Home Buying Strategies

Buy according to your needs, not what the bank will give you

Max out your payments – they effectively work for you

Weekly/Bi-weekly are bunk, so monthly and max out your payments. (Transaction fees, opportunity costs, interest earned etc.

Minimize amortization

Greetings all.

With January 1st fast bearing down on us I guess it’s only appropriate that we follow the old “out with the old, in with the new” theme… and with that, edmontonhousingbust.com is being ushered out, and blogonomics.ca rising in its stead.

Why? Well, from a creative standpoint the old name kinda pigeonholed me. While the housing market was the primary focus (and will remain a major one), we actually covered many macroecomonic topics, and in fact those posts were often the most popular. Further, from a marketing perspective having a geographically specific name was kind of excluding. The name was also a bit too much of a mouthful.

The Blogonomics name itself is a callback to a bad joke or two I made way back when, so the spirit lives on. We’ll be taking a bit more of a broader perspective, spread our wings and get a bit more into personal finance issues and the like. For example, the first post I’m working on will be regarding the permutations and combinations of incorporation, when it’s a good idea, when it’s a bad idea, all according to Kev.

All the old posts and comments have been ported to the new site. I’ll leave the old site up for now with a link to forward people to here. I’ve been updating the Twitter and RSS, so if you’re subscribed to those they should continue to work. I’m still working out the kinks, so that’ll give me something to do on my week off while I sit around and watch the World Juniors and 20-year old baseball (which I’m finding surprisingly captivating, truth be told).

So if you notice any issues, or have any topics you’d like me to take a look at post a comment or fire me an e-mail (kevin@blogonomics.ca). Welcome to the new place, make yourselves comfortable!

Alright, so getting back on the horse. Been updating the spreadsheets and trying to figure out just how and what I used to do, the EREB released their November 2012 figures this week. Hopefully I’ve worked most of the bugs out, but if not let me know. Enough foreplay, lets get dirty.


Edmonton Sales


I guess we’ll start off with sales, coming in at 1,063 for the month. That’s over 300 lower than October, so the fall seasonality is in full effect. This is about 80 lower than the year before, and 120 lower than two years ago. Could be the effect of new mortgage rules, or could just be the dismal weather we’ve had this month. We’ll do some more sales analysis next week though, and see how they’ve charted for the year.


Edmonton Inventory


Edmonton Inventory Change


Like sales, inventory is doing it’s normal seasonal drop in the fall. Currently sitting at 5,681, that leaves an absorption rate of 5.3 months. Judging from the graphs this is about the normal range for November as has been the case the last couple years. I’d suspect this will continue until we see a significant shift in interest rates and the effects that will have on the market.


Edmonton SFH Price


Edmonton Condo Price

On the price front, seems things are continuing to fluctuate in the same range it has the last couple years. The Single-Family-Home median sits at $363,000, and Condo’s come in at $222,500. For both this is up a tick from last month, down a bit from six months ago, and up a bit from a year ago… so like I said, fluctuating within the established range.

So, it seems that market has founds it’s equilibrium with the current interest rate levels. While those remain at historical lows, there doesn’t seem to be any indication they’ll be rising by any appreciable amount anytime in the near future.

Sales* = 1,063
Since two years ago = -10.1% (-120)
Since one year ago = -7.0% (-80)
Since last month = -22.7% (-312)

Active Listings = 5,681
Since two years ago = -18.6% (-1,301)
Since one year ago = -8.0% (-497)
Since last month = -10.2% (-642)

Single Family Homes Median* = $363,000
Since peak (May ’07) = -9.3% (-$37,000)
Since one year ago = +3.7% (+$15,500)
Since six months ago = -1.9% (-$7,000)
Since last month = +1.4% (+$5,000)

Condo Median* = $222,500
Since peak (July ’07) = -16.0% (-$42,500)
Since one year ago = +1.1% (+$2,500)
Since six months ago = -4.1% (-$9,500)
Since last month = +1.6% (+$3,600)

Residential Median* = $315,000
Since peak (July ’07) = -8.3% (-$28,500)
Since one year ago = +1.6% (+$5,000)
Since six months ago = -5.1% (-$16,944)
Since last month = 0.0% ($0)

* Preliminary data, subject to revision

Greetings all, or at least the handful that apparently still occasional kick around here.

