Hammered by Headlines

[TerryF]

Lately in Calgary, the headlines have been just brutal. In the last few days alone:

- 8% drop in average home prices
- Oil & Gas land sales down - below B.C. and Saskatchewan
- Alberta slump bringing down Canadian house price average
- Condo over-supply will take years to absorb if investors bail out
- The bubble has finally burst on Alberta`s housing market


I work hard to stay informed and up to date, read the REIN materials regularly, practice looking behind the curtain, and still I have to admit the headlines really shake me at times. I know Alberta`s fundamentals are very strong and haven`t changed, but what has changed is the mind-set of the population. I thinks it`s quite possible that worry and fear will drive the market as much or more as the fundamentals. If so, how long can worry and fear last before fundamentals drive the market again?

We really want to buy another property in Alberta soon, but I have to admit, I am a bit hesitant because of the overwhelming number of negative news stories out there lately.

For you seasoned investors, is this typical of other down troughs in the real estate cycle? Or is this downturn and the news stories that go with it, worse than in the past? Trying to keep my perspective so all comments are welcome!

 

[roizes]

Oh boy.

Average home prices is not that important as it includes big ticket mansions, look at the median price instead. And put things in perspective, an 8% decrease coming after a 40+% increase in value.

Land sales go down when well there is less land to sell. Royalties revenue are very high. AB to post something like a $12B surplus.

Unemployment rate extremely low, fastest job creations in the country, highest population growth, highest incomes in Canada, fastest growing hourly wages.

Alberta export to top $100B in 2008 (double the 2002 level)

Non residential construction: $217B in the books for the next 2 years

Massive oil reserves yet to be fully exploited

And it goes on and on. Basically red hot economy, population growth, rising incomes and flat house prices=buying opportunity




QUOTE (TerryF @ Aug 15 2008, 09:16 PM) Lately in Calgary, the headlines have been just brutal. In the last few days alone:

- 8% drop in average home prices
- Oil & Gas land sales down - below B.C. and Saskatchewan
- Alberta slump bringing down Canadian house price average
- Condo over-supply will take years to absorb if investors bail out
- The bubble has finally burst on Alberta`s housing market


I work hard to stay informed and up to date, read the REIN materials regularly, practice looking behind the curtain, and still I have to admit the headlines really shake me at times. I know Alberta`s fundamentals are very strong and haven`t changed, but what has changed is the mind-set of the population. I thinks it`s quite possible that worry and fear will drive the market as much or more as the fundamentals. If so, how long can worry and fear last before fundamentals drive the market again?

We really want to buy another property in Alberta soon, but I have to admit, I am a bit hesitant because of the overwhelming number of negative news stories out there lately.

For you seasoned investors, is this typical of other down troughs in the real estate cycle? Or is this downturn and the news stories that go with it, worse than in the past? Trying to keep my perspective so all comments are welcome!

 

[Thomas Beyer]

QUOTE (TerryF @ Aug 15 2008, 09:16 PM) Lately in Calgary, the headlines have been just brutal. In the last few days alone:

- 8% drop in average home prices
- Oil & Gas land sales down - below B.C. and Saskatchewan
- Alberta slump bringing down Canadian house price average
- Condo over-supply will take years to absorb if investors bail out
- The bubble has finally burst on Alberta`s housing market


I work hard to stay informed and up to date, read the REIN materials regularly, practice looking behind the curtain, and still I have to admit the headlines really shake me at times. I know Alberta`s fundamentals are very strong and haven`t changed, but what has changed is the mind-set of the population. I thinks it`s quite possible that worry and fear will drive the market as much or more as the fundamentals. If so, how long can worry and fear last before fundamentals drive the market again?

We really want to buy another property in Alberta soon, but I have to admit, I am a bit hesitant because of the overwhelming number of negative news stories out there lately.

For you seasoned investors, is this typical of other down troughs in the real estate cycle? Or is this downturn and the news stories that go with it, worse than in the past? Trying to keep my perspective so all comments are welcome!

prices moved up well over 100% in 3-4 years .. no wonder it is correcting down .. maybe another 10 % to 25% !!

It will rise from there .. but the worst is NOT over yet !!

So let`s say price was $500,000 last year for a slightly above average home (the peak in late spring 2007) .. it is now about $460,000 .. it may drop another 3-5% .. let`s say to $430,000. Then flat for a year .. then inflationary rise of 4-6% /year or $20,000/year .. back @ $500,000 in 2012 to 2013 !!

5 to 6 years from peak to peak ..

So position yourself for buying NOW .. but be VERY diligent and careful .. no need to rush !!

Or buy strict rental properties that perform well in any economy ( .. this is what we do ..)

AB has strong in-migration, strong job growth, decent but not great affordability .. and interest rates are still low .. so is well positioned fro eventual growth again .. after price correction has flattened out ..

Real estate does NOT grow linearly .. it wobbles up and down an inflationary slope of 4-6% ON AVERAGE .. and in the last 3-4 years we were (across the globe in UK, Victoria, Australia, Spain, BC, AB ..) WELL above that 4-6% inflationary growth .. so even a drop of 30% from 2007 peak is NOT a surprise !!

Hence the emphasis on cash-flow so you can hold .. and weather out these troughs !! It is NOT a fast path to wealth .. don`t flip .. the time to buy pre-sales condos is over .. and the time to make a fast buck is over too !! It is a PROVEN LONG TERM PATH TO WEALTH .. if you are patient enough and can hold long term !

 

[TerryF]

Ok, good points, and I do know that the fundamentals are strong! Question is - what do the masses think. Most of the people I talk to that are NOT into RE investing are convinced the Canadian RE market will suffer the same fate as the US market! Including the Alberta market! They could influence the market simply by their numbers.

So my question is more..... will the perceptions of the masses have greater influence on the market than fundamentals will? I think it is likely which is why I am a bit worried. That`s why I wonder if past downturns were similar to this one as far as the number of doom and gloom headlines making the rounds.


QUOTE (roizes @ Aug 15 2008, 09:40 PM) Oh boy.

Average home prices is not that important as it includes big ticket mansions, look at the median price instead. And put things in perspective, an 8% decrease coming after a 40+% increase in value.

Land sales go down when well there is less land to sell. Royalties revenue are very high. AB to post something like a $12B surplus.

Unemployment rate extremely low, fastest job creations in the country, highest population growth, highest incomes in Canada, fastest growing hourly wages.

Alberta export to top $100B in 2008 (double the 2002 level)

Non residential construction: $217B in the books for the next 2 years

Massive oil reserves yet to be fully exploited

And it goes on and on. Basically red hot economy, population growth, rising incomes and flat house prices=buying opportunity

 

[DonCampbell]

Here`s a thread to another discussion on this exact subject. Click on the link at the end of this post
It includes some numbers and analysis as well

The most important piece to note is:

"Current Real Estate Market Numbers DO NOT Indicate What The Future Market Holds... Only Economic Analysis Can Tell You Where The Long Term Market is Going."

Read the headlines but STUDY the economics and the 12 Questions from your Goldmine Scorecard - it was developed to help Members cut through the Highs and Lows of a market and get them to the truth with a long-term future view.

REIN has seen the ups and downs of markets for 16 years and developed these systems to empower those who use them. Sadly many people skip steps of the system when the market is too hot and then forget to go back to these fundamentals when the market comes back to normal.

Trust this helps!

(Market Thread)