard to believe we are at the end of another year – and what an interesting real estate year it has been!  With the volatility of the market in 2009 I thought it would be helpful to provide our readers with a bit of a review.

The most significant statistic, in my opinion, when considering market conditions, is what portion of the available inventory is selling? The following table shows the percentage of properties sold compared to the available inventory, or the absorbtion rate for single-family homes in Calgary Metro year over year for the month of November for the last three years.

While a 27.22% absorbtion rate is good the best absorbtion rate this year for single family homes was in June when a whopping 32.58% of available properties were sold! The following table shows the absorbtion rate for each month since November of last year.

I’ve always said that Real Estate is not rocket science, just common sense and the basic economics of supply and demand. Looking at the above data it is easy to see that although there were fewer sales in November than there were in August, September and October we actually had a better absorbtion rate in November than in those previous months.

The Total MLS (including Condos and Country Residential) Median Price has shown the following progression:

The Calgary Real Estate Board reports both average and median prices. I prefer to judge market conditions by following median prices because average prices can be distorted by unusually high single sale prices. The median price shows us the “middle” price of all sales during any given month. The lowest median price reported this year was $340,000 which represented the “bottom” of the market. The highest median price reported was $360,000 which was achieved in June and then again in October and November. The difference between the lowest median price and the highest median price in the last year was 5.56%.

In review, although the beginning of 2009 was difficult for anyone involved in the business of Real Estate, both the increase in the median price and the absorbtion rate should provide us with a return to a better market in 2010.

It is important however to consider because less than one third of available homes are selling properties still have to be accurately priced to sell. Buyers do have properties to choose from but because there is no longer super high inventory, not at bottom basement pricing. I will leave it to the economists to make long term predictions, but it looks like we have seen a return to balanced market conditions for the first quarter of 2010.

Hope this helps!

Susanita de Diego 

According to this article on November 3, 2009 from the Calgary Herald

http://www.calgaryherald.com/business/Calgary+Real+Estate+Board+points+October+price+rise+evidence+housing+market+turned/2173739/story.html

The October price rise is evidence that the housing market has turned …… or has it?

As I stated in a previous blog in my opinion a more significant statistic is the ratio of the number of sales compared to the existing inventory. In other words what portion of the available inventory is selling? The following graph illustrates the percentage of properties sold compared to the available inventory or the approximate absorbtion rate for single-family homes in Calgary Metro.

While a 26.65% absorbtion rate is very good the best absorbtion rate for single family homes we have seen this year was in June when a whopping 32.58% of available properties were sold! The following graph shows the absorbtion rate for each month since the beginning of the year.

I’ve always said that Real Estate is not rocket science, just common sense and the basic economics of supply and demand. Looking at the above data it is easy to see the trends over time.

What is also interesting is the interpretation of the changes in the median and average sale prices. The median single family residential price decreased from $360,000 In June to $353,000 in July and to only $350,000 in August. The median price increased to $399,900 in September and increased again to $410,000 in October.

The average single family residential price was $402,621 in June, $394,968 in July, $397,863 in August and increased to $459,085 in September and increased again to $462,465. The average price will definitely be affected by any unusually high sale. I have always looked at the median price as the true indicator of changing market values.

The median and average price increases indicate that the sales in the summer represented entry-level buyers and the sales in the fall represented move up buyers. This does NOT mean that all prices have increased by $50,000.00! With only approximately one quarter of available homes selling we do not have a lack of inventory which is usually the cause of increased prices in every market segment, as was the case in the Spring of 2006 and to a lesser extent in the Spring of 2007. Properties still have to be accurately priced to sell and buyers still have properties to choose from but because we no longer have an overabundance of inventory, not at bottom basement pricing. I will leave it to the economists to make long-term predictions, but it looks like we have seen a return to balanced market conditions.

Hope this helps!

Susanita de Diego

According to this article on September 2, 2009 from the Calgary Herald

http://www.calgaryherald.com/business/real-estate/index.html

The Calgary housing market is in full recovery mode…… or is it?

As I stated in a previous blog in my opinion a more significant statistic is the ratio of the number of sales compared to the existing inventory. In other words what portion of the available inventory is selling? The following graph illustrates the percentage of properties sold compared to the available inventory or the approximate absorbtion rate for single-family homes in Calgary Metro.

