Market Watch, Comfort Zone in Fall Market

Recently I was having a conversation about the market with a few friends and colleagues.  Those that were not Realtors were asking about the so called price decline in Listings.  "How much do you think the market will fall?" they asked me.  I look at them and reply "fall?". 

The market is competitive and yes there is pressure on price, and on the surface it may seem like prices are on the decline, but the reality is that the market is very healthy and strong.  See my earlier post regarding median sale prices etc...  The biggest change is the increase in supply.  In general it is always a good time to buy.  Real Estate is a long term investment, not a quick get rich scheme.  Sure there may be moments in time that allow for rapid growth, but overall Real Estate is a long term investment and should be seen as part of your overall wealth creation portfolio.

I was looking further into the numbers and decided to look at averages as well as the medians and surprise, surprise, it's very similar to the median.  The median price is lower than average which it should be.  Red Deer is still a small market, and the influence of higher priced homes as an impact on the "average" sale price.  It's not every day or every month that we have a home sell for $1,000,000.  This sales bracket is a new domain for us in Central Alberta.  May of this year we saw 2 homes list and sell at or near $1,000,000.  This was such a rare thing that it made headlines as the first $1,000,000 MLS sale for Red Deer.  So do you think that this may skew average numbers just a tiny bit?  Of course it would and it did.

The best thing we can do is look at stats month by month for the year and identify trends.  See Graph below:

Average Sale price spiked in May, in my opinion it was influenced by a few high end homes.  The trend is quite similar to the median where it indicated that prices have been flat for the most part in 2007, where as 2006 was characterized by strong growth.  So is 2007 a catch up to the growth year?  All indications are yes.  We've levelled out and values have reached a point where they need to rest while we catch up income, and perception of value wise.  The really note worthy item is the volume.  Sales volume in 2007 has been amazing.  we've exceeded the number of transaction over 2006 consistently.  I'm no statistician, but if sales are up I'm thinking this is an indicator of a strong market, not a depressed market, and the influence on price is a reflection of economics 101.  Supply and demand, supply is presently exceeding demand.  Talking with others and looking at the inventory it also appears that the majority of those selling are moving "somewhere".  That is to say they have some where to go or would like to go.  I'd be interested in looking at demographics closer to identify the age of those selling and see if this is the beginning of a retirement baby boomer trend.  unfortunately we don't track age.  One can merely speculate.

So don't be alarmed.  Yes there maybe the odd property that has to be reduced more than the norm.  Yes it is very competitive and pressure is on price causing decreases in some brackets.  Overall the market is healthy and strong with tremendous amount of opportunity to move up from that starter home to a larger family home or dream home even.  Talk to your Realtor ask them questions about the market, the ups and downs, pros and cons.  Your Realtor should be able to confirm stats,and identify trends as to what products and price ranges are more affected by changes in the market, and the impact of headlines, economy changes, and more on the housing market.  If they glaze over and give you an answer you're not comfortable with, perhaps it's time for a Realtor you are comfortable with.

Your Friend In Real Estate,

Patrick Galesloot

Patrick Galesloot

Patrick Galesloot

CENTURY 21 Advantage
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