Edmonton Housing Bust

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.

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.

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 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.

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.”

Alrighty, then… lets get back on the horse. The revised October numbers are out, and it looks like things continue to be tight out there, with just 1,154 homes trading hands last month. That is the lowest total since 2000 when 1,122 moved. This is obviously way down from last year when the novelty of interest rates were still goosing the market and there were 1,535 sales.

Seasonally, we continue to track about one standard deviation below where where YTD sales predict we should be… and this is typically when we start seeing sales really fall off going into the November and December. It’ll be interesting to see if the dismal weather that’s hit the last week might effect things further, it’ll certainly scare off the tire kickers, but those people aren’t really buying anyway.

Should we stay on this clip it’s now looking like we’ll definitely come in under 16,000 sales for the year, and likely have the third lowest annual tally since Y2K. Come spring sellers could be getting a little antsy, but I don’t see any relief coming for them.

Quick look at the YTD totals compared to historically. After a fast start sales have really dwindled and we’re now sitting with the fourth lowest YTD-through-October since 2000, and 2001 will likely nip us when November and December are figured in.

And finally absorption rate… it’s high, and apparently demonic, with 6.66 months of inventory on the market. This is down a shade from September, and from the 2010 high of 6.87 hit in August… but obviously still WAY above normal.

The revised sales numbers for September have been released. I guess I shouldn’t call these the “final” numbers, since these numbers seemingly never cease being revised. I have no idea what they’re doing with their numbers, and it’s becoming increasingly apparent that they don’t either. Anyway, enough kvetching, lets get to the stats.

The revised tally came in at 1,282 for September, down slightly from August, but almost 25% from September last year. As we can see from the graph we’re a little low historically, but still well above the contemporary low water mark set back in ’07, when the market was first turning after the big boom.

Looking at the seasonality, we’ve eked back within one standard deviation of the mean predicted by our year-to-date sales. Given our current trajectory, it looks increasingly likely we’ll be coming in around 16,000 for the year (give-or-take a hundred)… which could make it the lowest annual total in a decade, and lowest since 2000.

Looking at his historical year-to-date figures, here is a look at those. We’re well below anything we’ve seen since ’04… and we’ve been losing steadily to the the ’01-thru-’03 years over the summer, and when all is said and done for the year it looks like we’ll likely come in below them. We’re in no danger of coming in below ’00 though.

It’s interesting looking at the ’07 figures. We can see that through June that year the sales tallies were HUGE… but then the market turned fast, and sales just hit a wall. It’s an interesting dichotomy, the first six months were obliterating records for those months to the high side… then the second half of the year it’s setting contemporary lows every month by equally large margins. Consumer sentiment is a fickle beast!

Finally, lets touch on absorption rate. We’re obviously extremely high historically, but still dwarfed by the ’07 figure… which was obviously the result of extremely low sales as we noted, and inventory levels just shy of 10,000. Interesting note, that September ’07 rate of 9.52 is actually the second highest in modern history, behind only the 10.39 of December ’08.

Our current level is 6.71. Obviously well above where it was a year ago, but actually down a tad from last month when it was 6.87. This is due to inventory dropping a bit, while sales were only down a tad month-over-month. We’ll probably see the rate climb over the fall, as this is typically when sales really start seeing the seasonal forces.

We’ve got a look at the final sales numbers for August, and after adjustment they came in at 1,305 for the month. So, it managed to sneak past August ’07 to avoid the distinction of being the lowest total in a decade, but still came in a comfortable second.

And here is a chart reaffirming that. Not much else to add… ’05 and ’06 sure stick out though, and even ’09 to a smaller degree. Typically we seem to come in around the 1400-1500 range in August, so we’re maybe 10% below “normal”. Year-over-year we’re down 22%, and month-over-month down 6%.

Figured I’d include a new chart this month, this being year-to-date sales. Just a little something else to munch on. It’s interesting to note the contrast between the sales pattern last year and this year. Last year we had the worst first quarter in a decade, but had huge second and third quarters to, where as this year it’s been much the opposite. Just goes to show that interest rate manipulation can certainly have short term effects, but the novelty will eventually wear off.

Now we’ll look at the seasonality trend. Our year-to-date sales of 11,955 put us on pace for about 16,776 on the year… but that is very unlikely as we’re trakcing more than one standard deviation below what would be required to do that. We do seem to have finally leveled off a bit and have tracked consistently in July in August, and at this pace it’s looking like we should come in somewhere around 16,000 for the year when all is said and done.

