Albertans scramble to list homes

Yale economist Robert Shiller’s famous 120-year charting of American house prices, updated for the impact of the ongoing correction.

Cdn house prices drop for 1st time in 12 years

A sign of the cooling housing market in Alberta was evident in numbers released by the Canadian Real Estate Association showing the average MLS sales price in the province in April declined compared with a year ago — the first year-over-year monthly decline since July 1996.

The CREA report said the average sale price in Alberta was $353,515 last month for all residential properties — a decrease of 1.7 per cent from the $359,640 registered in April 2007.

The number of sales throughout the province also fell by 23.2 per cent — 7,803 units in April 2007 to 5,996 in April 2008 — while new listings soared by 25 per cent — 14,017 last month compared with 11,213 a year ago.

“What’s happening in Alberta is that listings are on a very strong up trend and at the same time sales are returning to more typical levels,” said Gregory Klump, CREA’s chief economist.

“The market in Alberta was tightest toward the end of 2005 and it’s becoming more balanced since then. That coincided with the increase in listings. And at the same time, because price reacts with a lag to the tightness of the market, average price increases peaked for the province in close to mid-2006 and they’ve become smaller ever since.” The province is following a general trend being experienced in Calgary as well with falling sales, stabilized prices and increasing listings, said Lai Sing Louie, senior market analyst in Calgary for Canada Mortgage and Housing Corp.

“The one market where there’s still a lot of price strength is in Fort McMurray (Wood Buffalo region). If you look up there, that real estate market still seems to be rising there,” he said.

Louie said the CMHC’s provincial forecast for 2008 is for prices to rise by 3.6 per cent to an average of $369,000 from $356,235 in 2007. In that forecast, the Calgary region is expected to see a price increase of 3.6 per cent to $429,000 ($414,000 in 2007), while the Edmonton region’s increase will be 3.4 per cent to $350,000 from $338,636 last year.

However, the Wood Buffalo region is forecast to see a 15 per cent hike in the average MLS sale price to $530,000 from $460,768 in 2007.

Nationally, the CREA report said the average MLS sales price rose by four per cent last month — the smallest year-over-year price increase in more than six years — to $317,619 from $305,499 in April 2007.

Across the country, sales dropped by 6.2 per cent compared with a year ago (52,385 units to 49,114), while new listings increased by 20.3 per cent (82,501 units to 99,248).

“The reason you’ve got a month-over-month decline (in Alberta average prices) is that the sales price in April last year was extraordinarily high,” said Klump. “It has come back just a little bit but it has stabilized.”

Year-over-year change in average price peaked in about mid-2006 in the province and it’s been declining ever since. April’s decline was the first monthly year-over-year decline since July 1996 when the average price fell by one per cent in Alberta.

CREA said the number of new listings for homes for sale on MLS in Canada reached its highest level ever in April. Two new properties were listed for sale for every home that sold through the MLS system, said the national organization.

“This price trend is in line with the association’s projections for the balance of 2008,” said CREA president Calvin Lindberg. “Price increases are now maintaining at levels that are historically more consistent with the Canadian real estate market.

“There are more listings on the market which means more choice for the buyers. That also means sellers have to pay more attention to how they price their home.”

[email protected]

69 comments ↓

#1 Popping Bubbles on 05.26.08 at 8:54 am

Myth # 1 – Canadian housing prices haven’t increased dramatically, especially in comparison to the U.S.

The fact is that real Canadian housing prices have increased substantially more than during the previous three Canadian housing cycles dating back 40-years (all of which ended badly). More tellingly, real housing prices in Canada have increased more from trough to peak than in the U.S. [1]

Myth # 2 – Canadian housing prices are justified by the fundamentals

The fact is that Canada’s housing prices-to-rent ratio is higher than in any other OECD country save Spain and 90% higher than the long-run trend [2]. In addition, Canada’s housing prices-to-income ratio is 32% above historic trends and substantially above the ratio which prevailed when the last housing boom bubble popped in the late 80’s / early 90’s [2].

Myth #3 – Growth in the price of real estate is supported by strong growth in incomes

The fact is that Canadian incomes have stagnated. Statistics Canada recently reported “that adjusted for inflation the earned income of the ‘average’ Canadian — the so-called median income — was the same in 2004 as in 1982”

Myth # 4 – Canadian housing remains affordable

The fact is that housing affordability is at its worst level since the last housing bubble burst [3]. Never mind that housing affordability measures exclude the carrying cost of non-housing debt, which is at record highs, and the impact of energy and food inflation.

Myth # 5 – Canadian lending practices are conservative and prudent

The fact is that the unprecedented run-up in prices have been fueled by a proliferation of risky lending practices such as (i) a decrease in the required down payment from 10% to 0%, (ii) an increase in the allowed amortization from 25-years to 40-years, (iii) the proliferation of 7% cash back mortgages and other lending gimmicks (teaser rates, step mortgages, skip a payment, builder rate buy downs, etc.), (iv) the proliferation of home equity lines of credit, and (v) lenders not being on the hook for the vast majority of risky loans they write (CMHC guarantees low-down payment and/or extended amortizations).

