2010 August

Archive for August, 2010

Tuesday, August 31, 2010

Some weekday reads

An interesting study was released today by the Canadian Centre for Policy Alternatives regarding the potential unwinding of the housing bubble, not just in Edmonton and Calgary (though, we are featured prominently) but in major markets throughout the nation. Some very interesting reading… and just in case you missed the post last week I’ll post the updated paper from Alec Pestov as well.

So, if you’re looking for a way to waste away the hours at work and they’ve blocked facebook on you, well, you’re welcome!

Canadas Housing Bubble

The Elusive Canadian Housing Bubble – Summer 2010

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Friday, August 27, 2010

July Sales Report

Filed Under: Sales

Happy Friday everyone! Always an exciting day, for most of us it’s the end of the work week, and the beginning of two blissful days where if done right we will find ourselves thankful to be back to work Monday, cause we can just not be trusted with our own care like that. It’s also the day all the new movies hit theaters, and a couple weeks ago, after months of begrudging the girlfriend with making me suffer through Sex and the City 2… I figured it was payback time.

Having loved the book, she really wanted to see “Eat Pray Love”, and I told her a movie was a great idea. So the next night I took her out to a nice romantic dinner, then we headed to the theater… but my dastardly plan was already well in motion, as I had tickets to “The Expendables” in my back pocket, and a glint of revenge in my eye. Not my typical movie fare, but this was about making her suffer and not my enjoyment, and this had all the makings of the most mindless and vapid guy movie there ever could be… and this fit the bill, 90 minutes of fights and stuff getting blowed up real good (actually wasn’t a bad flick at all, it is just what it was sold as).

She probably should have figured out that this wasn’t “Eat Pray Love” from the fact that the theater was 85% testosterone, but she was too busy babbling about the book and Julia Roberts to notice apparently. The previews being all action flicks didn’t even clue her in. It didn’t dawn on her until the movie started, then she was some pissed! In related news, apparently women will try to make you sleep on the couch, even when it’s not their apartment. Now you know. Still, totally worth it.

Anyway, enough babbling. Earlier this week the updated July sales figures came out, and now we’ll examine those as we can no longer do it with the rest of the monthly numbers.

As we can see there, even after revision, the numbers are down in a big bad way. The July tally came in at 1,389, the lowest July since 2000, also the only one below 1,500 over that time period too.

Obviously it was no surprise it was down from last years number, right in the midst of a recession the interest rate orgy spurred sales to levels that dwarfed even those of the boom years… but the 39% decline is still well beyond what the talking heads in the industry were expecting. They were blaming the ~40% declines in BC and Ontario on the HST… apparently even though our sales were down just as much it doesn’t fit into their spin quite as well, you know, since we don’t have the HST and all. I guess when the narrative doesn’t fit… you must not mention it!

Now we’ll take a look at sales from a seasonal and projected perspective. It’s not getting any prettier, in fact we’re now even outside one standard deviation from where sales should be at this time of years given our sales levels year-to-date (10,650). The model projects sales of just over 17,000 for the year, but that’s skewed high because of higher than normal sales early in the year that have since fallen hard… at this point 16,000 is not even a sure thing (we’d need to chart a course roughly equal to the dotted green line).

The curve should start flattening out a bit heading into the fall though. I wouldn’t expect anymore month-over-month drops of 269 like we saw from June to July, though it does sound like we’ll be down at least another hundred in August, so we’re staying below that green line for now. The market is certainly giving a lot of indications of grinding to a halt.

Finally, your favorite and mine… absorption rate. Remember how much griping about how bad the market was in the summer of ’08… yeah, well, it’s even worse now. We’re sitting with 6.4 months of inventory on the market. This is the highest in at least a decade (for July) , and the highest the rate has been since February ’09… we’re starting to enter rarefied air, as that is an almost unheard of number for the spring/summer months, only exceeded by August/September ’07 when inventory first exploded.

So… seems the resale market is almost as ugly as the football team in Edmonton. At least the Eskimos have the bright side of having finally fired Maciocia and they have a chance to be decent in a couple years, I don’t get the sense the housing market will be nearly so lucky. Have a good weekend everyone!

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Tuesday, August 24, 2010

Canary in a Coal Mine – The Elusive Canadian Housing Bubble Update

Filed Under: Macroeconomics

You guys may remember back in March we featured a report title “The Elusive Canadian Housing Bubble” by a York University grad student by the name of Alec Pestov. His report created a lot of buzz around the Canadian blogosphere and beyond (even was featured on Zero Hedge), and he was nice enough to swing by here and answer some questions and interact in the comments section.

Well, I just got an e-mail from him letting me know he just published an update on it, and I figured who would be better to share it with than my faithful readers… all two of them (btw, hi mom! Just kidding, she’d never read my tripe). Haven’t even got a chance to read it myself yet, as I literally got the e-mail in the last ten minutes… planning to dig in to it myself once I finish writing this.