And finally, knowing the final sales tally, we can now figure out the absorption rate… and it comes in at 6.8. A tad lower than the record for August set in ’07, when inventory was first spiking, and coincidently the last time sales totals were this low. We’re up from 6.4 in July, and from 3.9 a year ago. So much for those who thought the inventory evaporation last year was for real huh?!

In conclusion… have a great weekend everyone!

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!

Hopefully your weekend is going better than Danny Maciocia’s thus far! Good Riddance. Here is a little something-something for those of you kicking around this long weekend and not at the lake, or Big Valley, or out in Edson playing slo-pitch… a brief look at the commercial real estate sector.

Sales actually look fairly good all things considered. Commercial sales actually kind of reflect residential over the last few years, fell off a cliff in mid-07, and were dismal in ’08, but took off last year after interest rates collapsed. We’re back around where we were in ’05/’06 (interestingly, sales were actually the highest early in the decade, and were somewhat more moderate during the real boom years).

Inventory is a different story though, and it’s now at the highest it’s been in a decade. It appeared to be quite low and stable from ’06 thru ’08, but last year spiked in a big way, and that trend has continued through this year and we’re now just shy of 1,400 units. So that is quite a glut that has formed.

I guess we’ll leave it at that, and let you get back to your weekend. The July residential numbers should come out Wednesday, and the rumblings are that both prices and sales slid significantly last month. I guess we’ll find out for sure then. Anywho, get out there, enjoy the weather, and have a great weekend!

Had another request to look at the sales data from a slightly different angle, this time relative to the changing population. An easy enough task, so off we go.

Here is the backgrounder… the population and (annual) sales levels going back to 1986. This is the metro population, as the sales data includes the surrounding area, I figured we’d better include those areas in the population to make the comparison as true as possible. I’ve also included a projection for this year, this is based on population growth of 2% over 2009, and the sales experienced over the first six months and typical seasonality (though if the current trend in sales level continues we’ll likely come in under this number).

We can see there appears to be some correlation in there, we see they both incline through ’92… then the population stagnates for 3-4 years, and sales decline at the same time… but after that they both steadily incline through ’04, after which we see sales spike, and we’ve been kind of all over the place since ’07 on while population growth has remained largely constant.

While population and sales do seem to largely track together, it appears from this graph that sales growth has outpaced population growth by a fair margin, and we’ll explore that later. First just quickly we’ll discuss this year projected sales level. Our current pace would put us as the lowest sales tally since ’04, and as I mentioned, this estimate is likely higher then sales will actually realized, so we could come in at the lowest since ’03, or even ’02 depending how things play out.

Now to get a better idea of how these two have trended relative to each other, I’ve converted the above data into a rate, the number of sales per 1,000 people in any given year. This looks pretty similar to the sales graph, only more exaggerated. As we can see, the rate has appeared to grow noticeably over time… the rate in ’92 looked abnormally high for it’s time, but since the turn of the century we haven’t had a rate lower than it (at least until this years numbers come in).

The average from ’86-’89 was a mere 11.5… from ’90-’99 it was 13.2… but from ’00-’09 it 17.0. Granted that is a bit skewed by ’05-’07, but even so in the last decade there has only been two years below 16.0, and none below 15.0. So, even after removing the effects of population growth, there is still a lot more transactions taking place then there had been historically (as per why, we could probably dedicate several entries to that).

Which brings us to this years projection, which is shaping up to make even ’08 look like a bumper year. Right now, even with the high estimate, sales will be at a level not seen since ’97 when it was 14.45… and we could easily come in as low as 14.0 (depending how the last six months play out of course).

I must say, even with my bearish views on the current market, it is surprising to see sales levels this low while interest rates remain at or near rock bottom… but I guess that’s what happens when you have overpriced assets and a fatigued market, interest rates will only do the trick for so long before the novelty wears off and the correction resumes.

Thought we’d take a look at the 2009 sales tallies from a little bit different angle, and see how the parts played into the whole. As we know, a year ago, before central banks really cut their prime rates to the bone, all the news was that sales were really quite dismal… but as soon as rates crashed, suddenly sales took off right across the country (as did prices in many markets). Hell, it even seemed to breathe a little life into the spiraling US market.

Anyway, without any further ado, lets see how things played out here in Edmonton.

On an annual basis, we can see 2009 actually had the 3rd highest sales total of the decade (and in all likelihood, all-time). Easily outpacing more balanced years like 2000-03, and even the scalding real estate market witnessed in 2004-05. Last years tally was only surpassed by the totals put up during the two years when the lending floodgates were thrust open, and the entire Alberta real estate market went totally off the rails. Not bad for the worst recession in generations, huh?!