The fact is that studies show typical consumers do not fully understand the implications and risk of low down payment, long amortization and gimmicky (e.g. 7% cash back) mortgages. How many consumers do you think have run a scenario analysis which asks, “what would happen if interest rates went to 8%, 10% or even 12%? What would happen if my partner or I lost our job? What would happen if real estate prices dropped by 10%, 20% or 30%? What impact will extending myself for this house have on my retirement plans?”

Myth # 6 – Canada’s housing market isn’t at risk from overbuilding

The fact is that housing construction is far in excess of household formation. CMHC data shows housing starts averaging 226,000 units per year from 2003 through 2007, 33% per year above the roughly 170,000 net new households formed each year [as estimated by TD Economics and others]. Based on housing permits and starts, this trend is expected to continue well into the future.

Myth # 7 – Canadians are well positioned to withstand a downturn in the housing market

The fact is that consumer indebtedness is at record highs, having risen from 90% in 1990 to 135% of disposable income in 2007. At the same time, the savings rate is close to nil even though the baby boomers should be saving for retirement. [4]

Myth # 8 – The Canadian Real Estate Market Remains Healthy

The fact is that Canadian MLS housing inventory is at record highs while at the same time the number of sales is dropping dramatically [5]. Prices are already dropping in Edmonton and Calgary. And while the real estate industry likes to cite year-over-year price increases, the reality is that month-over-month price data in markets like Toronto show prices to be essentially have basically been flat for the past 6-months even as inventory continues to build and sales decline [6].

Sources:
[1] Scotiabank. Real Estate Trends, 26-Feb-2008, p.2
[2] OECD Economic Outlook No. 82, December 2007. Data table can be found in the housing price ratio tab of http://www.oecd.org/dataoecd/6/5/2483894.xls
[3] RBC. Housing Affordability. Mar-2009, p.1
[4] Vanier Institute. The Current State of Canadian Family Finances. 11-Feb-2008. p.9 and p.28
[5] Canadian Real Estate Association (CREA)
[6] Source: http://www.canadian-housing-price-charts.235.ca/canadian_housing_price_scorecard.htm

#2 Keith in Calgary on 05.26.08 at 9:21 am

On my daily drive to and from work here in Calgary I play the “Count The For Sale Sign” game.

I got up to 11 last week…..until I took a shortcut thru a different area and counted 12…….yes……12……in a 3 block range on one street (56 Avenue SW between Elbow Drive and 2 Street SW)…….that took me up to 26.

Pretty much every condo coplex here in town has 3-8 signs out front……..and the SFH signs are everywhere as well……

If RE is such a good investment, and our market healthy and without a chance of a downturn as those in the REIC would have you believe………why are the investors and others running for the hills ?

#3 SMWhite on 05.26.08 at 10:41 am

I just posted this on another thread on the blog before looking at Schiller’s juicy chart… Food for thought.

In 1997 I rented a condo from a Doctor in Ottawa that she bought in 1988 at $125K. After almost 10 years, she was renting it for $800 a month minus hydro electricity.

After my first year in the building she offered me the unit for $85K. Being a lot greener with finances and business cycles I passed on it. That unit now is available in the same building for $170K. From the bottom at $85K that unit would have paid back almost 8% from 1997 to 2007, but from 1988 only 2%, less than inflation…

As a rental it did well because of afford ability, I see the new condos being built requiring a very steep fall in order for them to be comparable investment. Rent in most major centers is just too cheap.

If your expecting to buy condos now at this stage and flip you may be in for a let down, and because of the crazy run up in prices(look at the chart) you’ll be no where near a break even point on recovering money via rental for years, like 20…

#4 PBrasseur on 05.26.08 at 11:42 am

I’ve been following this blog for a while trying to figure out where the market was going. As far as I’m concerned it has no place to go but down. While financing has been streched to the limit, buyers cannot pay much more (they’re only buying because they still believe price will keep rising, pretty soon that belief will evaporate), plenty of other prices are going up with world inflation – a trend that is just beginning – something’s gotta give and after a decade of steady increase at unsustainable rates (several times the speed of economic growth), that something has to be the real estate market. No rocket science here just common sense.

I live in the Montreal region, (probably because of language barrier an aera not addressed much by this forum but after all it is still the second largest city in the country), here the home prices are still lower than other Canadian cities but so is income and either way prices have more than doubled in the past few years. In fact relative to standart of living Montreal is probably almost as expensive as Toronto.

So there will be a decline, that is certain. The only questions left are how fast, how steady and how deep? That nobody know since it depends on so many other factors such as the world economy and human emotion. Chance are though it’s going to be deep because a) the unprecedented size of the current bubble and b) demographics.

Demography does no favor us here in Canada (specialy true in Quebec, also very true in Europe) because of aging and low birth rate (compared with US), this should have long term effects and is about to come into play. If the current slowdown does’nt kill the market growth demographics will later.

#5 Jim on 05.26.08 at 12:05 pm

SMWhite,

Your 8% return assumes 100% cash down. Since your return is dependent on your cash down it would quadruple if you put only 25% down.

But lets assume that you had put 100% cash down. At that point you can save 100% of what your mortgage/rent would have been and that has to be accounted for in your calculations as well since we all need to live somewhere and these are fixed costs.

Further, the rental that you speak off is probably paid-off by the renters by now. Since the renters paid most of the mortgage, the return for the owner is pretty high. The cash-flow positive asset will produce income for the duration of it’s lifetime even if it does no appreciate and even if it falls in value. Again, increasing the owners returns.