While a 24.53% absorbtion rate is very good the best absorbtion rate for single family homes we have seen this year was in June when a whopping 32.58% of available properties were sold! The following graph shows the absorbtion rate for each month since the beginning of the year.

I’ve always said that Real Estate is not rocket science, just common sense and the basic economics of supply and demand. Looking at the above data it is easy to see the trends over time. Anyone involved in the Calgary Real Estate Market should also be aware that the median residential price has decreased from $360,000 In June to $353,000 in July and only $350,000 in August. The average residential price was $402,621 in June, $394,968 in July and $397,863 in August. The average price will definitely be affected by any unusually high sale such as the highest home sale ever recorded in Calgary’s history this August at $10.3 million. I have always looked at the median price as the true indicator of changing market values.

I will leave it to the economists to make long term predictions, but it looks like we have seen a return to balanced market conditions after a bit of a frenzy in May, June and July. Properties still have to be accurately priced to sell and buyers still have properties to choose from but no longer at bottom basement pricing.

Hope this helps!

Susanita de Diego

According to the latest news release on June 1, 2009 from the Calgary Real Estate Board

http://www.creb.com/public/documents/statistics/2009/package/res-stats-2009-may.pdf

the number of single family homes and condos sold in May in Calgary Metro are both up from a year ago.

Year over year comparing 2009 to 2008, single family home sales were up by 16% and condo sales were up by 13%.

As I stated in a previous blog in my opinion a more significant statistic is the ratio of the number of sales compared to the existing inventory. In other words what portion of the available inventory is selling? The following graph illustrates the percentage of properties sold compared to the available inventory or the approximate absorbtion rate for single-family homes in Calgary Metro.

For those of you who are currently in the market for a single family home you will have noticed that there is far less choice than a few short months ago! In fact the absorbtion rate for the month of March 2009 was only 16.99%.

When almost 26% of the available homes sell as in the month of May 2009 it is usually a reflection of a very healthy market. Properties still need to be priced at market value in order to sell but now face a lot less competition. Those who have been waiting for the “bottom” who have not yet bought have probably missed it – at least within this most recent cycle.

The condo market is still lagging behind the single family market but has also improved as can be seen from the following graph.

I’ve always said that Real Estate is not rocket science, just common sense and the basic economics of supply and demand. Anyone involved in the Calgary Real Estate Market should be aware that the median price has increased from sitting at around $340,000 from December through to April up to $350,000 in May. The average price has increased to $394,397 in May after sitting between $373,000 and $379,000 for the past five months.

I will leave it to the economists to make long term predictions, but there has been a definite stabilization short term.

Hope this helps!

Susanita de Diego

As of last month I have been in the Real Estate industry for 22 years. Having lived and breathed Real Estate for so long I sometimes forget that because Buyers and Sellers do not buy and sell Real Estate everyday that they may not share my knowledge about how our industry actually works. This can lead to erroneous assumptions about what is important in the buying and/or selling process.

On the selling side some property owners still believe that the Realtor who lists the property will be the same Realtor who brings the Buyer, when in fact this happens in only approximately 5% of Real Estate transactions. As a matter of fact, in many States in the US, one Realtor representing both the Buyer and the Seller, or Dual Agency, is forbidden. This is because of the potential conflict of interest. In Alberta, according to the laws that govern our industry, Realtors must disclose to a Buyer or Seller their legal relationship at the earliest possible moment.

In practice this means that any Realtor representing the Seller who receives a showing request directly from a Buyer MUST advise the Buyer of their Agency options at the very beginning of the relationship, often before they show the Seller’s home.

 The Buyers can choose a Customer relationship or a Client relationship. In a Customer relationship the Realtor MUST disclose to the Buyer that they will be representing the Seller and that while they have a duty to be fair, the Buyer will not receive “representation” or advice. If they want to receive full “representation” they must choose another Realtor to represent them. If they prefer a Client relationship the Realtor can provide them with “Agency” representation but because the Realtor is also representing the Seller he or she can only provide “Limited Dual Agency”. In Limited Dual Agency the Realtor must not disclose either party’s motivation or final price to the other party and must not favour one Client over another.  If you were a Buyer which relationship would you choose?

Some Sellers also assume that the Listing Realtor will be able to use their “sales” skills to “talk” a Buyer into paying more for their property. As you can see within “Limited Dual Agency” this is impossible for an ethical Realtor.

