Andrew Kyle’s Blog - Calgary Real Estate

This is a Re/Max USA commercial that sums up my thoughts on the current market:

The latest market conditions:

Last week the Calgary Real Estate Board (CREB) issued its forecast for 2009 - this is the last organization expected to issue a forecast for the 2009 Calgary real estate market so I thought it might be useful to summarize them all - that will be today’s post which I am calling “Part 1″. In Part 2, to follow in a couple of days, I am going to comment on these forecasts, and weigh in on the controversy around them.

There are 5 major organizations that forecast the Calgary Real Estate Market each calendar year. In addition to CREB, there is Royal LePage, Re/Max Canada, CMHC, and Toronto Dominion (TD) Economics.

Royal LePage predicts that after a slow start in 2009, Calgary’s market will return to a growth state later in the year. They predict that over the year the average home price will drop 1.0% in Calgary. This forecast was issued on January 6, 2009.

Re/Max predicts housing activity to be “somewhat static” in the first 9 months or so of 2009, and like RLP, recovery later in the year. Re/Max predicts net no change in the average home price over 2009. This forecast was issued in late November 2008.

Canada Mortgage and Housing Corporation (CMHC) predicts an increase in average (resale) home price of 0.7% in 2009. Part of CMHC’s rationale is a predicted 29% increase in net migration to Alberta in 2009. This forecast was issued in December 2008.

CREB, the only organization that makes separate predictions for houses versus condos predicts a 2% average price drop for houses, and 5% for condos. Combined, this is a predicted 3% drop in average sale price across the entire market. This forecast was issued on January 21, 2009.

And TD Economics predicts a 15% drop in average sale price in all of Alberta, which I am taking liberty with and calling “Calgary”. This forecast was issued in late November 2008.

In my next blog post I am going talk about the integrity of these forecasts (or lack of?) and the controversy surrounding them.

Back on November 25 I made a post (“So You Want To Time The Market”) where I pointed out that the market seemed to have turned a bit in the previous week. It turned out to be wishful thinking (for my sellers) and just a blip in the weekly numbers as December was extremely slow for home sales in Calgary. But since I am glutton for punishment I am back again to point out that the absorption rate has again turned in the last week.

Is this really the bottom? Well it may be for absorption rate, but I don’t think it is for prices. As long as the absorption rate is higher than the number of months that the average seller considers acceptable to have their home on the market (maybe 4 months?) then prices will fall.

Click chart to enlarge

Calgary’s real estate market continued to be stuck in a morass of very slow sales relative to MLS inventory levels in December as it has been for much of the Fall. MLS inventory continues to fall as anyone who doesn’t need to sell or isn’t serious about selling takes/ keeps their property off the market. But since the financial crisis of late September sales have also dropped off considerably, outstripping even the declining inventories. The overall result is far more properties for sale than there are buyers. a VERY strong buyer’s market, perhaps the strongest since the early 1980s, and falling prices.

The overall absorption rate (houses and condos combined, within city limits only) stands at 9.98 at the end of December. But there is something to keep in mind about December Absorption Rates… a lot of listings expire at midnight at the end of the year (it just seems like a convenient date), and also sales are always very slow in December (people have other things on their minds), so December Absorption Rates are always a bit skewed. So I urge people not to read too much into December Absorption Rates - nonetheless December’s stats generally confirm the November and October numbers: a VERY difficult time to sell and a VERY strong buyer’s market

Click Chart to Enlarge

Click Chart to Enlarge

Year-to-year here’s what we saw as far as price drops (median prices) in 2008:

Single Family Homes: $406.4k to $380k, a drop of $26.4k or 6.5%
2-Bed Condos: $288.5k to $257.5k, a drop of $31k or 10.7%
1-Bed Condos: $234.5k to $210k, a drop of $24.5k or 10.4%

And from the peak in June 2007 to present (end of December 2008):

Single Family Homes: $439k to $380k, a drop of $59k or 13.4%
2-Bed Condos: $310k to $257.5k, a drop of $52.5k or 17.0%
1-Bed Condos: $253k to $210k, a drop of $43k or 17.0%

Click Chart to Enlarge

Click Chart to Enlarge

January to March will bring out buyers, as it does historically in Calgary. Whether this will stabilize the market or simply slow the decline remains to be seen.