For those economics/stats geeks out there that may have missed out the first time around, be sure to check this out though, as it’s surely right up your alley. I look forward to discussing it with you all, and if we’re lucky maybe Alec will even swing by again and answer some questions we may have.

The Elusive Canadian Housing Bubble – Summer 2010

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Monday, August 23, 2010

June Arrears Figures

Filed Under: Foreclosures

I apologize, I’ve been kind of missing in action here the last week. I had been waiting for some specific numbers, and then didn’t come out, and didn’t come out, and still haven’t come out. Even after getting fed up of waiting I tried writing something, but suffered from some writers blocks. Sad, I know, depriving you all of my rapier like wit. How did you ever survive?!

Anyway, today the latest mortgage arrears numbers came out, and I’ve been spurred back to action. Before we get to that, but on a related note I heard a couple things on the radio on the way to a meeting today that left me shaking my head.

First a BMW spot promoting that you can drive in luxury for zero down, and zero due at signing. Shudder. I’m sure there is great money in providing financing, but that is a sad statement about our culture when we’re pushing status symbols to those with no money whatsoever… not to mention, kind of stains their branding as a prestige item. Maybe it’s just me, and judging from the behavior around me, it is, but I’m of the opinion if you’re pushing 30 and you can’t buy a car with straight case, you can’t afford that car… and that goes double to luxury vehicles.

Then there was a guy call in bragging about owning an $80,000 boat… the term “owning” is being used very loosely in his case, apparently he and three buddies went in, financed it to the hilt with an extra looooooong term (“way longer than for a car”, so 10+), and can evidently enjoy a few weekends at the lake for a mere $400 a month, each, all year, for many, many years. This is a guy in his mid-to-late 30′s, and thinks he is one of the smart ones. Shudder again.

So. Yeah. This is going to end well. Anyway, enough naval gazing, lets get our stats geek on!

Arrears continued to creep up, but remains in that 0.70-to-0.75% range that we’ve been in since last fall. We’re now back at 0.74%… up from 0.73% in May, and 0.60% last June. As we’re still range bound there isn’t much else to say that hasn’t been said before… but perhaps one notable item is that the total number of mortgages outstanding (included in this survey anyway) exceeded 500,000 for the first time.

On the national front, the rate held at 0.42%, equal to where it was a month earlier, and year earlier for that matter. I guess we’ll work our way west-to-east this time, BC also sits at 0.42%, no change MoM, up from 0.34% a year ago… Saskatchewan sits at 0.27%, down from 0.29% MoM, up from 0.22% YoY… Manitoba maintains lowest rate in the nation at 0.26%, same as in May, up from 0.25% YoY… Ontario sits at 0.37%, up from 0.35% MoM, down from 0.43% YoY… Quebec sits at 0.35%, down from 0.36% MoM, no change from a year ago… and finally the Atlantic provinces saw their rate drop to 0.44%, down from 0.46% MoM and YoY.

Interesting to see the Atlantic provinces continue to improve relative to the rest of the country… actually their rate hasn’t changes much, but the other provinces have seen theirs rise. Until Alberta’s meteoric rise, the Atlantic provinces has held the dubious distinction of highest arrears rate in the country for much of the last decade.

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Thursday, August 12, 2010

Rental Market Update

Filed Under: Rental Market

About an hour ago Boardwalk released their latest financial statements, and with those some market stats… and as they are the dominant company in Edmonton, and one of the larger ones in Calgary, we like to use those stats for market updates. So, without further ado…

Looks like rents have stabilized, at least for the Boardwalk properties. Market rents (advertised rents for new tenants) are up slightly in Edmonton, but in a BIG way in Calgary. They’ve been enjoying quite low vacancy rates, especially in Calgary (historically, and relative to the rest of the market), and it looks like asking prices are headed up. This makes no mention of incentives being offered though, of which have been being increasingly offered.

The occupied rents (average of rents paid by established tenants) didn’t move nearly as much, but those two were up in Calgary by about $10 to 1,091 per month… whereas in Edmonton the occupied average continued to slide, and is now sitting at $1,034 per month. Generally we can see in the trends that whenever the “market rent” remains below the “occupied rent” generally both are in decline… where as when “market rent” > “occupied rent” both are increasing.

Now the vacancy front. In Edmonton we’ve leveled off this year around 3%. Calgary has seen a lot more fluctuation, they’ve been as low as 1.0%, but has recently rebounded up to 2.32%. These are still low historically for the company, but are also well below the market averages as we’ve explored earlier. So, knowing that vacancies were around 1% in Calgary, it’s not surprising to see their advertised rates take off last quarter. It’ll be interesting to see how they respond now that their vacancy rate has bounced back above 2% (depending on if the rate remains there or goes higher).

