17 comments so far. We'd love to hear your thoughts.

• Doug
  April 29th, 2009 at 1:39 PM

  “They can take some comfort in knowing that demand remains strong”

  Well demand is still less than now slowly increasing, but large, supply. Maybe this week demand finally > supply (new listings). And mortgage changes coming. People in Saskatoon are kind of bandwagon jumpers, weakening market, prices down a bit, was is jroch who thought sales looked like a ski jump? Maybe sales prices will look like that too. In a balanced market, shouldn’t sales = new listings, some weeks more, some less? Just a comment, not a criticism against Norm’s comment in any way. Compared to 2005 and 2006, demand does look like it’s about the same.

  My guess was $270,000 average by January (a lot of posters seemed to guess about 10% down. Still seems reasonable to me, if not lower with population numbers. I know Norm, I’m bringing up the population again, but that’s gotta scare buyers, more than any warehouse closure or cost per square foot trend will.

• Norm Fisher
  April 29th, 2009 at 1:39 PM

  Doug,

  In healthy markets only about 60-70% of listed homes will sell. Clearly, there should be more properties listed than sold or sellers are always able to name the terms.

  Buyers don’t appear to be “scared” if you ask me. They seem to be out there buying and I think the fact that prices are edging down will only help as far as demand is concerned.

• MVATrail
  April 29th, 2009 at 1:39 PM

  I am very much still in the market, made an offer on a place in January, got outbid, did not want to start a bidding war. Made another offer on a place in February 2008, but because the “lazy” real estate agent who was selling the place did not fulfill his paper work on time, I walked. He told me he will have others lined up to buy the place immediatley. Long story short, it did sell, 51 days after the listing. For less then I offered, btw I offered OVER asking price !

  I am waiting for the right property to list – I know the exact street I want to live on – meanwhile my

  $ 159,000.00 home in Arbor Creek, which was recently appraised at $ 429,000.00 will do me just fine. My strategy, price my house $ 10 – 15 k less then the competition, as there is a ton if it in my area and especially my street.

  Whoever gets my bungalow in Arbor Creek will get a 4 year old, completely finished home and I will get my property I am searchng for.

  I don’t care where our population is, which business is closing, or if those “pretty lights” on the Vic bridge are working, my house will sell because I will price it right.

  It is a matter of supply and demand – If I supply an above average home in a good area with a good price, people will come – just like building a baseball field, if you build it, they will come.

  MVA

• JoJo
  April 29th, 2009 at 1:40 PM

  “just like building a baseball field, if you build it, they will come”

  yes, because that was based on a true story.

• jrochest
  April 29th, 2009 at 1:40 PM

  It’s nice to see the prices finally begin to fall. I thought it would take a good deal longer, to be frank.

  But there’s a good ways to go.

  A lot of units — particularly apartment conversions, but also houses — are appearing on the Kijiji rental pages. In some cases I recognize the photos from the MLS, in others they’re just too flossy to have been taken for rental purposes. I get the impression that many people are going to rent for the fall and winter and try again in the spring.

  There have also been some *smokin’* deals on the used furniture pages: entire sets of living room furniture ‘bought three months ago’, going for a song.

  This means two things: the rental market’s going to be less tight this fall than it was last fall, and next spring is going to look a lot like this year when it comes to sales and listings. The pain is being deferred.

  MVA — did you have your property on the market this year?

• jrochest
  April 29th, 2009 at 1:40 PM

  Oh yes, it was me who expected a ski jump: alas, it was not to be

• George
  April 29th, 2009 at 1:41 PM

  Mva,

  very true about a properly priced home

  Norm,

  there will always be demand even in a depreciating market. In the States the bottom is nowhere to be seen, but there are buyers.

  I think most of the demand we see are people trading up or down. I believe there are some people moving into town and buying. ( I don’t believe that population story, I just can’t, the numbers definitely do not add up) Very few first time buyers or investors make up that demand right now, I would suspect. With prices edging down it will only get better for them.