There was no significant difference between the SF House and Condo Absorption Rates in December, but we know from broader trends that the condo market continues to lag behind houses due to oversupply. it has been 12 months since the spread between the House and Condo markets became noticeable. It will likely continue for another 12 months.

A new feature this month in my market report… below are the 20 communities in Calgary with the best Absorption Rate in the last 6 months. These are the communities that are bucking the trend. What do they all have in common? I think 2 things:

1. They are NOT condo communities. Condos continue to move VERY slowly.
2. These are commuter communities - communities with a reputation for having a good price relative to the commute time to downtown.

Advice For Sellers:
Although more buyers will enter the marketplace in the first quarter of 2009 providing some welcome relief and showing activity for sellers, the cards will continue to be heavily stacked against sellers. I have been recommending for about 5 months that sellers be sure to get ahead of the curve and price their properties aggressively. I am revising that advice this month to advise serious sellers to be STRONGLY aggressive on price. All forecasts suggest more price drops in Calgary in 2009 - the buyers who are out there looking are expecting some of this price drop to be given to them now. We are starting to see some very good prices on properties from sellers who are very serious about selling and those are the properties which are selling (my office has even seen some multiple-offer situations on well-priced properties). If you are not an aggressive seller with respect to price the odds are very good your property will not sell at this time and you are looking at the prospect of selling later at a lower price.

Advice For Buyers:
Things continue to trend in the direction of favouring buyers. Prices are dropping and selection, although not as good as in the Fall of 2008, is still pretty good. It is not clear how much farther prices will drop but the consensus from the forecasts seems to be that prices will drop at least a bit farther in 2009. If you are waiting for me to tell you that we have hit bottom and it is the absolute perfect time to buy then I will do so… 6 months after the fact, because that is when I will know.

One consideration for buyers is be sure you have an active line of communication going with your mortgage broker/banker. Much has changed in the world of home financing in just the last 4 months. It is crucial that you have a good mortgage broker/banker and are communicating well with them and they understand the particulars of your situation while you are home-hunting.

Mortgage Rates Drop

Mortgage rates, fixed and variable, took a nice drop in December, about 30 to 40 basis points (0.3 to 0.4%) on average in December. There are some good mortgage deals out there.

On the negative side though, there is still some uncertainty on the side of credit availability. It is crucial, especially if you are self-employed, have a checkered credit history, are a non-citizen of Canada or are an unusual situation in any other way that you have a great mortgage broker/banker to work with.

Andrew Kyle, B.ASc., is a REALTOR^® with Royal LePage Foothills and a Certified Condominium Specialist.

Even in a very slow housing market some communities buck the trend. Below is a table of the hottest 20 communities in Calgary in the last 6 months (in terms of MLS inventory turnover, aka Absorption Rate). Starting next month I will be including a similar table in my regular Monthly Report

What do all these communities have in common? Well, I think 2 things:

1. They are NOT condo communties. The condo market is very slow (see my past market reports for the reasons why).
2. Generally, these communities have reputations for being good value for their distance from downtown. In otherwords, for the most part these are affordable commuter communties (the exception, being Scarboro at #1, which has prices well above the city average).

Those of you who read my blog regularly know my thoughts on trying to time a home/condo purchase perfectly to leverage every last bit of buying power. I think it is futile, and for buyers there are so many other important considerations in deciding when to buy (see my September 2008 Market Report for a more detailed discussion).

But if I were a person who was waiting for the absolute best time to buy a property according to the market stats I might take careful note of my last weekly Absorption Rate trend update:

(click chart to enlarge)

The Absorption Rate may have hit a highwater mark last week and may be starting to move toward balance. The very best time to buy may be upon us now. I think this is the result of the effects I predicted in my last Monthly Market Report:

• discouraged and show-weary sellers removing their properties from the market;
• sellers with the option of renting doing so;
• low fixed interest rates (possibly the best they are going to be in the next 12 months);
• and buyers feeling the bottom may be upon us.

Who knows what 2009 holds, but the stats certainly suggest that now is a great time for buyers to buy.

See the full set of weekly stats here: http://www.andrewkyle.com/mlsca/home_page.php?page=weekly_stats

And here’s a bit of Batman humour about perfect timing:

(From Bully’s Comics Oughta Be Fun, http://bullyscomics.blogspot.com/2007/10/batman-master-of-timing.html)

I’ve been meaning to do this for a while… I want to post a strong recommendation for Jason Dodd of Canada Mortgage Direct (CMD) and his boss, Greg Williamson, President of CMD.

