Losing Balance, Regaining Control

Information gathered from a presentation by Todd Hirsch, ATB Financial's Chief Economist - September 9th, 2015

There have been serious imbalances in Alberta's economy over the past five years or so, and Albertans are worried... we have been relying on high oil prices and a stable and expanding energy sector to grow our economy and province. The recent extended period of lower oil prices is certainly a major contributor to the current economic environment we are seeing in Alberta, and across the nation. Make no mistake, low energy prices is a National issue, not just a provincial challenge! Last year at this time the cost of a barrel of oil was around $97, today we are looking at the mid $40's. Aside from the obvious effect that has on exploration and new capital expenditures, it also affects the Federal and Provincial Governments coffers.

To regain an economic balance, four things need to happen...

1) There must be some rebound in the price of oil. Reaching and sustaining around $60 a barrel should stabilize the industry, and contribute to our economic recovery. There is much debate regarding the question of whether or not we are in an economic recession in Alberta. We will not know for sure until April of next year whether or not we did see two consecutive months of economic retraction as that is when those figures are released.

2) There must be a re-balancing of wages. In the past decade the average earnings in Canada increased 29%, for that same period Albertans enjoyed an increase of 48%... here is the real kicker though, the average wage in the oil and gas industry increased 56%!  With many capital projects being put on hold in the energy sector, there should be downward pressure on wages as more contractors compete for less work.

3) We must see strong performances in other sectors of the economy. Agriculture, forestry and tourism should benefit from the lower Canadian dollar and lower gas prices. The US economy is also on an upswing, including new housing development contributing to the demand of products from our forest sector.

4) The value of the Canadian dollar needs to remain where it is. The lower value of the Canadian dollar is giving a bit of a cushion to lower oil prices, contributes to tourism from other countries and adds value to other exports such as forestry products.

The energy sector will need to adjust to these lower oil prices, and diversifying into other resources and alternate energy will be prudent going forward. I am sure we will find that we indeed have been in a recession this year, the question is to the extent of this retraction. Albertans are a resilient bunch and will persevere through this economic crunch. This should be a modest recession and we will most likely see a below average growth rate in the coming year. Generally people will be cautious in their investment and spending habits in the next few months, however, this should be a softer downturn than we saw in 2009-2010.

The new norm will be lower growth rates, right across the world. The rebalancing of income will start in the petroleum sector and move into other sectors of the economy leading to softer commodity prices, including real estate. Price corrections are most likely inevitable, however, should not be severe.

Real Estate Photography

Visual content in an important tool as a medium for customer retention and good real estate sales. It is of prime importance to have high quality photography to stand out from the competition. Great images not only determine the success of property sales, but also the website on which the properties are listed. Online content with compelling imagery quite simply attracts more viewings.

 

 

Homes that show well online with superior photos are also more likely to sell faster than homes with low quality photography and little or unimaginative staging. Quality is not the only factor though, it is also important to offer a variety of interesting and outstanding photos to keep a potential clients interest piqued. Without a doubt, most buyers today will research a property online prior to booking an appointment to view, or stopping by an open house. Keeping a buyer engaged through interesting and a wide variety of great photos is so important in bringing potential buyers to the table.

When buying a home, or any investment real estate property for that matter, a good portion of our decision is influenced by emotional factors such as our first impressions. We often are most likely to buy a property based on the feelings it gives us rather than the actual value it provides. Developing a consistent and obvious style with high-quality photography and staging will engage more buyers and help ensure the success of the seller regardless of their price category.

Alberta Economic Outlook 2015

I had the opportunity to sit in at an ATB presentation by their chief economist, Todd Hirsch, last week for some of his insights into how he see's our economy faring this coming year. Some great information that I will implement with my own thoughts here. To paraphrase Todd, the secret to good "economic forecasting" is to revise it frequently!

First and foremost on our minds is the question of how the orange tide and their political philosophy will influence the Alberta economy. Our political structure over the past four decades has been so entrenched in conservative thought and procedure, it will take some major work to completely change the path we have been travelling. The "machine" that runs each political portfolio within the system has a myriad of components and positions that have been filled by the previous conservative regimes. Making changes within this structure will be a long process ensuring that any major change in philosophical direction will take a fair bit of time and effort. Premier Notley has given us no indication that she sees any major policy changes in our immediate future.