• George
  April 29th, 2009 at 1:41 PM

  Doug,

  I would agree with a 270,000 average in Jan 09 if mortgage lending was not tightening and the possible rise in mortgage rates.

  This will lead to a smaller pool of buyers after Oct. 15 that are loaned less money.

  I’m thinking 245-255k by Jan 09.

• Norm Fisher
  April 29th, 2009 at 1:41 PM

  George,

  “there will always be demand even in a depreciating market.”

  True, and a great deal of the activity is people who are moving around. They were put out of the market last year to so they’re taking advantage of easier conditions.

  “In the States the bottom is nowhere to be seen, but there are buyers.”

  Or so the media, and the “pigs” would have us believe. Here’s an interesting tidbit that you haven’t likely heard. June was the fourth consecutive month in which both the median and the average price rose for a US home. Median went from $195,600 in February to $215,100 in June. Average climbed from $242,000 to $257,500.

  NAR Stats to June ’08

  When prices come down demand often goes up.

• Nick
  April 29th, 2009 at 1:42 PM

  I’m surprised no one has mentioned it here, but in July saskhouses had their lowest average asking prices since January 2008. Seems like a good indication of what people think their homes are worth.

  I think it also may be that buyers who were previously just testing the waters by shooting for the stars just to see if they could get some obsene price, are now being realists and trying to sell investment property before prices fall further and not waste more time trying out at higher prices, and they actually begin to lose money over what they paid.

• jrochest
  April 29th, 2009 at 1:42 PM

  Norm — that’s interesting, because we have duelling data, at least for February to May.

  The Case-Shiller indices only go through to May (the May figures were released last week) but still, they show declines month over month from February to May for 15 of the 20 cities they track. And both the 10 and 20 city composites are down (that is, month over month; goes without saying that everything is down year over year).

  I know you’ve seen this data, but for everyone else, the Case-Shiller data is here; click on the ‘May’ hotlink and you get an Excel file.

  http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_csmahp/2,3,4,0,0,0,0,0,0,1,1,0,0,0,0,0.html

  Denver, Atlanta, Charlotte, Portland and Dallas are all up a bit (none by much) but none of them had a really massive gain, either.

  This may be the result of a couple of things: they may use different data collection than the NAR; the NAR may be cherry-picking a little (and who would blame them, frankly, things suck hugely for real estate south of the border); or the data from all areas of the US rather than the 20 cities tracked by Case-Shiller may be more positive.

  I’ll reserve judgment until it’s possible to compare all the data between the two sources.

• George
  April 29th, 2009 at 1:42 PM

  jrochest and Norm

  I am thinking one reason why there is a difference is not every place in the states reached bubble heights, and the case shiller index does not report all markets while NAR reports all( is that correct?)

  There are some places that had very little speculation and very little run ups during the housing boom in the states. ( Houston, many others) I have seen some places that have numbers that look like inflation growth during the bubble(sorry don’t have them right now) and are positive this year.

  Unfortunately for Canada it does seem like every place has had a huge runup, no place was left untouched save PEI and is due for a correction. This may explain why the national average in Canada is 330k and the national average in the US in 257k even though they make about the same per capita maybe a bit more than us.

  jrochest, maybe you can find this out or Crikey

• jrochest
  April 29th, 2009 at 1:43 PM

  George — the higher average in Canada would be a function of us having a more urban population in relation to our size.

  I think you’re probably right about the lack of drops in the non-bubble areas — although there are plenty of places that had nasty bubbles that aren’t in the cities the Case/Shiller data hits.

  One thing that backs this up: the cities in the Case-Shiller data that have seen a rise in prices are all those that had minimal run-ups. It’s pretty clear when it’s plotted on a graph, here:

  http://www.iaconoresearch.com/BlogImages/07-10-30b_case_shiller_index.png

• Warren
  April 29th, 2009 at 1:43 PM

  Norm:

  Re: the U.S. situation. I wouldn’t put too much faith in the NAR’s numbers – this is the same organization that has been calling a bottom to housing for almost two years now. At one point, not even joking, they had made something like 11 straight monthly downward revisions to their estimates.