Like I mentioned in the intro though, sales this time last year were considered dismal. So how can we end up with boom level sales? Or were sales just not that bad to being with?

So, here we break the annual tallies up into their quarterly components… and we see, that yeah, a year ago sales were that bad. The worst first quarter in a decade in fact. There had been a couple years in the early part of the decade that were nearly as low, but on a whole it was a fair bit worse than average. And if we browse up to Q4 ’08, we note that we were coming off the worst quarterly tally of the decade, period. Things were pretty rough.

So, once the financial crisis took hold, sales dwindled and we witnessed two brutal quarters. The worst in at least a decade, and since a time when the population was noticeably smaller… then interest rates plummeted… and even with the recession still taking jobs and halting earnings, sales took off again. Third highest Q2 on record… then second highest Q3… and second again in Q4. Obviously we saw a lot of disproportional sales on both ends of the spectrum, though at least one could argue that the low Q1 numbers were justified given the economic climate. The last three quarters have seen boom level sales, all the while the economy has actually been getting worse, or at best holding.

Doesn’t seem to pass the sniff test (unless you work for the CREA or CAAMP of course). It was so obvious even the Bank of Canada and the Feds started firing off flares… hell, now we’re even hearing the big banks have been begging the government to save them from themselves. You know it’s bad when Bay Street is screaming for more tighter regulation.

I did a post on ComFree back in the spring, and figured it would be a good time to do an update on them after the eventful summer real estate experienced. Compare how they fared to the conventional resale market. So, without further ado…

The prices look to have trended up, as with the rest of the resale market. The overall average for whatever reason appears extremely volatile some months, but I think it’s just been misstatements of their stats, as that measure now has to be derived from their other numbers. So take it for what it’s worth.

Here we’re looking at sales and market share. On the sales front, even though they’ve improved steadily month-over-month, we can see they’re still down noticeably down year-over-year, and obviously WAY below what they were in 2006/2007.

So, while the rest of the resale market put up some record months thus summer, ComFree is still struggling, and losing market share on the whole. They have been trending up the last few months though, and as far as For-Sale-By-Owner outfits go, ComFree in Edmonton is probably the envy of many.

Finally we’ll touch on inventory. The big glut that formed in 2007 really catches our eye, and there was an equally big shedding of inventory last. Though as we noted earlier, sales were historically low last year, so the decline was no doubt due to a wave of delistings. The inventory level has returned to roughly the level it was at in 2006, though with sales levels lower, the absorption rate is higher.

In conclusion, it doesn’t appear the summer has been as good for ComFree as it has for the rest of the resale market, but they do appear to be stabalizing. It’s also worth remembering that these guys get paid up front regardless of whether the properties sell, so sales are not nearly as important to them as for traditional agents that get paid on the back end.

A few months back I touched on price ranges/sales mix, and as the last quarterly number just came out I figured it would be a good time to revisit the subject and see what is selling and how it’s changing.

Like the last time around, this measure is of the proportion of sales any price range accounts for, so makes no differentiation for how many are sold.

It’s interesting to note the change from the June ’09 numbers September ’09 (these are of monthly tallies, not quarterly, though I will try to do those one day). We’re seeing an increase in activity at the extremes of the market (<200K and >400K), and shrinking in the middle.

While 200K-to-400K still make up the lions share of sales, at a combined 59.6%, this is actually significantly below where it had been the prior year when it made up between 66.2%-to-67.4%.

While shifts in market are not unusual, which the chart nicely shows… what is curious is how both extremes are showing increases. Typically you’d expect it be one or the other.

Obviously in the last six months in particular we’ve seen a drastic change in interest rates, which has a massive effect on housing prices. This could explain the strength in the 400K+ ranges, as long as rates are low it greatly increases the amount a person is capable of qualifying to finance. Those looking to buy can get a lot more house for the same monthly payment.

What is more unexpected was the increase at the low end, back to the levels seen in the fall/winter. As I’m previously hypothesized I suspect this could be a signal of the return of speculators to the market, as they largely operate in the lower price ranges.

As per what the future holds, that’s still anyone’s guess as it seems more then ever the financial world is a complete crap shoot… and things will only get more rocky if the governments of the world turn the stimulus taps off, and the true effects of the downturn are felt.

About the only thing that is a general consensus is that it’s going to take years to sort out.