Some things to think about. Not saying that it’s a good time to pick up a condo or anything but I find that simply looking at price appreciation over a time period is a bit too simplistic.

#6 Andrew on 05.26.08 at 12:07 pm

Anyone know if we can also get a chart like robert shillers but for canada’s house prices over the last 100years or would it be identical..

#7 jrochest on 05.26.08 at 12:23 pm

I particularly like the way that the CREA focuses on Fort MacMurray: as of noon today, Calgary has 16,024 listings, and Edmonton has 15,254 listings so of course the CREA says “Hey! Let’s talk about Fort MacMurray!”

Nice spin, guys. :)

#8 Peter on 05.26.08 at 1:09 pm

I hope people are selling their homes all together and flooded the market, let those flippers suffers…with lowballing…

#9 Al on 05.26.08 at 1:12 pm

jrochest,

I use that same trick when I take my infants to the doctors. Look at the shiny keys, not the needle….

#10 kamikaze on 05.26.08 at 1:27 pm

^^ me too. i group real estate speculators in the same category as ticket scalpers

#11 SMWhite on 05.26.08 at 1:38 pm

Jim, agreed, my point I attempt to make is in reference to the ups and down of the market over time. I should have used the term “appreciation” versus return.

You don’t get any “return” on property until you sell…

#12 Mark on 05.26.08 at 1:52 pm

Well if you want to see lots of For Sale signs in Vancouver just take a stroll around Granville Island in Vancouver! Awesome. Saw about 7 hanging from a pole in front of one of the condo complexes. The pole needs to get taller since it’s almost touching the ground! Too funny.

Busting in progress. It’s evident. I see lots of “For Sale” signs popping up all the time. Great time to be on the sidelnes.

#13 Bubble Lad on 05.26.08 at 2:00 pm

Fort McMurray! (I can’t even spell it!). I literally laughed out loud! Fort MacMurray, here I come! What’s that Monty Python song: “Always look on the bright side of life.”?

#14 SMWhite on 05.26.08 at 2:02 pm

Just as a side note, being an landlord and collecting big checks has costs, so minus the below from the $800:

$150 – $200 – Monthly condo fees
$200 – $250 – Monthly property tax
$50 – $100 – Monthly maintenance fees

There was a reason she wanted to get rid of it, and being a doctor I’m sure common sense took over at some point.

With condos now expecting $350 – $400 for monthly condo fees + $300 – $400 property tax and maintenance to boot, can you make a go at renting a $300K to $400K condo for $1200 to $1500?

#15 jrochest on 05.26.08 at 2:41 pm

Oh jeez, obviously I can’t spell either, which is sad —

Fort MCMurray, obviously.

#16 Michael on 05.26.08 at 3:06 pm

Saskatoon is still likely to see strong growth though over the next couple of years, right? Someone please tell me this article is only relevant to the now “passe” cities of Edmonton and Calgary, correct? Ignoring real estate prices for a second, how is the Alberta economy doing? I know that Saskatchewan is really booming right and its rapid income growth will be able support further housing price increases, but on the other hand could the slow down in the oil patch and general poor economic perfomance be the cause of a bit of a slow down in Alberta? Saskatchewan will likely be unaffected by these slow downs for some time to come, correct? Unlike these others centers experiencing these slow downs, Saskatchewan seems to have all the fundamentals in place to avoid any sort of slump. From what I have been told, there is not much in the way of speculation, wages are rapidly growing, it has a great opportunities in the science and tech fields, and has a robust agriculture and natural resource based economy. Should these other centers slow down, would not more people get out and choose to move to Saskatchewan driving prices up even further? Are $100,000 increases over the next year still likely?

#17 David on 05.26.08 at 3:15 pm

I think the reason people in Toronto are delusional is because we dont have For Sale signs hanging infront of the condos, but to give an idea if you check mls.ca for

1 King St W(20+ listings)
Carlaw ave (20+ listings)
43 HANNA AVE toyfactory(12 listings)
Laidlaw/Joe Shuster town house complex (12 listings)

for the M6K postal code which is liberty village, there are 94 mls for sale listings and 11 to rent listings(this is only the MLS rental listings)

#18 peter on 05.26.08 at 3:39 pm

Michael,
Saskatoon has hit its peak. Condos are flooding the market from conversions, speculators and new ones on the market. House listings are gonna reach alltime highs pretty quick and people moving to Saskatoon fron Alberta with huge equity is over. The Saskatoon advantage is over. If you bought a property this year to flip, you won’t remain anal retentive very long. That’s what happens to speculators who get in the game late.

#19 jrochest on 05.26.08 at 3:47 pm

Michael:

Sell. Sell now.

Saskatoon is not going to displace Calgary or Edmonton as the business centre of the west. Saskatoon is not going to become the engine of the Canadian economy.

Immigrants are not going to relocate to Saskatoon in droves. Every immigrant I’ve met in the last three years has expressed one desire, to leave as quickly as possible.

Saskatoon’s “income growth”, such as it is, will not cover a 55.5 % jump in median housing price over one year: wages have not doubled.

Three years ago Saskatoon was small, cold, remote and poor. It is still small, cold, remote and a little less poor. It is a fine place to live, as many residents will tell you, but it is not the golden ticket to wealth that you’ve been conned into thinking it is.