  The Case Shiller index is widely considered the gold standard of price reporting (except by the NAR, who doesn’t want people to hear about prices falling 10, 20, and now almost 30%). And the Case-Shiller certainly doesn’t show U.S. prices going anywhere but down these last four months.

  It’s so highly respected because it tracks the price changes of the same houses. So no arguments like all the Calgary blogs have been having about “prices are going down because less million dollar homes selling” or “prices are staying stable because of a different sales mix”. The index (which is really quite fascinating in how meticulous they are in sorting through all the data – google “Case Shiller” for more info) tracks the exact same house over many, many years.

  It’s not a perfect system, but neither is the NAR’s or OFHEO’s. Yes, it primarily focuses on 20 major centres (which happen to be where nearly 1/2 of the U.S.’s RE value is). Yes, it excludes condos and attached homes (which one could assume move relatively in tandem with SFH). Here’s a very good analysis of the Case-Schiller, it’s flaws and it’s advantages:

  http://www.inman.com/blog/2008/05/30/wheres-beef-in-case-shiller-attacks

  I tend to take all price changes with a bit of skepticism. I don’t think Calgary’s numbers are fully reflecting what’s going on here (the numbers say SFH are only about 7% down at the median from last year’s peak – condos are down only about 11%). Meanwhile my neighbor can’t sell his house for 80% of what another neighbor (I live in cookie cutter suburbia, so it’s pretty much comparable) got last year. What I see with my eyes and hear with my ears aren’t what the numbers are telling me.

  Similarly, I was in Florida in May and Vegas in June and just from talking to the locals – they sure don’t see a bottom anytime soon. One of my dealers at the Wynn was actually a part time Realtor and she had some crazy horror stories (after talking to her, I felt bad for her and she was the one taking money from me, lol).

  Interestingly, while googling “Case Schiller vs NAR”, I came across an opinion piece from the NAR that tried to tear down the Case-Shiller because it was a “conflict of interest” (Robert Shiller co-founded a company that offers futures options on housing on the CME). Hmmm…because the NAR doesn’t have any conflict of interest…as my friend would say “pot – this is k

• Norm Fisher
  April 29th, 2009 at 1:45 PM

  jrochest, George and Warren,

  I have no problem with the Case Schiller study. I think I posted a link to it a few posts back when we were talking about Phoenix. It’s an excellent study to track price changes in specific markets.

  It’s certainly not relevant or reliable in tracking the average, or the median price of a US home and makes no attempt to do so.

  I would point out that half of the cities that they report on are in the “top 5 foreclosure states” and a couple of the others are in the top 10.

  http://www.usnews.com/blogs/the-home-front/2008/7/10/the-top-10-foreclosure-states-as-of-june.html

  My understanding of NAR stats is that they are based on all MLS sales nationally. While averages and medians are not perfect, they are grounded in mathematics which makes them immune to “cherry-picking.” It either adds up, or it doesn’t.

  I would be the first to tell you that “projections” made by Realtor associations should be taken with a grain of salt, and in fact I’ve said as much on many occasions. NAR has damaged its credibility significantly in recent years predicting sustainable markets and bottoms. However, the Department of Justice almost camps out on their door step and their every move is under constant scrutiny. I highly doubt that they would risk cooking the numbers when they could be easily opened to audit. I suspect that doing so would rise to level of a fraudulent act. It’s not criminal to make stupid predictions but I think it is criminal to mislead the public by making unqualified and unsubstantiated claims about what’s actually happening.

  Interestingly, you have to dig pretty deep on their website to find these stats and they’ve not been included in any of their press releases. NAR objects to comparing this month to last because of “seasonal” issues.

  “The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the geographic composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if more data is received than was originally reported.”

  All of the NAR releases that I’ve read compare year-over-year numbers. This release from June 26 regarding May sales is an example.

  http://www.realtor.org/press_room/news_releases/2008/may_home_sales_show_gain

  You’ll note that they report the median as being “down.”