I do a lot of work directly with Jason - he is the Mortgage Broker/Associate I recommend to all my clients. I’ve never known a Mortgage Broker who knows his business as well as Jason. Good Mortgage Brokers are worth their weight in gold, particularly for clients/situations which are slightly unusual such as the self-employed, folks moving here from other countries, young people whose parents are going to be involved in the financing of the purchase and so on. In my experience, Canada’s major banks tend to mess up any situation with a bit of added complexity to it. But Jason knows his stuff so well, he makes it look easy. I highly recommend Jason even if you have a bank or Mortgage Broker you are working with now.

Jason and his boss, Greg Williamson, are the source of much of the background info on the economy and housing market that you read in my monthly market reports. Greg is a “big picture” guy - he really knows economics and what is driving the finance and housing markets and interest rates. I get weekly in-person updates from Jason and every couple of months or so I have the privilege of hearing Greg’s take on local and national economic trends.

Part of serving real estate clients very well is having a good network of experts in various fields at your finger tips that you can consult with and refer clients to. Jason and Greg are invaluable to me and my clients in that regard. So check out the CMD website, Greg’s blog and Jason Dodd if you want outstanding mortgage expertise. I’ve now linked to Greg’s blog from my own, see the link to Greg’s blog to the top-right.  ===>

Jason Dodd can be reached by phone at 403-815-0565 or via his email address: jason@canadamortgagedirect.com

by Andrew Kyle, B.ASc., Realtor

The Calgary real estate market continues to slow, moving into territory not seen in a generation. It is an extremely difficult time to sell, and conversely an extremely good time to buy. The overall absorption rate (houses and condos combined, within city limits only) stands at 7.15 at the end of October. This is up dramatically from 5.29 at the end of September. What was driving the market for much of 2008, affordability issues, lower migration to Calgary and oversupply due to building activity, has now been joined by major economic upheaval in the form of the September-October 2008 financial crisis, and confirmation of a worldwide recession. The result was a nearly “perfect storm” causing a dramatic worsening of the market (from a seller’s perspective) in October, but the worst may be behind us, and the next two to three months may be the best time to buy in Calgary in a generation.

Looking forward there is reason to see a silver lining. The October numbers reflect a short-term mortgage availability problem that was caused by the worldwide financial crisis. For a brief time, some banks stops lending to each other, and the availability of mortgage funds was uncertain. This seems to have worked itself out. In addition, October to December are, historically, slow for home sales in Calgary - with things picking up after the holidays. So I am expecting that January 2009 will see at least a bit of a rebound (call it a “stabilization”) in the market.

Between now and the end of the year will be a great time for buyers, particularly if having a wide selection suits you. Many sellers will remove their properties from the market between now and the end of the year, so if you are a buyer, I think selection is peaking now at the same time that fixed mortgage rates are at the lowest that they are predicted to be for the remainder of 2008 and 2009. A great combination for serious buyers.

Condos:
The absorption rate for condos in October 2008 was 7.09 - a new high. So that is more than 7 months of inventory of condos currently listed on the MLS system at the current sales pace. The median price for 2 and 1 bedroom condos now stand at $265k and $231k respectively. This is down from $289k and $255k 12 months ago - price drops of 8.3% and 9.4% respectively in the last 12 months. See Chart A - Absorption Rate and Chart C - Median Prices.

If there is a silver lining in the condo market it is twofold:

1. The gap between houses and condos has closed for now. For much of the last year, the condo market has lagged behind the Single Family (SF) House market (see my Feb 2008 report for a detailed explanation of why), but the dramatic events of the last 6 weeks seems to have closed this gap. Perhaps this is just a statistical fluke due to volatility, or it may reflect that house buyers are more sensitive to the recent economic turmoil than condo buyers (possibly because of the higher values involved).
2. We are starting to see a slowdown in new condo units under construction (source: CMC Housing Now - October 2008 ). This is due to a slowdown in projects being started, a number of projects being stopped and a number of projects being completed. This is the first glimpse of the light at the end of the tunnel as far as condo oversupply mentioned in my Feb 2008 report, but we still have 12 to 24 months to go I think.

