Dichotomous Marketplaces – Calgary Trends in Construction for SFH diverge from Resale Market January 8, 2009
Posted by radley77 in Calgary real estate, supply and demand.Tags: construction
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The new home construction market has shifted in comparison to the resale market. The new house price index for Calgary continued to rise into 2008 as compared to the resale market which peaked in 2007. The new house price index for Calgary has only recently had a year over year decline and as of October 2008 had declined by 1.6%. Against this price backdrop, single family home starts dropped 44% against a 29% drop in sales. Also, there was a large shift towards higher end houses in Calgary and the top end of the market experienced large sales growth. SFH units under construction have retreated to 2001 levels.
It is possible that participants from both marketplaces may find opportunity in new places for 2009. Builder’s may find less demand for high-end houses due to the slump in stock prices greatly affecting the wealthier class. The resale market may experience less new listings due to less people buying new at the top of the real estate pyramid. People looking to buy at below $350,000 may find that the best source of supply is in the resale market.
Below is a table of changes in the new SFH market that occurred over the last year:
CMHC housing information available here.
Radley,
There is a delay between when the price is set and when a house is absorbed:
“The average absorbed price of a single-detached unit in the Calgary CMA was $616,656 in November, up 19.7 per cent from a year earlier and to a record high. Note, the absorbed price reflects units absorbed in the current month but in most cases negotiated and priced before construction began.”
I think the new house index is the better indicator but even still there has been only a small drop in price. I would come to the same conclusion that resale is better value. Personally, I am finding the list price of resale more favorable than new construction in Edmonton.
I see your point that new construction and resale as substitutes, but I still think 2009 will be a weak year for both regardless. During the boom both resales and construction spiked. I don’t think 2008 was year of buyers sitting on their hands (although some clearly are) rather a natural vacuum of demand as the result of everyone and their dog buying and building houses in the boom. Its hard to say when this turns into tangible pent-up demand. I guess you would have to look at the homeownership rate.
Condos are a substitute as well. For myself, I would consider a new townhouse as an alternative to resale SFH. Condo under construction are still at boom levels. Combined the number under construction is at high or at least ‘healthy’ levels.
Is Bridgeland a dichotomy ? Half a million dollar condo owners rubbing shoulders with crack heads ? Heh….deduct 10% and go directy to Kensington…….do not pass go.
http://www.calgaryherald.com/opinion/letters/There+goes+neighbourhood/1217785/story.html
Re: “Crime plummets after Cecil Hotel bar closure,” Jan. 22.
I was cheered to hear that city hall and the police are happy with the decrease in crime around the Cecil Hotel. Has no one noticed that a large number of these displaced persons are now trekking across the bridge and bringing their “business” to Bridgeland? Maybe instead of spending millions on purchasing the Cecil, they could have just bought some buses to make it easier for people to get to the first liquor store across the river.
I understand there was a stabbing the other night in the parking lot at Edmonton Trail and 1st Avenue N. E. Thank you, city hall. We have people drinking and doing drugs in the bushes and behind buildings in this residential neighbourhood and please don’t excuse it by saying “what do expect if you live in the city core?”
I guess everyone thought that by closing the Cecil, this problem would just evaporate.
Well it hasn’t; it just moved.
Marilynn Montgomery,
Calgary
© Copyright (c) The Calgary Herald
http://www.calgaryherald.com/Business/Bridgeland+bears+brunt+closure+downtown+Calgary/1229878/story.html#Comments
Bridgeland businesses and residents will be asked to form a task force on community crime amid growing concerns over vagrants and other undersireables since the closure of the Cecil Hotel tavern last month.
Community leaders say vagrants from downtown’s east side are heading across the river into Bridgeland, acting disorderly, looking for liquor, dealing drugs, engaging in prostitution and causing fear in the community.
“We’ve been here 10 years, and it’s never been this bad,” said Bobby Kullar, owner of the Bridgeland Liquor Store on 1st Avenue N. E. just off of Edmonton Trail.
“Friday and Saturday nights are the worst. The parking lot is full of crackheads. You can see them exchanging the stuff.
“Many nights, we have to call the police. They keep coming in, acting disorderly, and sometimes we just can’t keep them out on our own.”
Kullar said the past month has been particularly bad since the closure of the Cecil tavern. His liquor store, it seems, has been the closest alternative.
Lori Losowy, president of the Bridgeland-Riverside Community Association, said residents, too, are wary.
“People are feeling unsafe– men are afraid to walk to work, in an inner-city community where they want to walk. People are afraid to take their kids outside, and women are afraid to ride the LRT alone, going in groups instead.
Carioca, why are you posting here? This is a blog about the Canadian Real Estate Bubble and how houses are still overpriced in Calgary. I understand you bought a condo in Bridgeland, but the crackheads only accelerate the inevitable: Your condo is worth WAY less than what you paid.
Radley, the blog owner, bought a $475K condo in Bridgeland……….and now he spends an inordinate amount of time trying to convince the world he did the right thing.
Calgary will have to drop a ridiculous amount of money to revitalizing the downtown core if they want to clean it up. The key to a safe core is to get bodies on the streets. That starts with more high rise commercial and especially residential properties of high value. If people have an invested interest in it, they will fight to keep the core safe. If that means cameras at every corner to boot then so be it. They can always be removed at a later date when crime is cleaned up.
It’s an interesting time in Canada real estate in general. Personally I think the media has hyped up the recession so much that consumers are making a mistake by missing out on the deals in the housing market.
Robert Eskiw – Home In Edmonton
“Hyped up the recession”? What I find interesting is that the only people who seem to feel this way either work in real estate or bought a house near the peak. So let me guess, Robert…it’s a “great time to buy.”
I think it WILL be a great time to by say next winter. Until then developers will be slashing prices and bumping up incentives. The reality is that historical trends indicate the average house price should be $300K. Not suggesting a full correction to that extent is going to happen, but it should be allot closer to that than it currenlty is. We have seen about a 10-15% corrections so far, we still have atleast another 10% to go.
[...] and homeowners may choose to delist if they believe their is more value in renting, or that the new construction inventory may not be able to be supplied at the current price point. Note: Buyers need to run various budget scenarios to determine the risk of rising interest [...]
It’s definitely difficult to forecast the end of the bubble. I’ve a friend who says that it’s probably not a bubble since he thinks demand would pick up when young adults really begin to move out to look for homes of their own. I wasn’t aware there was a state financial agency which routinely bails out its banks regularly