At present, there are nearly 1200 properties listed on the MLS , more than in the last two years combined, and the invisible hand of the market is writing the word “Correction” in fire across the sky.

Sell, Michael. Sell now.

#20 RJT on 05.26.08 at 4:01 pm

Michael from Sask…

Quit drinking the cool-aid buddy. Saskatchewan is a bubble market, it started about 2 years after Alberta and will likely bust 2 years after Alberta.

Unless incomes rise 56% a year (haha), it makes little sense for home prices to rise 56% a year and it not be a bubble. And if you really believe they’re “running out of land” in Saskatchewan than I don’t know what to say.

#21 RJT on 05.26.08 at 4:04 pm

oh, and one more thing. Speculation is HUGE in Saskatoon. I live in Calgary and I personally know 3 people who’ve bought spec homes there, with the intention of flipping. It’s only a matter of time before that speculator demand becomes speculator supply as they flood the market. Just like Calgary, Edmononton, Pheonix, Las Vegas, Miami, San Diego…

Only difference is Saskatchewan has a tiny population and millions of acres to build on, and barely any net migration, almost zero immigration. Until last year, Sask was losing people every year. That has stopped… but the population is not growing very fast…

#22 Doug from Calgary on 05.26.08 at 4:10 pm

Re: #16, Michael, Saskatchewan

The joke I heard recently is that if two buyers are in a bidding war in Saskatchewan, one will be from Edmonton and the other from Calgary! Don’t know if its true…

#23 Robert B. on 05.26.08 at 4:15 pm

People, it is natural for things that go up to come down. I personally believe that Calgary’s RE prices will drop a lot more over the next few years. This should mean that someone moving there in say a year or 2 will be able to get a home really cheap. Yes/no/maybe?

Then buy and wait. Long term with oil prices headed much higher, Calgary will boom again. Any comments on my last point? I want to move to Calgary next year but don’t have O&G experience.

I live in Burlington now, rent but hate my daily 1 hour (to go 20 KM) commute to Oakville. Manufacturing is dying so time to go in a completely different direction….

#24 kabloona on 05.26.08 at 4:27 pm

Michael:

You might find this interesting:

http://www.canada.com/vancouversun/news/business/story.html?id=15b7dec7-1936-4081-8ca9-029cb6238856

Quote:

Saskatchewan has since jumped into the housing market spotlight as its commodity-led economic expansion has attracted an influx of migrants and led to a major housing market boom, it said.

“Regina and Saskatoon continue to clock year-over-year price gains that are several multiples above the pace of their local wage growth,” it noted. “This lends evidence that current momentum is unsustainable, with a similar fate to Alberta’s likely for both of these cities in a year’s time.”

#25 redshirt on 05.26.08 at 4:38 pm

They’re going to have to rename the place to Fort McScurry soon, when the homedebtvestors are scurrying outta there.

#26 Crikey on 05.26.08 at 4:43 pm

Oh Michael,

Did you not get the responses to the last identical inane drivel you posted about the “Paris of the Prairies”? Are you seriously expecting to get a different response this time? Please, go back and look. Your posts are really starting to smack of desperation now.

#27 Robert B. on 05.26.08 at 4:45 pm

Addendum: Bob Truman is normally pretty optomistic but even his stats show the sales are down and listings are up:
http://www.bobtruman.com/Weekly_Stats_Update/page_1947259.html

I wonder how long it will be before he admits that Calgary is bust.

#28 Crikey on 05.26.08 at 4:54 pm

Lower house prices can make you happy
By Roger Bootle
Last Updated: 10:26am BST 26/05/2008

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/05/26/ccom126.xml&CMP=ILC-mostviewedbox

But what about all the fortunate millions of people who have been personally enriched by higher house prices? Reading this, you may already be feeling distinctly upset by what you have just read. In that case, stand ready to be outraged by what you are about to read. Never mind, I’ll risk it. That wealth amassed in the housing market is part illusion and part redistribution from other members of society.

#29 Anonymous on 05.26.08 at 4:58 pm

Well looking at the chart above it did strike some interest as being old enough to remember the last bubble bursting I felt that this had to come at some time. I sold my house in 2007 and have been staying with family rent free ever since…yes I have a wonderful family and would do the same for them in a heart beat. Last year I was thinking of purchasing this spring, but having researched the market and this site I have decided to hold off for another year…BUT, my question is…looking at the past history downfalls it has taken between 3 to 6 years for the market to bottom out…i.e., the bubble burst in 1989 but didn’t bottom out until 1993-94…since everyone here is claiming this time it will be far worse as everyone has over extended themselves…what are peoples thoughts on how fast the market will drop this time? Will it take 4 years to bottom out as in the past or did you guys think it will be more rapid this time?

#30 bobbuilder on 05.26.08 at 6:35 pm

michael, to say that edmonton and calgary are “passe”compared to saskatoon really shows you haven’t travelled very far from your hometown. do you really think the laughable statements you make will come true just because you want to believe them? please seek out other forms of media than the crap and propaganda the star pheonix feeds its citizens and really check out what is happening to real income growth and real estate stats. check out stats canada and the many links people have posted here as their sources. your naivete is apparant. not that anyone couldnt see what you are doing, you are just being silly if you think anyone is buying your statements as fact. saskatoon will never be the economic hub of canada no matter how much the inner child in you wishes it be. if you bought investment property there you should be selling as quick as you can dial a phone.