The Alberta Economy has been slowing rapidly with the decline of the price of oil, a major component of our provincial economy. Our GDP growth rate is the lowest it has been in five years, certainly raising the level of anxiety amongst Albertans. We may have not seen the bottom of the market yet, although we have seen the price of crude increase over the past couple of weeks. Investors are still skittish and this nervousness will contribute to the volatility in the market over the next few weeks, leading into the summer. Prices should improve by the end of the year, however, the price will most likely still be lower than the actual cost per barrel of many Alberta projects. There will need to be some major re-adjustments and cost-cutting within the industry and this will be an uncomfortable and painful process possibly leading to more layoffs and lowering of contractor costs.
We will also see a discouraging job environment in all sectors of the economy. The labour market for new graduates will decrease as all industries adjust to the economic slowing process. The rate of "in-migration" to Alberta should also slow significantly as we see a decrease in employment opportunities.

Another concern we should be aware of is the record level of Canadian personal debt, last week at 163.3% of earnings. The good news is that we seem to have reached a plateau with that level.
NOW SOME GOOD NEWS...

The Loonie has decreased in value over the past year, however, this is more of an American Dollar story than a decrease in our own value. Where we are set today is actually good news as it contributes to our value as an exporter, especially to the United States. Costs of goods shipped to the US are lower for them when our dollar is lower. Our economy would be in a far worse position if we were closer to par. The Canadian dollar is in a "monetary easing" position whereas the US is moving into a tightening position.

Our dollar position should also increase tourism from our neighbours to the south. That in combination with lower gas prices at the pump will be appealing for many vacationers, especially folks with travel trailers and motor homes.

Other secondary industries in our province, such as forestry, will have the opportunity to find top notch employees due to the slowing of the oil industry. It is difficult for secondary industries to compete for manpower when oil prices are high. Other industries will also benefit from the low cost of fuel... imagine the increase in the bottom line for the trucking industry.

Although we are in the midst of a slowing economy, Albertans should not be overly worried. That is not to say we should ignore what is going on around us. It is not "business as usual", we should be making prudent, educated life decisions. The biggest threat to the economy is fear... fear leads to irrational decision making. This year will be a flat year for growth as we adjust to the new economic realities, however, we should return to normal levels of growth by 2017.

"My life has been full of terrible misfortunes, most of which never happened" Michel de Montaigne 

 

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www.atb.com/economics

Inventory Climbs in Calgary's Housing Market

Reposted from the Calgary Real Estate Board February Statistics Package

Calgary, March 2, 2015 - Year-over-year new listings growth eased from 37 per cent last month to nine per cent in February. However, as sales activity remained below long term averages for the month, Calgary inventory levels rose to 5,474 units in February.

"While housing supply levels continue to be higher than we have seen in this market for some time, they remain below February 2008 record highs of nearly 7,000 units" said CREB® chief economist Ann-Marie Lurie. "If the pace of growth in new listings continues to ease, this could place some downward pressure on the supply growth in the resale market."

After the first two months of the year, there have been 6,236 new listings come onto the Calgary market. However, the new listings gains have varied depending on price range and segment. Detached homes have continued to see a decline in new listings in the under $400,000 segment, while both the apartment and the attached product have recorded listing growth in the over $300,000 price range.

"It’s really important for consumers to consider what segment of the market they are buying or selling in when they make any real estate decisions," said CREB® president Corinne Lyall. "The inventory, demand and price movement will vary based on the community, price range and product type."

City of Calgary sales totaled 1,217 in February, a 34 per cent decline over the previous year’s activity. While sales fell across all product types, the rate of decline was higher in the apartment and attached sectors of the city.

"Everyone has different reasons for making a move and so it’s difficult to predict how buyers will react to this market," said Lyall "Buyers who have been waiting for more inventory to come on the market may find what they are looking for today. If they are in a position to make a buying decision they certainly can take advantage of the lower interest rates."

Months of inventory remain elevated at 4.5 months due to supply gains relative to slower sales in February. This placed downward pressure on pricing over the past month.

Unadjusted detached benchmark prices totaled 516,000 in February, a year-over-year increase of six per cent, but a 0.5 per cent fall over January figures.

Meanwhile, attached and apartment benchmark prices totaled 354,600 and 296,000 respectively. Both represented a decline over previous month’s levels.

The variation in price is more extreme when considering the average price. In February the average price rose by 0.3 percent relative to January, but fell by 4.2 per cent compared to last year. This does not come as a surprise given how the composition of the sales influences the change. Benchmark prices provided changes over time on similar properties, providing a clearer indication of pricing trends.

"Expectations vary significantly when talking about the impact that lower oil prices will have on the housing market," said Lurie. "This wide range in forecasts is often related to assumptions about how long the cycle will last and the resulting impact to employment and net migration."

"These differences in expectations will likely persist until there is some firm data to support assumptions about Calgary’s employment levels," said Lurie.