I guess for those looking in Calgary, Boardwalk may not be the most willing to give you a deal… but in Edmonton they still seem to be offering a lot of incentives, so they’d probably be more open to negotiation at this point.

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Saturday, August 7, 2010

July Labour Force Survey

Filed Under: Alberta

The latest Labour Force Survey numbers were released on Friday, and while the unemployment rate actually hit it’s lowest point in over a year, it was actually something of a poor report for Alberta.

As of July the unemployment rate stood at 6.3%, which is the lowest it’s been since last April, and down 0.4% from June. That gain isn’t quite as impressive when you look into the numbers and realize that while we gained over 21,000 part-time jobs, we actually lost 13,000 full-time jobs in the month.

Now we’ll isolate the full-time job numbers and look at those. After looking the obvious drop witness in late ’08/early 09, it was looking like we may be finally recovering through May after some strong gains, but in the last two months much has those have been wiped out, having lost 22,600 full-time positions in that time.

Things look even a little worse when we look at the full-time employment rate (relative to the eligible working population). Currently 55.8% of those 16 and over and eligible to work currently hold full-time positions. This is just a tick above the low set in March of 55.7%, and these are levels not seen in Alberta since the year 2000. So. Yeah. Things aren’t very pretty out there.

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Wednesday, August 4, 2010

July numbers are in…

Filed Under: Monthly Stats

And the theme for July was ‘down’. Prices = Down. Sales = Down. Inventory = Down. The big story seems to be the SFH average which dropped faster than a Kardashian sister at a frat party, down over $12,500 in one month. Though this was not the record dive some were predicting, that distinction still belongs to November 2007, when it dove $14,839 from that October according to the new stats system (under the old system it was down a shocking $20,922).

So with the change in their stats system we’ve now got a real mess of numbers floating around, so I’m going to shake up how these are presented. So here are the SFH and Condo numbers, both averages and medians.

As noted earlier the SFH average took a big dive MoM, but is still north of where it was a year ago. The median was actually up $1,000 from June (and is up $10,000 from a year ago)… in the face of the big dive in average, we’ve got to figure the high-end of the market is starting to fall off a bit. It was widely speculated that the high-end was really active through the first half and kept the average up, so a drop has been expected, though perhaps not quite to this degree.

On the condo front, median figures are actually exactly the same as they were a year earlier and a month earlier. The averages were down a bit though, a little over two grand from June, and about $3,500 from a year ago. So things are rather tame here compared to their SFH brethren.

Here are their sales numbers as reported, though with their change in method it’s now hard to put much stock in these anymore as they’re going to be revised up later. The preliminary number is 1,294, the lowest total for July since 2000, the next lowest 1,459 in 2007, though this number will be revised, so it may-or-may-not surpass that mark.

As we don’t have the final numbers anymore, I’m doing away with the absorption rate for now. If the final numbers are released later I’ll update it then, but at this point who knows if that will happen.

We still have inventory though, and they changed course in a big way in July, dropping over 500 from June after a record tying six months of gaining at least 500 per month. Inventory has actually been building over the month, but it seems the end of month wave of delistings more than wiped those out. We can probably expect inventory to continue dropping by this much (or more) for the rest of the year, and we’ll follow patterns similar to ’08 and ’09.

It appears we’ve hit the typical summer slowdown on all fronts now, and we can expect to see all these figures continue to slide to varying degrees until we hit the New Year.

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

Sales* = 1,294
Since two years ago = -26.5% (-467)
Since one year ago = -41.8% (-929)
Since last month = -15.9% (-245)

Active Listings = 8,892
Since two years ago = -15.3% (-1,609)
Since one year ago = +34.9% (+2,300)
Since last month = -5.5% (-514)

Single Family Homes Median* = $360,000
Since peak (May ’07) = -10.0% (-$40,000)
Since one year ago = +2.9% (+$10,000)
Since six months ago = +1.1% (+$4,000)
Since last month = +0.3% (+$1,000)

Condo Median* = $230,000
Since peak (July ’07) = -13.2% (-$35,000)
Since one year ago = No Change
Since six months ago = +3.6% (+$8,000)
Since last month = No Change

Residential Average* = $329,734
Since peak (July ’07) = -7.4% (-$26,405)
Since one year ago = +1.6% (+$5,245)
Since six months ago = +4.7% (+$14,951)
Since last month = -1.7% (-$5,663)

Single Family Homes Average* = $378,979
Since peak (May ’07) = -10.7% (-$45,421)
Since one year ago = +1.5% (+$5,685)
Since six months ago = +3.1% (+$11,232)
Since last month = -3.2% (-$12,518)

Condo Average* = $240,371
Since peak (July ’07) = -12.4% (-$34,008)
Since one year ago = -1.4% (-$3,498)
Since six months ago = +0.6% (+$1,365)
Since last month = -0.9% (-$2,273)

* Preliminary data, subject to revision

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