#31 SMWhite on 05.26.08 at 8:08 pm

http://bp0.blogger.com/_pMscxxELHEg/R-k6W9DCIVI/AAAAAAAABwo/HTSDDSu1vKk/s1600-h/CaseShillerRealJan2008.jpg

It was mid 2005 when cracks started to show in the USA housing market… Thats when affordibility become an issue.

Looking at the graph you can see that levels have now gone back to almost 2004 prices in the “Composite 20″. So figuring it took a year of the market moving sideways (2006 – 2007) it took one ear for mass panic (2007 – 2008) and USA is only starting to talk about a recession.

Michael from Saskatoon, remove your heart from the equation and use our head other wise your going to end up sorry. Some people on this blog are in denial and still believe Calgary and Toronto are”can’t lose” cities. They been touted that for the past 5 years in the media.

San Diego was a can’t miss city, so was Phoenix, Las Vegas, Miami, Washington, etc. Funny how the can’t miss bleed more, why is that? Hmm?

Michael from Saskatoon, I suggest you buy three or four more condos and play the flipping game, whats the worst that can happen?

http://en.wikipedia.org/wiki/Casey_Serin

We will have a year of sideways movement next year, then the pain will begin in the bubble cities in Canada. Specu-flippers will continue to deny, exashurbating the problem and cause a bigger slide. Its really quite interesting to watch this train wreck play out.

It little to do with fundamentals anymore, because fundamentals never factored in the asinine Canadian RE market over the past five, physcology is turning and Mr. Shiller’s book will tell you why, so if you’ve read Garth’s or still doubt what he is saying I suggest you RUN to Indigo/Chapter’s and buy Shiller’s second edition of Irrational Exuberance to fully understand the five stages of dying real estate bubbles.

Those that still figure the RE market ANYWHERE in Canada still has legs after reading that, I say invest heavily! When Klump is talking about Fort mac as the shining star(or Saskatoon for that matter), you know there is little to brag about…

This was a physcological phenomenon on the way up and it will play out the same way on the way down.

Composite 20
http://calculatedrisk.blogspot.com/2008/01/s-case-shiller-composite-house-prices.html

#32 spectator on 05.26.08 at 9:09 pm

@Michael
.
what’s the worst that can happen?
ask this guy

http://news.yahoo.com/s/nm/20080511/us_nm/california_foreclosures_dc_1

#33 newguy vancouver on 05.26.08 at 11:00 pm

I’d rather jump naked on a huge pile of thumbtacks
Then spend one minute in Saskatoon

#34 SMWhite on 05.27.08 at 8:29 am

Here are some books you might NOT want to read from the former head economist from the National Association of Realtors David Lereah and date of publication, aka the Pinocchio of real estate.

Talk about doing everything you can to put some positive spin on the market, or just out and out lie, 3 books in three years, no wonder he missed the RE apocalypse in the USA, to busy writing fairy tales and all his hopes and dreams.

Once again, believe the media and CREA & CMHC, ignore Garth “Boogyman” Turner and keep flipping. The next press releases in Canada will be the infamous “real estate is such a bargain” spiel…

2005
Are You Missing the Real Estate Boom?

http://books.google.ca/books?id=2VUAAQAACAAJ&dq=David+Lereah&client=firefox-a

2006
Why the Real Estate Boom Will Not Bust

http://books.google.ca/books?id=pz_FAAAACAAJ&dq=David+Lereah&client=firefox-a

2007
All Real Estate is Local

http://books.google.ca/books?id=i2qFAAAACAAJ&dq=David+Lereah&client=firefox-a

#35 Mike on 05.27.08 at 9:28 am

I live in Montreal. Does anyone have any data on this city? It seems to me that prices here have doubled during the boom. I think taxes and income levels here make it very un affordable, probably worse than TO.

Anyways, I would like to read what people have to say about Montreal RE.

Thanks

#36 SMWhite on 05.27.08 at 10:01 am

Great Newsweek article from May 6 on where DL is hiding now… He’s moved to Wall Street, now thats scary!

http://www.newsweek.com/id/135724/page/1

Real Estate makes me happy! Are you still missing out?

http://www.youtube.com/watch?v=AYiX2BuRVhg

#37 Andrew on 05.27.08 at 11:07 am

Credit losses lower BMO profits

MATHIEU BELANGER/REUTERS
BMO CEO Bill Downe addresses an investors’ meeting in Quebec, March 4, 2008. Email story
Print
Choose text size
Report typo or correction

Today’s markets Highs and lows Mutual fund finder May 27, 2008 09:35 AM
THE CANADIAN PRESS

Second-quarter profit at BMO Financial Group fell to $642 million from a year-ago $671 million as the big bank booked $151 million in provisions for credit losses.

Cash earnings per share of $1.26, however, beat analysts expectations for earnings of $1.19 per share according to Thomson Financial and BMO’s chief executive said the outlook is “improving” in capital markets.

“Results in BMO Capital Markets reflect current market conditions as activity in the investment banking business was slow in the quarter,” said president and CEO Bill Downe.

But, he added, the bank has seen “indications that concerns are easing in credit markets as credit spreads are trending towards more normal levels and we are encouraged by these developments.”