So I guess I should start off with a bit of an explanation. As you may or may not recall, a few months prior to the blog going dormant I had started a new job, and it had been cutting into my ability to maintain the blog… and that just got worse as we got deeper into the winter.

I also started taking some courses, and that was actually kinda the nail in the coffin of the blog, as not only did that take additional time but they required me to write in a very form very different than the casual style I did here… and while I fought it, eventually I relented and just did it their way. Frankly I find the entire process an exercise in needless aggravation and  mastabatory levels of self-importance for the profession… but, they write their own law.

Long story short, I had little time, and writing this way was making life difficult… so I quit cold turkey.

To dispel any theories of the blogs demise, I didn’t suddenly capitulate on my opinion and buy a house… my opinion hasn’t changed, I work for the same company, and I live in the same apartment I did two years ago… I do however have a MUCH larger tv than I did then, and that’s the important thing!

So, I suppose in a roundabout way this is my way of announcing my return to blogging and the resurrection of EHB. I’m sure literally two’s of people who neglected to remove me from their RSS and Twitter feeds are stoked by the news.

I don’t see it returning to the 8-10 post/month level it once was, but I hope to be able to do 2-4 in-depth posts/month. I’m not sure whether we’ll stay at this site, or maybe expand into something a little more encompassing for the range of macroeconomic stats I like to explore, but we’ll play it by ear.

It’s going to take a little while for me to get back up to speed as admittedly I haven’t kept up with the market as I would have liked. Checked the Edmonton stats monthly and stopped by Garth Turner’s blog to see he’s pretty much saying the exact same things we was two years ago… so I’m guessing not much has changed, and I’m working through the backlog of comments and e-mails that went unanswered.

Anyway, in conclusion, we’re back, and I hope you’ll join me again!

The January resale numbers came out today… and you know it’s bad when they are looking to Winter ’09 for a comparison other for sales levels. You may remember the 1Q of ’09 was dismal for sales, the worst this Millenia in fact, but of course no mention of that in their schlep. I guess context doesn’t help shine a turd.

Edmonton Sales

The preliminary sales tally comes in at 735. We can expect the revision to be in the 770-790 range… so we may or may not top January ’09’s rather dismal total. In any case, ’tis ugly. Even down from December in fact, though that’s not entirely unusual, and actually also mirrors the inventory situation to a degree. Apparently both buyers and sellers are playing it close to the vest.

Edmonton Inventory
Edmonton Inventory Change

Like I mentioned, and as we can now see, inventory is also down… though barely, and obviously nothing like December. This too isn’t all that unusual for January, the listings don’t usually start to flood back until March/April. Going back to the boom years, we can see in 2006 inventory didn’t start growing until August of that year (well, it was +2 in June, but then it went -3 in July)… but that’s a different world then we’re living in now.

Edmonton SFH Price

Now onto prices. Big month for the SFH median, or at least indicates last months dive was an aberration. We’re just a tick below $350,000. The average also rose over December, but only by $1000 to sit around $356,000. From this was take that the fluctuation of the median in the face of a fairly stable average that it was either an anomaly, or the middle of the market firmed up drastically. Maybe it took it’s New Years resolution seriously?!

Edmonton Condo Price

The news was not nearly as rosy for condo’s though. You may recall last month my mentioning that we were on the cusp of retracting to ’06 price levels… we’ll we ain’t on the cusp anymore. We’re now officially at the lowest point since November ’06. The median took a pretty large MoM drop of $6,000 to $214,000. The average took a more moderate hit of about $2500 to sit at $221,000. Don’t be surprised to see a little bounce in these in the next month or two, especially in the median. When you see drops over 1% MoM, you often see a bit of a rebound, at least in the short term.

