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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:
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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