Houses:
The absorption rate for houses in October 2008 was 7.17 - like condos, a new high water mark since I have been tracking this key market indicator. The median price continues to fall. The median price now stands at $390k, down from $413k (-5.6%) 12 months ago. Median prices typically lag behind absorption rate somewhat, so I expect fairly dramatic price drops in November. See Chart A - Absorption Rate and Chart C - Median Prices.

Advice For Sellers:
My advice to sellers continues to be to focus on the critical importance of pricing your property for the new economic reality. It is absolutely crucial to get ahead of the price drops in this market. With only 1 out of every 7 properties on the market selling last month, only the best priced properties are selling. Many good properties priced at their “market value on paper” are not selling because they are not among the really well-priced properties. This is what I mean by urging sellers to get ahead of the market.

Advice For Buyers:
Between now and the end of the calendar year will be an especially great time to buy, particularly a condo. I think many sellers who aren’t especially motivated to sell will be taking their properties off the market over the next 6 weeks. And come January, I think additional buyers will jump into the market - this historically is what happens in Calgary. The two effects should return some balance to the market early in the new year. So November-December will be a great time to buy property in Calgary.

Additionally, expect mortgage rates to rise slowly over the next 6 months or so. I am told by Jason Dodd at Canada Mortgage Direct that it’s a good time to lock in a 1-year fixed rate. Expect interest rates (both fixed and variable) to be higher next year.

See my market report from September 2008 where I discuss in detail some of the other factors you should consider in deciding whether now is the time to buy for you.

Mortgage Availability Stabilizes, Variable Rates Rise

After a short-term issue with mortgage availability in October, things seem to have stabilized in the lending industry, and the issue of mortgage availability which I mentioned last month is gone for now. For a short time some banks were not lending to each other leading a short-term credit crisis here in Canada corresponding to the high profile one in the US. This seems to no longer be the case and mortgage availability has stabilized.

The fallout from the October ‘08 financial crisis has been a steep jump in variable mortgage rates. It was, for a time, possible get a variable rate mortgage at 0.5 to 1.0% below prime. For the time being the best variable rate mortgages are at prime to prime plus 0.5%. The average posted variable rates from my weekly survey of Canadian banks and mortgage brokers stands at 5.13% on November 1.

We also saw a short-term spike in the average 5-year fixed rates in October from 6.15% to 6.50% - a fairly dramatic 1-month jump.

And as I said earlier, 1-year fixed rates are stable for now at about 6.0% on average.

See my weekly mortgage rate chart here

Andrew Kyle, B.ASc., is a REALTOR^® with Royal LePage Foothills and a Certified Condominium Specialist.

For the second week in a row I feel it might be useful to make a blog post about the latest market data. This is because the Calgary housing market seems to have undergone a “significant event” in the last 4 weeks (that event being the effect of the turmoil of the financial markets). Sales have come to a screeching halt. See chart below (click to enlarge):

The full set of weekly stats can be found here: http://www.andrewkyle.com/mlsca/home_page.php?page=weekly_stats

Two interesting articles in the financial post yesterday regarding condo overbuilding in Canada’s major centres and a housing correction that is starting to look very similar to what has been happening in most US markets the last year or two:

“Cracks appearing in condo land”:
http://www.financialpost.com/most_popular/story.html?id=917523

“Canada’s housing market ‘tracking’ U.S. boom and bust”:
http://www.financialpost.com/news/story.html?id=914783

… the turmoil on the financial markets seems to have had a chilling effect on the Calgary real estate market.

Below is my weekly Absorption Rate trend:

Notice the screeching halt in the market about 3 weeks ago.

The full set of weekly stats can be found here: http://www.andrewkyle.com/mlsca/home_page.php?page=weekly_stats

Sorry to be the bearer of bad news. :o(

Condos: The absorption rate for condos at the end of September 2008 stands at 6.08 - a new high, and now breaking the psychological barrier of 6 - so that is more than 6 months of inventory of condos currently listed on the MLS system. The median price for 2 and 1 bedroom condos now stand at $262.5k and $222.0k respectively. This is down from $300.0k and $255.5k 12 months ago - price drops of 12.5% and 13.1% respectively in the last 12 months. In the last 3 months alone, median prices have fallen 6.9% and 4.1% for 2 and 1-bed condos respectively, supporting my feeling from the street that the fall in condo prices is starting to gain momentum and becoming “dramatic”. See Chart A - Absorption Rate and Chart C - Median Prices

Note: See my market report from February 2008 for some insight into why the difference between the condo and house markets.