  I realize that I’m arguing against myself here with respect to the validity of these numbers, and it really wasn’t my intention to paint a rosy picture. I know things are bad in the US, but I can’t help get the feeling from all of the reading that I’m doing that things are starting to turn around in many of their housing markets and I think these numbers indicate that it’s not totally a downward spiral.

  My point was in response to George’s comment, “In the States the bottom is nowhere to be seen, but there are buyers.”

  Clearly, this is the case in some, but not all States.

• jrochest
  April 29th, 2009 at 1:46 PM

  Well, I’m obsessive AND lazy, a sad combo for a lovely Sunday AM (why am I not picking tomatoes?). Turns out there are three main sources of info on the US housing market, and the way the competing indices gather and process data makes for considerable differences in it.

  So I went hunting for info, beyond “Case-Shiller hates America” and “The NAR is lying outright” and “OFHEO is a cookie, isn’t it?” none of which is helpful.

  Here’s some stuff I found.

  This is a good, relatively balanced defence of Case-Shiller, that explains the reasons for the variation in the three main sets of data available for the US market. It also addresses criticisms of the index from the NAR, but not in a bigoted way. The author’s explanation for why the three are different in quoted below:

  “Why do Case-Shiller’s numbers differ from those produced by NAR and the regulator of Fannie Mae and Freddie Mac, OFHEO?

  Before your eyes glaze over, the numbers all have their uses, their differences are easily explained, and they boil down to this:

  1) Case-Shiller and OFHEO look at repeat purchases and exclude new home purchases, but OFHEO also throws in appraisals that are generated when people refinance their homes. As we have all become very cognizant of lately, what a house will appraise for and what a house will actually sell for on the market can be very different things.

  2) OFHEO doesn’t consider transactions involving loans that are too big or too risky to be guaranteed by Fannie and Freddie, and acknowledges that homes with these mortgages on the upper and lower price ranges are seeing bigger price declines than the homes it tracks.

  3) NAR looks sales of existing homes listed by MLSs, and reports median home prices, which reduces the impact of price volatility in upper price ranges.

  The result is that the Case-Shiller index can show more extreme swings in price — both up and down — than NAR or OFHEO’s numbers.”

  The rest of the article is here:

  http://www.inman.com/blog/2008/05/30/wheres-beef-in-case-shiller-attacks

  Then there’s this article, from the WSJ, on the variance between the Case-Shiller and the Ofheo index:

  http://futurerealestate.blogspot.com/2008/02/when-home-values-dont-mesh.html

  And here’s a primer of differences between these two:

  http://blogs.wsj.com/economics/2008/02/26/ofheo-vs-case-shiller-a-primer/

  Here’s a link to the Ofheo page that explains its methodology:

  http://www.ofheo.gov/hpi.aspx?Nav=269

  And here’s the page with the OFHEO data itself:

  http://www.ofheo.gov/#

  And here’s the NAR’s homepage, which describes its methodology: yes, they collect EVERYTHING, and they measure medians, which lops off wild swings. And they release it earlier than everyone else, so they have data out from May. However, their revised figures are often different from the initial data. And, yes, they have a vested interest in the numbers being ‘bad’ or ‘good’, which neither of the others really do.

  http://www.realtor.org/research/research/ehspage

  And here’s Lawrence Yun arguing against the Case-Shiller numbers:

  http://www.realtor.org/research/commentary_competing

  That’s enough links for now!

• jrochest
  April 29th, 2009 at 1:46 PM

  Ah! my post crossed with yours, Norm! I agree with you: the NAR isn’t shouting glory from the rooftops, and they’re not fudging their data. The really can’t, as you point out. I wasn’t suggesting that — just that people see the patterns they want to see in data.

  But the differences really seem rooted in the type of data corrected.

  And here’s one more link, this one the article crictizing Case-shiller Warren mentions above:

  http://www.realtor.org/archives/commentaryjune08