In the prior-year period, BMO earned $1.31 per share.

The bank’s revenue improved four per cent in the quarter, year-over-year, to $2.62 billion.

***no issue here with subprime but looks like it starting the other banks report this week as well ***

#38 imawaitin' on 05.27.08 at 1:11 pm

I lived in the province of Sask, but I call it SaskPEN, did three years, and never want to go back! (I was too young to have any say in the matter). Micheal I don’t know who you’re expecting to move there but it won’t be the like of me, and others who have the same sentiment.

#39 Keith in Calgary on 05.27.08 at 1:19 pm

IMHO the banks are not telling the truth to their shareholders.

For example, ATB (Alberta Treasury Branches) has over $1B of the junk on their books yet takes next to nothing for a writedown.

If US banks are writing down 50% or more, of the “book” value of the same junk bought by Canadian banks, why are Canadian banks not doing so ?

Keeping this crap on their books after the pending “restructuring” is a joke……and a lie.

The Hosue of Commons ought to be forcing them to report the reality of the situation, and not let Canadians think everything is OK when obviously is not.

#40 SMWhite on 05.27.08 at 2:54 pm

Keith, its because the house of cards hasn’t fallen yet, there is still some of the herd getting sucked into the black hole, once recession is undeniable they will take the pill then. Why have a soft landing when you can have everything crash hard at the same time?

Makes sense if you think like the banks…

#41 Dom-GTA on 05.27.08 at 3:50 pm

Mike,

We recently sold in Montreal and had to reduce our price twice and finally accept an offer 15% below our asking price.But that was still almost double what we paid for it in 2001. So prices have doubled.

I see a slow down happening in Montreal now and a general price reduction. I would be surprised if it was any better than elsewhere. My in-laws are selling as well and it has been pretty slow in my opinion, some interest but also 3 price reductions.

#42 Terry on 05.27.08 at 4:17 pm

Every generation has to learn when we are in a bubble whether in real estate or stock markets. The only thing that scares me is that the bubbles seem to be getting much larger. If you want to understand the market we are in now take some time to educate yourself about market downturns of the past. Housing prices have in most parts always climbed with the rate of inflation with dips and dives along the way only to met again several years down the road. The quest for a “fast” buck is almost always meet by greater losses down the road.

#43 Adam on 05.27.08 at 4:40 pm

The banks are getting high on their own supply. It’s that simple.

#44 Crikey on 05.27.08 at 4:59 pm

Hey Michael,

We all know that you’ll never get what you currently paid for your place in “Toon Town” (well, not for the next few years, anyway), but here’s an intersting piece from the StarPhoenix, which is usually unbelievably pro-RE:

Is the Saskatoon housing market about to drop?
RBC economist says there is “evidence that current momentum is unsustainable”

http://www.canada.com/saskatoonstarphoenix/story.html?id=af5921c8-e9ad-486e-8f38-f741166e9c4e

Unsustainable?? Aww, anyone would pay an average of $306K to live somewhere where it’s 20-50 below for 8 months of the year, and incredibly buggy (West Nile buggy, too) the rest. Yes, the fact that it’s less expensive to live in many warmer and nicer cities in the world makes perfect sense.

You poor guy.

#45 vancity dude on 05.27.08 at 6:11 pm

May condo listings in Vancouver are spiking:

[URL=http://img179.imageshack.us/my.php?image=may08midmonthsd3.gif][IMG]http://img179.imageshack.us/img179/9082/may08midmonthsd3.th.gif[/IMG][/URL]

#46 vancity dude on 05.27.08 at 6:12 pm

May 2008 condos listings spiking:

[URL=http://img179.imageshack.us/my.php?image=may08midmonthsd3.gif][IMG]http://img179.imageshack.us/img179/9082/may08midmonthsd3.th.gif[/IMG][/URL]

#47 Vancouverwatcher on 05.27.08 at 7:44 pm

Cracks in the Vancouver market? Just got an email from Onni Development (major local developer) that they are “buying down” mortgages in 3 of their current developments. By my calculations, this is equivalent to 10% price reduction ?? Is this the beginning of your predictions, Garth?

Pasted it below:

As an Onni VIP registrant, we wanted you to be the first to know about our new incentive:

Aria 1 is now offering a Mortgage Buy Down on a select number of view homes! Move in this summer, with completion estimated for July 2008!

Own from $1,394/Month O.A.C.*

Buying your own home just got easier at Aria, where you can own your own 2 bedroom 1,060SqFt home for an affordable $1,394 per month OAC*. Click here for a floorplan! Lock in the exclusive rate of 2.99% for a full 3 years! Put your money towards your future – this is a limited time offer, so call us today or visit us to view our display suite!

Please visit http://www.onni.com to see the full set of floorplans with features list. All homes feature spacious 8’9”ceilings, floor to ceiling windows, granite countertops, hardwood flooring in living and dining rooms, high-end stainless steel appliances and an over-sized fresh air balconies.

Aria is located in Port Moody’s up-and-coming urban village Suter Brook. At Suter Brook home is the heart of an inspired community sharing access to amenities including: a recreation centre with a full-size squash court, a pool with steam and sauna facilities, together with fantastic retailers including a Starbucks and Thrifty Foods, as well as financial services offered through Vancity and TD Canada Trust!