Houses: The absorption rate for houses at the end of September 2008 stands at 4.97 - still well in the territory to be considered a strong “buyer’s market” but a slight improvement over the 5.12 it was last month and better than the high water mark of 5.47 in May of this year. So the SF House market seems to have stabilized and is very slowly improving over the last 6 months. Median prices continue to fall though as one would expect in a strong “buyer’s market”. The median price now stands at $395k, down from $420.5k (-6.1%) 12 months ago. The median price of houses three months ago was $408k, a drop of 3.1%. So the SF House market continues to be very soft and prices are falling, but not as dramatically as with condos. See Chart A - Absorption Rate and Chart C - Median Prices

Advice For Sellers:
My advice to sellers continues to be to emphasize the critical importance of pricing your property for the new reality. It is crucial to get ahead of the price drops in this market. Most sellers instinctively want to err on the high side when choosing a list price - it is natural to do so. Frankly, it is also a mistake in this market. If anything you want to err on the aggressive side with respect to list price in this market.

For condo sellers this advice is even more important. There is 6 months of inventory of condos on the MLS system - and then much more in the form of new condos not listed on the MLS. And your options are running out too - the official vacancy rate in Calgary has risen from 2.0% in the spring of this year to 4.0% this month (and unofficially my sources in the property management business tell me it is now more like 4.5%). So I was advising many potential sellers who were reluctant to price their property for the new reality to consider renting out their condos instead - but now, so many people are doing just that, that the softness has spread from the condo resale market to the rental market. Condo sellers, you are in a very tough spot with limited options I’m afraid.

Advice For Buyers:
It’s a great time to buy - simple as that. Prices are falling and the selection is great, even in the tighter SF House market. And if you are a condo buyer, well congratulations! It is an especially great time to buy a resale condo. If you are concerned that prices may fall even further and are wondering if you should wait, see my market report from last month where I discuss in detail some of the factors you should consider in deciding whether now is the time to buy for you.

Mortgage Availability Suddenly Becomes an Issue

Normally the mortgage rate update is the briefest part of my monthly market report, but there have been significant developments in the last month (and days) that are worth mentioning.

First, the “credit crunch” has hit home in Canada in the last few weeks. There is not nearly as much money out there for lenders to lend to home buyers. As a result, some people who would have been able to get a mortgage just a month ago will no longer qualify or will only qualify at higher interest rates or with a larger downpayment. These include the self employed, the underemployed, people who are a bit stretched financially and people with less-than-ideal credit. It is noticeably more difficult to get a mortgage today than it was just a few weeks ago.

Second, even though the Bank of Canada has lowered their trend-setting Overnight Rate (in a dramatic coordinated move with other federal banks around the world), it is not showing up in mortgage rates. In fact mortgage rates, both fixed and variable, are on the rise. See the weekly mortgage rate trend chart here. There are a few different reasons for this: 1. Banks are trying to recover their losses on the financial markets. 2. Banks/lenders have less money to lend, so they feel they can charge higher rates (supply and demand). 3. Banks/lenders are concerned about falling house prices and mortgage-defaults, and want higher returns because of what they see as higher risk.

So as a buyer, it is now more important than ever to get a mortgage pre-approval before home shopping. And as a seller it is now more important than ever to confirm your buyer has mortgage pre-approval before accepting an offer. The days of easy mortgage-access are over for now.

Andrew Kyle, B.ASc., is a REALTOR^® with Royal LePage Foothills and a Certified Condominium Specialist.

The Calgary real estate market continues to be very slow according to the August 2008 MLS stats. Total Calgary Metro listings at the end of August was 8,612, and properties sold was 1,669, yielding an overall absorption rate of 5.33. (See Charts A2 and A) The number of listings has fallen fairly dramatically for the third straight month since the “high water mark” of 10,617 in May 2008, but the number of sales has also fallen from 1,945 in May to 1,669 in August. The result continues to be a very strong Buyer’s market.