Finally, and as always, here are the hard numbers:

Sales* = 735
Since two years ago = +0.7% (+5)
Since one year ago = -16.9% (-149)
Since last month = -6.3% (-49)

Active Listings = 5,633
Since two years ago = -14.3% (-940)
Since one year ago = +15.8% (+769)
Since last month = -1.5% (-88)

Single Family Homes Median* = $349,900
Since peak (May ’07) = -12.5% (-$50,100)
Since one year ago = -1.7% (-$6,100)
Since six months ago = -6.3% (-$10,100)
Since last month = +4.0% (+$13,400)

Condo Median* = $214,000
Since peak (July ’07) = -19.2% (-$51,000)
Since one year ago = -3.6% (-$8,000)
Since six months ago = -7.0% (-$16,000)
Since last month = -2.7% (-$6000)

Residential Median* = $307,000
Since peak (July ’07) = -10.6% (-$36,500)
Since one year ago = +0.7% (+$2,000)
Since six months ago = -1.9% (-$6,000)
Since last month = +2.3% (+$7,000)

Single Family Homes Average* = $356,276
Since peak (May ’07) = -16.1% (-$68,124)
Since one year ago = -3.1% (-$11,471)
Since six months ago = -6.0% (-$22,703)
Since last month = +0.3% (+$1,005)

Condo Average* = $220,994
Since peak (July ’07) = -19.5% (-$53,385)
Since one year ago = -7.5% (-$18,012)
Since six months ago = -8.1% (-$19,337)
Since last month = -1.1% (-$2,460)

Residential Average* = $310,766
Since peak (July ’07) = -12.7% (-$45,373)
Since one year ago = -1.4% (-$4,511)
Since six months ago = -5.8% (-$18,968)
Since last month = +0.7% (+$2,269)

* Preliminary data, subject to revision

We’ve finally got a look at the revised December sales numbers, and with that was can finally put a fork in 2010 and take a look at the stats.

Sales Seasonality

The updated number for December came in at 848, up from the initial announcement of 784. About an 8% adjustment comes in right around what it usually does. We can see from the seasonality curve that put us right about where we should be given the total sales on the year. A little late year volatility after trending one standard deviation below the predicted curve for most of the 2nd half until an pretty big aberration in November.

Sales Totals

Here is how this December stacked up against December’s past. We came in at the low end, just nosing out 2002 to come in with the 4th lowest tally since Y2K, but fairly close to the normal range for the month. Nothing like 2006 or 2008, which are pretty clear outliers (for it’s time, 2000 was actually the highest on record up to that point).

Absorption Rate

Absorption rate remains extremely high… though not 2007/2008 high. I lot higher than a year ago, but that’s no surprise. That ’08 December mark of 10.4 is actually the highest on record for Edmonton, and the Dec ’07 mark is the 4th highest, just for some perspective.

Sales YTD

Finally a quick look at the annual sales. Spin it however you like, but 2010 had the lowest sales total since 2003… and this was even after an uber-hot late-winter/early-spring. Without that we very likely would have came in with the lowest total since 2000.

It’ll be interesting to follow into 2011. Obviously the lay of the land right now is pretty dismal, but with the recently announced changes in lending rules we could very well see another wave of dumb money this winter. Not sure how much of that can still be laying around out there, but I’ve been surprised before, and as Einstein said, “Only two things are infinite, the universe and human stupidity, and I’m not sure about the former.”

Better late than never, our beloved federal Finance Minister, Dim Jim Flaherty, dropped a big ole lump of coal in the stockings of the CREA and CAAMP yesterday. Clawing back mortgage requirements again, much like they did a year ago. Harper and Co. seem to be trying to play this off like they’re saving the country from the bony grip of debt… blissfully omitting the fact they were the ones who spiked the punch bowl in the first place.

Basically the changes we’ll see come March 18th boil down to this:

1) Max amortization periods will be lowered from 35 years, to 30 years
2) HELOC’s are now limited to 85% of the homes value, down from 90%
3) CMHC will no longer back HELOC’s

What’s it all mean? Well, lets look at it point by point. First, the change to amortization length from 35 to 30 years. Basically what this does is lower the amount a borrower can qualify for. So lets say you qualify for $300,000 under the current rules, come March 18, you’ll only qualify for $280,000. Here is a visual aid that may help.