On the Buying side some Buyers believe that their Realtor will be able to find properties that are not yet listed and that the Buyers will be able to buy that property at a lower than market value price. In this case if a Realtor was able to locate a property that matched the Buyer’s criteria but was not yet listed, under the laws that govern our industry the Realtor MUST disclose to the Seller their legal relationship at the earliest possible moment and give them the options of a Customer relationship or a “Limited Dual Agency “ relationship. In a Customer relationship the Realtor MUST disclose that they are representing the Buyer and while they have a duty to be fair to the Seller they are on their own in a negotiation. If they want to receive full “representation” they must choose another Realtor to represent them.  If they prefer a Client relationship the Realtor can provide them with “Agency” representation but because the Realtor is also representing the Buyer he or she can only provide “Limited Dual Agency”. In Limited Dual Agency the Realtor must not disclose either party’s motivation or final price to the other party and must not favour one Client over another.   In this case if you were the Seller which relationship would you choose?

There is no doubt there is a benefit to working with a professional and ethical Realtor who possesses experience, marketing skills and knowledge. On the selling side their duties include accurately reporting market conditions so Sellers can correctly price their properties, presenting the property well to the organized Real Estate marketplace and to the public, continuing to accurately report market conditions during the listing period and providing sound counsel once an offer is obtained. On the buying side a good Realtor will again accurately report market conditions, assist in the search of available properties, provide sound counsel during the offer process and assist the Buyer during the due diligence period.

Hope this helps…

Susanita de Diego

This is an interesting article in the Calgary Herald reporting on Calgary’s “obsession” with house prices.

http://www.calgaryherald.com/Business/home+price+obsession/1486088/story.html

I agree with Don Campbell’s comments regarding Real Estate as a long term investment and that we should be looking at the market through a telescope not a microscope. I also agree that the market is “just taking a breath.”

I think trying to time the purchase and sale of Real Estate as an investment or “flipping” is a little like day trading in the stock market, suitable only for a select few who have a high risk tolerance and who have the ability to hold their investments if the market turns. However with a Real Estate investment the property can be rented to mitigate a loss and to service the debt. Plus we all have to live somewhere and I would much rather own my home, even if I could have paid less for my home today than when I bought it. Unless I need to sell, as with my stock portfolio, any loss is only on paper.

I also think that good Realtors should analyze at the monthly numbers. Not mentioned in the article and I think of interest to everyone looking at the Calgary market is that the MLS median price for the last four months has been $340,000 in December, $340,000 in January, $342,000 in February and $340,000 in March. The average price for the same period has been $373,761, $373,978, $379,060 and $379,363.

I’ll leave the long term predictions to the economists but four months of consistent median and average prices when we have had almost a steady drop in values since August of 2007 is definitely a positive factor. Is this the beginning of the end of the price slide? Only time will tell…

Hope this helps,

Susanita de Diego

According to today’s article in the Calgary Herald  http://www.calgaryherald.com/Business/Calgary+housing+market+picks+speed/1453293/story.html things are looking up in the Calgary Real Estate Market. The data that supports the Author’s position comes from the statistics released by the Calgary Real Estate Board at the beginning of every month reporting on the activity of the previous month.

While we are encouraged by the increased sales activity there are different ways to interpret the data.

For example single family Calgary Metro sales were up by 261 sales in March 2009 from February 2009, terrific news! But sales were down by 332 sales from March 2008, not so terrific news. And sales were down by 1,186 sales from the “hot” market in March 2007, even less terrific news!

In my opinion a more significant statistic is the ratio of the number of sales compared to the existing inventory. In other words what portion of the available inventory is selling? The following graph illustrates the percentage of properties sold compared to the available inventory or the approximate absorbtion rate for single-family homes in Calgary Metro.

What does this mean? For those of us watching the market it means that even though we have fewer sales than last year we actually have a slightly better absorbtion rate indicating a slightly stronger market.

The Condominium numbers for Calgary Metro are as follows:

It’s easy to see why prices increased in 2007 and why prices decreased in 2008. While March numbers are positive we would need to see several months of increased activity combined with fewer homes coming to the market for prices to significantly change.

In the meantime, Sellers who price their home aggressively will sell, because roughly 16% of properties are actually selling, and Buyer’s will continue to have choice.

Hope this helps!

