Best wishes for you

http://www.knock-knock.ca

Good post but I do not buy a recovery in real estate for many years to come.

The Calgary economy is slowing, some business and trades are and have moved to Saskatchewan, The Bureaucrats are raising taxes, the crime rate is stupendous. The Industrial sector is down a good 10% since last year (will be reflected in Qtr 4). The only people that have anything good to say about the home market now are recently purchased homeowners, Real Estate Agents and Canadian Banks. Not exactly a unbiased source to be sure.

To top it off there is now pressure on the oil sands from oil companies to scale back production. If Dion ever gets in its game over.

Also, The American economy is in the tank so that directly effects us since American operations will have to scale back costs both domestic and foreign, that means say good buy to fat bonuses and wage increases; also eventual job losses (mainly in Ontario I admit). Albertans will feel the squeeze a bit (oil sands are a good buffer). This dampens the market since now there are less growth, and less money (inflation adjusted). I don’t think the average Calgarian will even catch inlfation this year (not to mention a surge in upside down mortgages).

Resale Condo I marked in March 2008 was $300,000 , now the same unit is $225,000. Thats a drop of 25%.
New Developer House I marked in March 2008 was $590,000, now its $525,000. Thats a drop of 11%.

Funny thing how new home developers are not adjusting down there prices relative to the resale market. Some have not moved a single dollar.

All and all, I tend to agree with the articles posted here in April, May, before they took on a more pro homebuyer tone.

I think I will wait until next summer and re-evaluate.

I understand how you are trying to justify current (high) housing costs in Calgary. But seriously, do you not look at that graph and not see the parabolic rise in prices from 2005?

It is clear that the 20 years prior to 2005 was steady, robust growth, reflective of a healthy economy, low unemployment, and wage growth.

Since 2005, it was clearly a bubble, driven by easy money, panic buying, slowness of the construction industry to ramp up, and heavy speculation.

Current economic conditions reflect 2002, but prices remain at 2007 levels. Basically, this is why you have a glut of homes for sales. Prices are too high given incremental demand. I you can’t see the bubble in that price chart since 2005, I don’t know what to tell you.

There’s a disconnect in about 2003 where inflation declined, but housing continued up. Then in 2006 inflation went up /slightly/ and houses shoot up in a *massive* spike. Barring a period of imminent hyper-inflation, I don’t see how houses can justify their current value.

Lets do some extremely rough calculations with the notable spikes+troughs in 1989 and 2005:

1989 House: $110,000
1989 Inflation: ~3%

1990 House: $140,000
1990 Inflation: ~7%

So a 4% increase in inflation translated to a 27% increase in house valuations (fair enough).

2005 House: $225,000
2005 Inflation: 2%

2007 House: $400,000
2007 Inflation: 5%

So a 3% increase of inflation translated to 78% increase in house valuations. Huh!?

Being conservative, a 3% increase in inflation should mean a 20% increase in 2005 home valuations (give or take). So that means houses should be about $270,000 which is pretty much bang on what the median income can afford (go figure).

Anyway, sorry for the brutally generalist calculations above. I’m a firm believer that incomes and inflation alone determine house prices. No data I’ve seen supports the 2006 super-spike, and all I can find is the “it’s different this time” explanation.