Single Family (SF) Houses continue to outperform Condos with absorption rates of 5.12 for houses and 5.82 for condos (see Chart A). The median price for a SF House in Calgary now stands at $398k - this marks the first time since January 2007 that the median price has been below the $400k mark. Median prices for 2- and 1-bed condos respectively are $261.5k and $239.7k. See Chart B. Median prices are down $32k in the case of houses, $42.5k in the case of 2-bed condos, and $14k in the case of 1-bed condos, in the last 12 months.

So in short, the significant market correction continues. Many predicted it would happen after the meteoric rise in prices in the first half of 2006, but after a lag of a year through to the midpoint of 2007, the correction is clearly here. And indications are that the correction is not yet done - prices will continue to fall until the absorption rate numbers come into line with a balanced market (under 3.5).

For Sellers:
My advice to sellers continues to be an emphasis on the critical importance of pricing your property for the new reality. It is crucial to get ahead of the curve in this market. Most sellers instinctively want to err on the high side when choosing a list price - it is natural to do so. It is also a mistake in this market. If anything you want to err on the aggressive side with respect to list price in this market.

Sellers need to put themselves in the shoes of buyers… Buyers know it is their market and they are looking for properties that exceed their expectations when they see them in person - they expect to be able to walk into a property and be pleasently surprised by what they can get for their money. And their expectations are not unrealistic because those properties are out there in this kind of market. If your property is not one of these well-priced properties then it will get lost in the sea of homes on the market and it simply will not sell - you will end up lowering your price eventually, but after the market has fallen further, and after buyers have stigmatized the property as overpriced or flawed in some way (”why has this property been on the market so long?”). Fight that instinct to list too high - trust the number your Realtor recommends for this market - be serious about selling, and you will be one of those whose property sells for a good price.

For Buyers:
My advice to buyers is essentially the same as last month… if the time is right for you personally to buy a new home then do it - you’ve got a great selection, and you can get significantly more for money than last year. It is called a “buyer’s market” for a reason - this is your market!

I get some buyers asking me if they should wait to see if prices drop further. My answer is that it depends on your personal situation and your priorities. If getting the lowest possible price was the only consideration in when to buy a home then there is really only one time to buy a home - when the market bottoms out before it begins to rise again. But there are a few problems with that:

1. We never know when this instant in time is upon us - we only know looking back after the market begins to rise again. Our look at the market is always in hindsight.

2. The bottom may be 18 months or more away - is the delay in moving on to the next phase of your life worth the money you may save even if your timing could be perfect?

And getting the lowest possible price is just one of the important considerations in when to buy, for example:

3. You also want to consider the selection out there - the more homes on the market, the more likely you are to get everything you want in a new home.

4. If a first time buyer, you want to consider whether the amount you will save by waiting will be more or less than the amount you will save in rent by buying now.

5. Also, you will want to consider your motivation for buying - if you want your own place for the first time in your life to celebrate your personal success, for example, then is it really worth putting off this dream for say another 6 or 12 months to potentially get a slightly better price?

So the answer to the “when to buy?” question is a very personal one - it all depends on your priorities. But that is what good Realtors help their clients do - examine your priorities, talk about the pros and cons, and give you all the information for you to make the right decisions.

Fixed Mortgage Rates Fall Slightly
Small drops in fixed mortgage rates this month. The one-year and five-year closed rates (average of all lenders) now stand at 6.06% and 6.17% respectively - down about 0.15% each from the beginning of August. The variable rate is 4.33% - only marginally less than last month.

The Board of Governors of the Bank of Canada is scheduled to meet again next week, so there may be changes to the trend-setting overnights rates at that time in response to the latest economic data.

Strong Buyer’s Market Continues

The Calgary real estate market remains in territory that I think is best described as a “very much a buyer’s market” according to the July 2008 MLS stats. Total Calgary Metro listings at the end of July was 9217, and properties sold was 1848, yielding an overall Absorption Rate of 5.15. (See Chart A and Chart A2) Although the number of listings continues to come down since the “high water mark” of 10,617 in May 2008, there are still far more properties on the market than there are buyers to absorb them. This continues to bring prices down as sellers who are serious about selling adjust to the facts of the market.Single Family (SF) House sales continue to outpace condos. The absorption rate for SF Houses stands at 4.92 at the end of July and for condos it is 5.72 a difference of 0.8. This is a significant gap and something condo owners need to consider when selling. Overall the market is very slow, and for condos it is even slower. This is not a monthly statistical “blip” - this divergence of the SF house and condo markets began in December 2007 and the gap has grown since. I predict condos will continue to lag behind houses in both sales and price for another 12 months or so, until the inventory of new condos coming on stream is absorbed. This bodes very well for condo buyers, as prices are coming down, but obviously bodes ill for condo sellers for the same reason.