If you have any questions regarding Aria or for more information on this limited time offer please contact us at the Suter Brook Presentation Centre: 604-552-0552.

We look forward to seeing or speaking with you soon!

Sincerely,

++++++++++++++

#48 VanCity dude on 05.27.08 at 8:07 pm

Listings of condos in Vancouver in mid-May is skyrocketing.

[URL=http://img179.imageshack.us/my.php?image=may08midmonthsd3.gif][IMG]http://img179.imageshack.us/img179/9082/may08midmonthsd3.th.gif[/IMG][/URL]

#49 Vancity dude on 05.27.08 at 8:17 pm

Vancouver condo listings are skyrocketing in mid-May.
Can anyone say “investor panic!”?

#50 Vancity dude on 05.27.08 at 8:17 pm

[URL=http://img179.imageshack.us/my.php?image=may08midmonthsd3.gif][IMG]http://img179.imageshack.us/img179/9082/may08midmonthsd3.th.gif[/IMG][/URL]

double post..forgot the chart

#51 Vancity dude on 05.27.08 at 8:18 pm

[URL=http://img179.imageshack.us/my.php?image=may08midmonthsd3.gif][IMG]http://img179.imageshack.us/img179/9082/may08midmonthsd3.th.gif[/IMG][/URL]

#52 Sam on 05.27.08 at 8:23 pm

Where is vultur there these days ?

#53 Jeff Riverdale on 05.28.08 at 12:03 am

For Vancouver Watcher,

I just got an email from a developer as well. Right now only a $10,000 ‘Decoration allowance’. Just another trick these developers use. By giving incentives instead of outright price reductions it doesn’t count in the official stats as a price decrease even though it has the same effect. Incentives will still be getting much bigger though.

Email Posted below:
(I’ve used the agents intials)

Dear Prospective Buyer,

As the date nears, excitement continues to build in anticipation of Perspectives’ Summer Preview Sales commencing Saturday June 7 at noon sharp! The response to Burnaby’s latest collection of high-rise residences has been truly overwhelming.

During the Summer Sales Preview event we will be accepting initial deposits of 10% of the purchase price* as well as offering an initial weekend $10,000 decorating allowance towards the purchase of your new home. With these value added promotions living in one of Burnaby’s most desirable neighbourhoods is even more attractive.

Poised to become the next landmark community within the Brentwood Town Centre neighbourhood, Perspectives will feature a range of home styles to suit your needs. This exclusive collection of one bedroom to three bedroom residences will feature open concept floorplans, chef inspired kitchens, and luxurious bathrooms.

As a reminder, our experienced sales team of LB and LL will be contacting you shortly to better understand your needs and answer any questions you may have in advance of the Summer Preview Sales. In the meantime, if you have any questions feel free to leave a message at 604.294.4995 or email us at [email protected]

Sincerely,

LM Perspectives Homes LP

#54 David on 05.28.08 at 1:12 am

I was in Edmonton last week and spent a bit of my spare time looking at the realty ads. There are a high number of anxious sellers trying to sell at yesterday’s prices. Too many over valued homes for sale and a shortage of potential buyers. The perfect storm is brewing.

#55 Dom-GTA on 05.28.08 at 6:22 am

Sam, Vultur is on the phone desperately trying to get his properties listed before the market tanks…

LOL

#56 Vancity dude on 05.28.08 at 1:08 pm

@Vancouverwatcher:
Port Moody isn’t exactly Vancouver! Burnaby isn’t exactly Vancouver! The outer suburban fringes are starting to see an impact of no buyers and too many sellers. A perfect storm indeed.

#57 Vancity dude on 05.28.08 at 1:12 pm

Vancouver condos listing graph

[URL=http://img73.imageshack.us/my.php?image=may08midmonthdz1.gif][IMG]http://img73.imageshack.us/img73/9151/may08midmonthdz1.th.gif[/IMG][/URL]

#58 Vancity dude on 05.28.08 at 1:16 pm

doublepost: forgot mid-May condos listing graph

[URL=http://img73.imageshack.us/my.php?image=may08midmonthdz1.gif][IMG]http://img73.imageshack.us/img73/9151/may08midmonthdz1.th.gif[/IMG][/URL]

#59 Dave in Calgary on 05.28.08 at 1:59 pm

I think Vultur is reading Garth’s book… looking for the predictions.

Garth, I am 30 year old renter in Calgary, was telling my mother that I was waiting to buy as I thought there’d be big RE drop here. She nearly jumped through the phone and demanded I read your book.

Mother knows best! Now I feel I am a lot more informed on my hunch. Thanks Garth for telling “the other side of the story” in a very effective manner.

I am single, rent for $750 month, all inclusive, walk to and from work in downtown Calgary, and smile at hundreds upon hundreds of for sale signs on my way to work! Not to mention my friends who tell me I waste money on rent!

#60 Jim on 05.28.08 at 4:43 pm

Dave,

750$ all inclusive downtown Calgary? I am guessing you are renting a room in a basement suite?

#61 moxie on 05.28.08 at 9:14 pm

Dave,

750$ all inclusive downtown Calgary? I am guessing you are renting a room in a basement suite?”

probably at his mom’s house.