CHMC Changes and Effects

Obviously this graphic hasn’t been updated to reflect the new changes, but this effectively puts us back at the level we were at in March 2006. Back to the first step up our stairway to disaster as it were. In fact if the feds had reigned in their changes at that point we could have limited our bubble in Alberta to a much more modest level, and in all likelihood saved most the rest of the country from any at all. But alas, they really took the axe out in June 2006, and after that all bets were off.

Basically this is going to make the already shallow pool of first time buyers out there evaporate even more, and those that do stay in will have less to play with. Thus I imagine we’ll continue to see further tightening at the lower end of the market, and as those transactions are typically the oil that keeps the market running smoothly, we’ll eventually see it work it’s way up into the higher end as the gears start grinding.

Changes 2 & 3 deal with HELOC’s, and these aren’t really going to have a direct effect on housing… but they’ll have a serious effect on household spending. No only will people not be allowed to borrow as much, but with the CMHC no longer backing those instruments, the cost of financing is going to go up. And by that I mean above and beyond just the expected increases in interest rates.

When the CMHC still backed HELOC’s they basically game the system to more-or-less allow everyone to borrow money at similar terms. Unless one had VERY poor credit, the sums involved and your credit worthiness was largely a none factor and it allows everyone to enjoy the lowest of borrowing rates, thus borrow more money. Now with the government out of the game, it means lenders will have to obtain insurance for those loans privately, and now the more your borrow, and/or worse your credit history, the higher that interest rate you’ll have to pay, and the more you’ll have to pay indirectly for insurance.

I imagine that will have a pretty chilling effect on consumer spending. Particularly the under-40 crowd, which it seems all to ofter lives off consumer debt, and lives a little too well. I guess the good news out of this is that if you’re affected by the first change, at least you’re not affected by the other two… cause, lets fact it, you have no equity to borrow against!

At the end of the day I guess we should look at these changes as another step in the right direction. If we wanted to look a gift horse in the mouth we could say we’d still like to see amortizations ratcheted all the way back to 25 years, and down payments requirements raised to 10% (and that would REALLY throw the brakes on first-time-buyers)… but alas we’ll just have to wait on that. It’ll give me something to bitch about anyway.

Hope everyone has found their ways back after a holiday break. Always nice to go home for the holidays, reminds you why you don’t go back more often. Don’t get me wrong, I love my family to death… but the likelihood of a death increases exponentially with each day I’m exposed to them. All jokes aside, hope everyone had a great festive season!

Getting back on point though, the December numbers are in, and it seems temperatures weren’t the only thing down in December.

Edmonton SFH Price

Prices took a beating last month. Single family home prices sunk to levels we haven’t seen since the lowly days of the winter of ’08, back in the worst of the financial crisis and before interest rates were tanked. The SFH median dropped to $336,500 and the average to $355,271. As we can see from the graphs the lowest in two years, and not far above the bottom of the first phase of the bust. If/when it goes much lower, we’ll have to go all the way back to ’06 for a comparison.

Month-over-month the median dropped $13,500, oddly close to the year-over-year drop of $14,000 (which is about 4%, a little scary considering the ultra strong winter which goosed prices). But December can be a bit of an outlier with the typically reduced activity, though I do expect this weakness to continue right through the winter and spring just don’t be surprised if there is a little bounce in January.

Edmonton Condo Price

Condo’s actually didn’t fair terribly on the whole, infact the median was up $2,000 MoM. Average was down over $6,000. Year-over-year they aren’t doing as well though, the median now sits at $220,000, down 3.5% ($8,000) from a year ago. The average took an monster hit or 7.2% ($17,342) from a year ago and now sits at $223,454. The softness of the condo market continues to make itself known. The average actually now sits at it’s lowest point since November 2006. Yeah, 2006. Not purdy.

Edmonton Sales

After an oddly strong November, sales tumbled back to about the level they were expected to for December given the yearly trend, with the preliminary number coming in at 764. Rather low for December, but well above the brutal number put up in December 2008 when the preliminary number was a mere 543 (that was the worst December tally since 1994).

It does put us over 16,000 for the year though, we won’t know the final number until the revised number is revised figure comes out later in the month. Hell, we won’t even know then, they never seem to stop playing with these figures since they changed methods a year ago. In anycase, this will be the worst year sales wise since at least 2003, or even 2002 depending on what the revised number is.