Susanita de Diego

We all know that with any investment we should buy low and sell high but without the benefit of a crystal ball it is almost impossible to know the perfect timing! In fact, many of the new condominiums currently listed are owned by investors who could not have known when they purchased their yet to be built condos that the market would correct. So how do we know that the current market is as low as it is going to go? We don’t! Just like we didn’t know when the boom market was going to end. What we do know is that investors who try to perfectly time their “buy low sell high” usually wait too long! While we don’t know exactly what will happen next year we do know that all markets are cyclical and that the market should eventually recover.  So if one were to buy a property today even if market values dropped another 5% next year it is probably safe to say that in 5 years they still would be making money on their investment. Especially when considering current interest rates and revenue properties where the tenant is servicing the debt!

The following model is an approximate estimation of potential future gains assuming a purchase of a 2 bedroom condominium in downtown Calgary with an interest rate of 5% for a fixed 5 year term with a 35 year amortization. The way to achieve the best return as shown in these examples is to divide the monthly mortgage payment to make 2 payments per month and with a tenant servicing the debt.

Rental Income to cover costs $1,510 per month. Tenant to pay utilities not covered by the Condo Fee

After 60 months:

Assuming no change in market value;

Assuming a 5% drop in market value in the 1^st year but a 2.5% increase in market value every year thereafter;

Assuming a 5% drop in market value in the 1^st year but a 5% increase in market value every year thereafter;

Obviously there is no guarantee that the market will perform as outlined above, however market value usually rises 3% to 7% in a “normal” market year.

Hope this helps!

Susanita de Diego

Hello,

I have had a few meetings over the past few weeks with condominium owners who bought brand new condos directly from the developers and those meetings reminded me that I should post a blog about Buyer Agency Representation.

Many Buyers assume that if they are buying new product, whether it be a house or a condo, that they do not require or that they are not able to have a Realtor represent them.

It is important for Buyers to know that the Builder’s or Developer’s in house salespeople do not represent the Buyer’s interests and are not legally obligated to tell you certain things unless you ask.  They are employed and paid by the Builder or Developer. In addition most in house salespeople have not or are not involved in the purchase and sale or re-sale homes and can therefore be ill equipped to provide sound advice about which features or locations represent the best re-sale value in the future. Also most Builders and Developers have created their own Purchase Contracts with terms that reflect the Builder’s or Developer’s best interests and may contain terms that the Buyer may not know are not in the Buyer’s best interests. For a closer look at some actual clauses check out the CBC Marketplace report on condos at http://www.cbc.ca/marketplace/condo_crunch/ .

Representation by an experienced, professional Realtor can save the Buyer from many potentially expensive future issues when buying new product or indeed any home.

A good Realtor can assist in choosing locations and finishings that will be desirable to future Buyers. When choosing a location a good Realtor will assist the Buyer in determining what future development around the subject property could be. In terms of finishings and floor plan a good Realtor will be able to advise the Buyer about what is popular and what will probably have value to a future Buyer. Realtors can also provide the Buyer with recent sales of similar properties, not only to determine current market value but also to show the different values of new and resale properties. A good Realtor will also negotiate on behalf of the Buyer. Many Buyers assume or are told that they are not able to negotiate the Builder’s or Developer’s price but sometimes negotiation is possible.

I’m sure that there are many home owners who have had great experiences in buying and/or building new properties and many Builders and Developers who do the right thing. Unfortunately, I often meet home owners that have bought properties that have less square footage than quoted by the developer, are in a poor location in a neighborhood or a building or have finishings that are unpopular or that were too expensive for the home owner to receive a return on their investment. One homeowner I know who bought a 2 bedroom and den apartment condo ended up with only a 2 bedroom with no den AND the developer ran out of money and – well within the rights accorded to them in the purchase contract they composed – leased the elevators to the new owners so that their condo fee was more than double the most common condo fee in the marketplace. Another homeowner I know paid $7,000.00 for an extra parking stall that they would not have title to because it was common property and therefore only assigned and could eventually be assigned to another owner or resident!

Our personal residences are often our largest asset. At the very least when buying new product the prudent
Buyer should get their purchase contract reviewed by a lawyer who specializes in Real Estate. The lawyer review should be a condition in their contract. Should one choose to have representation it is important to interview Realtors and to choose a Realtor that has experience in both new and resale properties. When buying a condo there are many additional considerations. Therefore it is extremely important to choose a Realtor who has a lot of experience and additional education regarding condominium ownership.

It is easy to get caught up in the excitement of “new” but a prudent Buyer will always look before they leap!

Hope this helps…

Susanita de Diego