(For interactive versions of all the charts in this report click here)

Median prices stand at $408,500 for houses, $267,500 for 2-bed condos, and $235,000 for 1-bed condos at the end of July. In July 2007 median prices stood at $435,000, $295,000, $255,000, for SF Houses, 2-bed and 1-bed condos respectively. So the drop in median prices over the last 12 months: $26,500 (6.1%), $27,500 (9.3%), and $20,000 (7.8%) for SF Houses, 2-bed and 1-bed condos respectively. Note that the drop in median price of 2-bed condos is greater than that of SF Houses - evidence that the lagging condo market is already showing itself in fairly dramatic price drops in condos. See Chart C.

For Sellers:
So my advice to sellers is the same as last month but perhaps with stronger emphasis; It is crucial that you price your property for the new reality - not just taking into account the price drops of the last year, but that even with those price drops, the market is still no where close to being in balance with respect to supply and demand. So in this market, if you are a seller, you want to get ahead of the curve - if you price your property incorrectly, it will simply sit there, and by the time you reduce the price, the market will have adjusted further and you will still be behind the game. Consider your list price very carefully - you want to be ahead of the curve, not behind it, in this market.

Sellers should also consider spending money to sell their home which they wouldn’t in a more balanced market. For example, staging a vacant home or bringing in a staging consultant to “freshen up” a furnished home. These can be expensive services, but with so many homes on the market - a $300 to $5000 staging can often have a greater effect than a further list price adjustment of say, $10,000. Bringing in handyman to do minor repairs and upgrades can also be a wise expenditure in this very competitive market.

For Buyers:
My advice to buyers is that if the time is right for you personally to buy a new home then do it - you’ve got a great selection, and you can get more for money (almost 10% more to be precise) than last year. It is called a “buyer’s market” for a reason - this is your market!

I get some buyers asking me if they should wait to see if prices drop further. My answer is that it depends on your personal situation and your priorities. If getting the lowest possible price was the only consideration in when to buy a home then there is really only one time to buy a home - when the market bottoms out before it begins to rise again. But there is problem with that; we never know when this instant in time is upon us - we only know looking back after the market bottomed out. But even more significantly, getting the lowest possible price is just one of the important considerations in when to buy. For example, you also want to consider the selection out there - the more homes on the market, the more likely you are to get everything you want in a new home. Also, if a first time buyer, you want to consider whether the amount you will save by waiting will be more or less than the amount you will save in rent by buying now. Also, you will want to consider your motivation for buying - if you want your own place, for example, to get away from an annoying roommate, then is it really worth putting off this dream for another 6 months to potentially get a better price?

So the answer to the “when to buy” question is a very personal one - it all depends on your priorities. But that is what good Realtors help their clients do - examine your priorities, talk about the pros and cons, and give you all the information for you to make the right decisions. If you are thinking of buying, call your favorite Realtor (suggestion: me) and schedule an appointment to discuss the market and your situation.

Mortgage Rates Steady
Only minor changes in mortgage rates this month. The one-year and five-year closed rates (average of all lenders) stand at 6.18% and 6.38% respectively. The variable rate is 4.35%. In the July, the Bank of Canada declined to change its trend-setting overnight lending rate - the Board of Governors is not scheduled to meet again until early September, so expect no significant changes in August unless there is an unexpected surpise in the financial markets. See my Mortgage Rate Chart here.

Andrew Kyle, B.ASc., is a REALTOR^® with Royal LePage Foothills and a Certified Condominium Specialist.

Below is my weekly market stats update. I call your attention to a growing gap between the condo and house markets (see the second chart and the red arrrow). If this trend continues I’ll write in detail about it in next month’s Monthly Market Report (in about 2 weeks). In the meantime… my advice is be careful if you are selling a condo - it is crucial that it be priced right if you are serious about selling it. For background you may want to read my Monthly Market Report from February 2008 or my blog post here from a few weeks ago where I talk about predictions regarding this emerging trend.