Edmonton Inventory
Edmonton Inventory Change

Now time for the EKG, see all that bad cholesterol we shoveled down during the break is effecting us. As expected, we eclipsed the -1000 MoM mark last month, pretty much business as usual for December. A little bit bigger drop than last year, but not as big as the two years preceding that. What’s it mean? Who the hell knows, there is still a shitload of homes on the market. That’s what it means!

There are 5,721 to be exact, about 1700 more than a year ago at this time. I imagine they’ll come back online as per usual over the winter and spring. The heights it will reach will depend on the desperation, I’d think 8-9,000 come summer is a sure thing… if we eclipse 10,000 we’ll know things are getting real ugly out there.

But fear, cause even if you think this news is a big lump of coal in the stocking of housing bulls… it could always be worse. For example, just before the break my boss dropped a file on my desk and said get it down ASAP this guy could bring us a lot of business and he want’s to tell him what’s what before the break. So I worked on the file, and just before leaving for home I swung by his office to drop it off. He asked my what the good news was… I looked at the file, shrugged, and said, “Well, he hasn’t been audited yet.”

The partner grabs it, and says it can’t be that bad. I then proceed to tell him the guy has been funneling off money for years from his company and not reporting it… thus has an outstanding tax liability of well over a hundred thousand dollars. So no matter how bad your holiday was, it was quite probably better than our clients, cause you might have some fat credit card bills coming in the mail, but at least they aren’t to the tune of six figures!

Finally, and as always, here are the hard numbers:

Sales* = 784
Since two years ago = +44.4% (+241)
Since one year ago = -11.0% (-97)
Since last month = -30.0% (-336)

Active Listings = 5,721
Since two years ago = -9.4% (-595)
Since one year ago = +41.7% (+1,684)
Since last month = -18.1% (-1,261)

Single Family Homes Median* = $336,500
Since peak (May ’07) = -15.9% (-$63,500)
Since one year ago = -4.0% (-$14,000)
Since six months ago = -6.3% (-$22,500)
Since last month = -3.9% (-$13,500)

Condo Median* = $220,000
Since peak (July ’07) = -17.0% (-$45,000)
Since one year ago = -3.5% (-$8,000)
Since six months ago = -4.3% (-$10,000)
Since last month = +0.9% (+$2000)

Residential Median* = $300,000
Since peak (July ’07) = -12.7% (-$43,500)
Since one year ago = -1.6% (-$5,000)
Since six months ago = -4.8% (-$15,000)
Since last month = -2.6% (-$8,000)

Single Family Homes Average* = $355,271
Since peak (May ’07) = -16.3% (-$69,129)
Since one year ago = -2.7% (-$9,970)
Since six months ago = -9.3% (-$36,226)
Since last month = -2.0% (-$7,386)

Condo Average* = $223,454
Since peak (July ’07) = -18.6% (-$50,925)
Since one year ago = -7.2% (-$17,342)
Since six months ago = -7.9% (-$19,190)
Since last month = -2.7% (-$6,149)

Residential Average* = $308,497
Since peak (July ’07) = -13.4% (-$47,642)
Since one year ago = -2.0% (-$6,348)
Since six months ago = -8.0% (-$26,900)
Since last month = -3.4% (-$10,982)

* Preliminary data, subject to revision

Wow, this year has just flown by. It’s already that most holy of holidays, that’s right, Festivus! I bet you all have been good little boys and girls, so come on up and get your presents… not so fast, Ernst & Young, you got some ‘splainin’ to do!

I was thinking of doing a “Naughty and Nice” list, an airing of grievances if you will, but that sounds like a lot of work, and I have a Christmas party to get to. The punch bowl isn’t going to spike itself, and without that my creepily hanging out underneath the mistletoe later in the night awkward and lonely. Hard work, but someone’s gotta do it. Instead I come bearing gift, an update on the mortgage arrears numbers. I know, I know, it’s not a Best Buy gift card, but it’s better than socks!

