A year ago I went to Calgary and said house sales and prices would decline. That was shocking enough to make the evening TV news. In response the Calgary Real Estate Board said I was (and I paraphrase) an idiot.
Tomorrow I go back. Let’s review.
A year ago 1,285 single family homes changed hands in Cowtown, and this year the monthly sales number is 958. That’s a decline of 25%. A definite gelding. In fact year-to-date house deals are at the lowest point in a decade. Back in 2007, for example, activity peaked with 15,422 sales, while this year it will be more like 11,000. Not so hot for a city of 1.2 million people.
As for prices, they were lower last month than a year ago and $16,000 per house less than three years ago. So, twelve months ago when realtor boss Bonnie Wegerick said, “Calgary’s housing market has clearly turned a corner,” she was right. So was I.
Of course, any Canadian city with a Muslim as mayor and nuts on its Silverados is inherently interesting. I just wouldn’t buy a house there. Despite Ted Zaharko – or maybe because of him. The irascible local Royal LePage broker was shilling this week for his company which just turned out another whopper of a media release (picked up by all the serious newspapers who just changed the bylines) claimeing an outbreak of housing normalcy.
Calgary house prices stabilized in the third quarter and now stand close to year-ago levels, it said. Of course, the loss in house values over three years went unmentioned, as well as the devastating one-quarter plunge in buyers. Added Ted, brightly: “When conditions such as low interest rates or price decreases occur in Calgary, the market reacts quickly and in a significant way. However, even though the downturn did have a considerable impact on us, the Alberta economy and its housing market have always been, and will continue to be, among the strongest in the country.”
I’ve told you many times it’s unfortunate when the real estate industry is blatantly irresponsible and deliberately distorts market conditions in order to fool buyers. It’s a democratic disaster when the media reports it as news. And yesterday this story was regurgitated, with the appropriate local spin, in Vancouver, Edmonton, Toronto, Winnipeg, Montreal and Halifax, as well as Calgary. In none of those articles was balance provided.
And this brings us to Alison O’Riordan, who writes for a big newspaper in Dublin, which is about the same size as Calgary. Her column this week was about her downtown condo and the despair she felt looking out her fifth-floor window at a brand new development across the street. Those condos boast marble, granite, stainless, oversized windows, heated towel rails and mirrored cabinets. And she hates them.
“If there was a competition for throwing dirty looks,” Alison says, “I would easily have come first, for those aesthetically beautiful Grand Canal Square apartments are being offered to first-time buyers for a sickening €190,000. Two years ago, with help from my parents, I bought into the same sought-after riverside location in Dublin 2, but for the horrifying sum of €525,000.”
That’s right. A 64% drop in real estate values in a major city, among luxury downtown properties – destroying this young woman’s financial future (and that of every other buyer in the last two years).
She continues: “The market’s collapse is the worst thing that has happened many young people of my generation. In 2008, even as the market was softening, I honestly thought I had found my ideal home for a reasonable price. I got caught up in the crazy mania of feeling I must have an apartment… I chastise myself for incarcerating myself in my own financial prison. A prison, I soon learned, that had no more than about 10 inmates. Today the other apartments in my building are filled to the brim with wise renters.”
Could this happen in Calgary? Vancouver? Toronto? Or is it so different here? Did the laws of supply and demand give Canada a pass?
Well, they sure didn’t exempt the country in the world most like us. The latest word from America is that real estate now seems to be entering an unprecedented double dip. “House prices are likely to fall steadily over the course of the next 12 months, taking them to a new cycle low,” says Capital Economics. “Prices may not regain their previous peak for a decade.”
Adds the report: “A big part of the problem is that the previous sharp falls in prices have left many households with a mortgage worth more than their home. In the second quarter, 23 per cent of all mortgage holders were in negative equity. Half do not have the 20 per cent of positive home equity necessary to qualify for a new mortgage … Millions of Americans simply are unable to move home or refinance.”
Can’t sell in Dublin. Can’t sell in Phoenix. Is there a lesson here?
Not according to LePage boss Phil Soper.
“Soper said it’s likely this year’s fourth quarter will see Canadian home prices, on average, about even with year-earlier levels, given the high comparison levels. He expects a return to a range of three to five per cent growth early in the new year.” Really? Based on record household debt, structural unemployment, aging Boomers and rising taxes? Sheesh.
Some people accuse this blog of being tedious and call its owner a useless sack of steaming fresh prairie feed lot patties. Houses will advance forever, they say, saved by those rich immigrants, more cheap money, Phil Soper and Mr. Harper.
And maybe they will. But just in case, I’d take cover.
Alison in Dublin – coping badly with a 64% drop in condo prices.