#62 Dave in Calgary on 05.29.08 at 1:15 am

Moxie,

Haha. Thanks. Nope. Moved out from Mom’s 12 years ago. I rent an upstairs room in a town home style condo with two other young urban professionals like myself in a nice neighbourhood. Have a basement, small front yard, free laundry, free parking, free internet, free cable, free utilites. In Kilarney (about 4km from downtown) and I spend about $40 a month is gas (and I am an oil and gas engineer… winning at both ends… suckers!!). I am banking $1500 a month and live an active life (work, sports, and dating).

Sure I’d like my own place, but hey, RE is ridiculous here and is about to tank. I’m a happy guy… and not living with mom… and not carrying a massive mortgage on some ugly place 25km from work. When the market tanks, I’ll put 25% down on a place and be a happy camper. Mom, 3000km away, will be happy too.

#63 Jim on 05.29.08 at 8:54 am

Dave,

Ok, so you’re renting a room for 750$. Fair enough. It’s tough to compete in the RE market when you are single because the way I see it, couples get everything 50% off.

Also, you don’t need to be quite so snotty because not everyone enjoys living in shared accomodation. However some people love it. Just think of the show ‘Friends’.

If the market tanks as you hope it will, the cause will most likely be energy prices tanking. Hopefully you’ll still have your job in the gas & energy sector at that point. Good luck though, and I can’t help wondering if you are so smart you didn’t buy anything when prices were affordable just a couple of years ago.

#64 Dave in Calgary on 05.29.08 at 11:05 am

Jim,

Have I really been snotty? I just thanked Garth for the book. I’m actually a nice guy. I have no time to share pot shots with people on here.

I wasn’t in Calgary a couple years ago, so that would explain why I didn’t buy place here. And, a couple years ago, it wasn’t cheap. Maybe 4 years ago it was here. I was tought to always have 25% down to buy a place so that’s why I didn’t own anywhere else either.

And, I’ve only been in the only and gas sector for a year, meaning I did pretty well outside of it for the previous 6. So I am not worried that it tanks too (again, no mortgage).

The point of my original post was to thank Garth for the book, and add to the arguement that its OK to rent, that not everyone NEEDS to own. Why this makes people want to sling mud at me and call me a momma’s is actually quite amusing.

Dave

#65 moxie on 05.29.08 at 2:01 pm

Dave:

my comment was ‘tongue in cheek’ and not mean’t to be callous as i couldn’t believe the cost of your rent.

i’m commending you for saving up for your downpayment and kudos that you pay less than $800 a month for living expenses while the average joe is living paycheck to paycheck servicing mortgage, higher energy costs, food, etc. and consoling themselves for paying too much on houses made of sticks.

Thankfully I own my own home (SFH) mortgage free …..had a 25% downpayment, started off with a traditional 25-year amortization, made lump sums every year, etc. etc…. on every renewal, i told the banker what i wanted with my own amortization schedules and different interest rate scenarios, not the other way around.

Dave, I started off buying my home the same way you did .. paying cheap rent ($ 600 + utilities in a half-basement apartment, unshared, many, many years ago) and saving for my downpayment. You are certainly on the right track.

#66 Dave in Calgary on 05.29.08 at 3:19 pm

Moxie,

Thanks. That was the point I was trying to get across. That there is an alternative to buying. Many people my age will only listen to Real Estate agents, the banks (mortgages), and their friends as compared to listening to the people who have done it the time tested correct way. Friends of mine just got a 40 year mortgage on an oversized shoe box south of 22x, $350,000. Very little down, they’ve been dating for 6 months, and they are lucky if their combined income is $110,000. Two car loans, credit card debt… I don’t know what they are going to do when food, fuel, and home energy prices continue to sky rocket.

Madness… they are good people too.

I mentioned my Mom on my original post because she reads this blog and I thought I would thank her. She got a good laugh at your post… haha.

I kind of have it good though… I really lucked out. 3 of us share 1800 sq-ft, and we are all so busy we never really see each other. I might say 10 words to my roomies all week.

And with the money I am saving for a down, it’s also my float should oil and gas tank, as it does from time to time, and since I’ll never buy at peak market values, I doubt I’ll ever lose 100,000 in real estate. Garth’s book confirmed what I knew (not much) and gave me a lot of mental ammo to plan my future.

#67 Jeff Shewchuk on 05.29.08 at 6:31 pm

Can someone provide the source of “Calgary has 16,024 listings”? I believe CREB indicates approx 8000 single family detached and I can’t imagine there are 8000 condos/duplexes on the market?

I thought the papers announced Calgary just hit the 10,000 listing mark?

btw – i’m loving this forum

#68 Another Albertan on 05.30.08 at 2:11 am

Jeff –

http://www.canada.com/calgaryherald/news/story.html?id=1afda6d4-6500-4885-ab41-b1470bb29b5c

#69 calgary on 07.01.08 at 10:24 pm

I sure am glad I did’nt buy a house last June (07) in Calgary. At the average price of $496,890, that house is now worth about $25,000 less. With my 40 year mortgage with 0 to 5% down, I would owe more than its worth. (no… were not like the U.S.)
During the height of the insanity, houses were going up $500 a day. Reason given was low supply and high demand, so prices increase. Now the same people tell us we have high supply and lower demand but prices are still going to increase 3-5% in 08?
They are re-calculating the forecast… now that the prices are actually falling.