Mortgage Arrears

As you can see, we’ve hit yet another new high. Eclipsed the 0.80% mark even. Up from 0.78% last month, and 0.69% a year ago. Cue the chorus, we’re still WAY above the national average of 0.43%, or even the next highest regions, which is a position shared by B.C. and the Atlantic Provinces. Our eastern and western extremes might not have a whole lot in common, but they do share an 0.45% arrears rate.

On the opposite end of the spectrum, Manitoba continues to enjoy the lowest rate in the country at 0.29%. As Manitoba has largely remained unscathed by the housing foolishness that much the rest of Canada has experienced the last few years, I suspect they’ll hold that position for a long while. Saskatchewan comes in at 0.31%, good for second, but they are starting to creep up, and I suspect we will see that rise a fair bit as they’ve had quite a bubble of their own, nominally maybe not as large as ours, but proportionately maybe even larger.

And just for good measure, Ontario and Quebec reside in the middle, and both sit at 0.35%.

So, I’ll send you off on your holidays with that. Hope you’re done your Christmas shopping, or are at least ready for a good scrap for what’s left. I knocked mine out in a mere couple hours last Friday. Fortunately being a young single guy, I enjoy low expectations when it comes to presents. In other words, liquor and gift cards for everyone! I may be lame, but at least I’m self aware.

If you get a chance tonight (or better yet, fire up the PVR), check out a little flick on Movie Central called “Coopers Camera”… it’s a riot of a Christmas movie. It’ll send you into the horror of a weeks worth of family get togethers with a smile on your face, especially those other children of the 70’s/80’s out there! Be warned though, this isn’t one for the kiddies. Happy holidays everyone!

Papa Bear

Mark Carney

Oh my! Papa Bear! Mark Carney!

It’s been quite a week for BoC Governor Mark Carney. He’s been all over the news, and dropping science faster than a theater major! Came out earlier in the week and told Canadians point blank they had too damn much debt and needed to tighten their belts. Given the timing, most Canadians probably think he was making a last ditch audition for the role of the Grinch. I’m sure that was music to the ears of retailers in particular.

For those of us who recognized this was happening years back, it probably doesn’t seem like much. But we need to read between the lines, and remember that for someone in as political a position as his, to come out with such strong words as he did is no small concession. One can only imagine the words being tossed around behind closed doors. After all, this is a bunch who wouldn’t say “shit” if you took one in their $800 Italian loafers. And it is prose like that which so aptly displays why my foray into public relations was a misguided as it was brief.

Debt to GDP and Disposable Income

But enough of the hyperbole, lets take a look at the data and see what Marky-Mark was talkin’ about (and don’t think that’s not a photoshop that is being worked on). The 3Q National Balance Sheet Accounts data was released Monday, and it was ugly. You may recall back in September some dumbasses were speculating that Canadians appetite for debt may finally be waning.

Upon further review… yeah… not so much.

After the debt-to-disposable income ratio apparently dipping in the spring, the preliminary numbers show that was merely an aberration as come summer we were right back on course, and have now eclipsed the 150% mark, coming in at 150.19%. After the ratio took it’s biggest quarter-to-quarter drop ever in 2Q, it took it’s biggest jump ever in Q3. In the twenty years that data has been kept the quarter-to-quarter fluctuation had only eclipsed 3% two times, and just barely… so that our jump this quarter damn near hitting 5% is no small feat (4.82% to be exact).

The debt-to-GDP figure also continues to climb, albeit more gradually. The preliminary 3Q numbers coming in at an all time high of 94.04%. So it doesn’t seem that we’ve maxed out yet. We’ve now surpassed the comparative U.S. figures, as since their housing market went bust they’ve seen their ratios fall off. At the peak down south their debt-to-disposable-income was close to 160% (their calculations are slightly different, so we’re ballparking it).

In any case, we haven’t been heeding the warnings thus far, and Carney has been one of the few the last couple years telling people to reign it in. We’re also starting to hear rumblings again from the big banks, apparently wanting the Feds to tighten mortgage lending rules even more, perhaps even so far as going back to 25 year amortizations and requiring 10% down payments. In this internet blowhards opinion that would be a great move for the government to make, but this is the same bunch that stripped them to the bone in the first place.