Essential Moving Tips

Reposted from Luna Grace, follow her here: http://lunagrace8.tumblr.com/

                        

Changing homes is extremely stressful, especially because you have to pack and then carry all your belongings from one place to another… It may not be the best fun you’ve ever had, but at least you can make it memorable! For this to happen, you surely need to take baby steps and have a great attention to details!
So, you need to move and you’re excited, until you realize the huge amount of things you have to pack! But don’t worry, you can hit two birds with just one stone – make it fun and effective too!
Even though planning this action with some months in advance may be time-consuming at a first glance, it will get to be less stressful and simpler if you don’t rush! By following these rules your stress level will decrease drastically! So, just enjoy your move!

Moving tips. Helpful checklist!

Main rule: Don’t take with you the things that you don’t need! Now it is the perfect time for you to have a mass declutter. Take advantage and get rid of the things that you don’t use! They’ll just occupy space in your new home as they did until the present moment, in your old one!
Here are some tips for you:

• Plan-ahead

After a tiring and stressful period, when you have probably sold your old house, now the time for you to move has finally come! Even though the stress is not over yet, don’t let things get too dramatic – there is a way for you to keep everything under control and the safest way is to plan ahead! Get the clear picture of the entire process and decide when and how you should manage this situation! A fact is certain – packing up your entire life and possessions will not be something that you’ll manage to do in one single day, therefore you need to arm yourself with a lot of patience! You’ll certainly need it!
Hint: Don’t panic!

• Stay organized

More than ever now it is the perfect time for you to show your organizational skills! Write down everything that you have to do and where you put every object. The boxes need to be labeled both with their content but as well with colors assigned for each and every room. Manage your inventory very carefully, you’ll thank yourself later on!
The thrills or frustrations of this whole situation may be disturbing to you, but stay focused! This is what you need now! Staying organized will save you time later on!
Hint: Don’t rush, take it all slow or you’ll end up mixing everything up!

• Get the right boxes

Planning in advance requires getting boxes of all sizes and shapes! Keep in mind that lighter objects should always be placed on top! What is more, you should also make sure you won’t leave empty spaces inside the box because objects will slide down and you’ll probably have a huge surprise when you’ll start unpacking!
Hint: Shake your boxes to see if any objects are misplaced and be careful not to make the boxes too heavy to lift either!

• Use colors for labelling

Colors may help you stay organized. Use a different color for every room; markers will be of great help! This way the unpacking process will become much more bearable and simpler too!
Hint: Keep it all visually appealing; you need to remember this entire experience as a step forward for you! Do everything when you are relaxed and fresh!

• Charity?

Maybe the time to do a good deed has come. You’ll probably stumble upon things you have completely forgotten about, so why not donate them all? You clearly don’t need them. Take your move as a fresh start and don’t bring useless things with you. You’ll just end up throwing them instead of reusing them. No junk, please! Take a big breath and see which objects are pointless to you!
Hint: Don’t throw away things you don’t use anymore, donate them! Others may be in great need of those particular items!

• Get rid of the dust

Hygiene is important and taking into account that you have to pack everything up, why not cleaning them first? You won’t want to get dust and dirt into your new home. Take it all step by step and make it all right from the early beginning. Think about it – one way or another at a certain point you’ll have to clean up your things so why not now? Chances are you’ll be too tired later on to clean everything!
Hint: A microfiber cloth is highly recommended!

• Newspapers, anyone?

You’ll need to fill up every box and wrap every object for protection. Therefore, try to purchase in advance enough packing paper!
Hint: When the time for unpacking comes, unpack only by room! Your entire effort to keep it all organized will become useless if you create chaos now!

• Separate the essential things

When you’ll get to your new place, you’ll firstly need certain objects so make sure you have them all together in a box at a close reach! You wouldn’t want to search for scissors or papers and not find any one of them!
What should you consider? For instance, think about – paper towels, phone chargers, trash bags or toilet paper!
Hint: Make a list with other objects and make sure you have them all in one single place!

• Pre-clean the new house

Before getting all your stuff in, try to clean up the house. Once you have the furniture in, it will much more difficult to Q-tip everything! This will save you a lot of trouble!
Hint: Take at least one week to make sure the house is clean and hygienic before bringing in your stuff! You’re looking for a fresh start, aren’t you? Then, make it look fresh!

• Vertically or horizontally?

Depending on the type of objects you are carrying, pay attention to how you place them! For instance, your plates should be placed vertically! Why? There are less chances they’ll break under pressure!
Hint: Take some time and think about every object you intend to transport, thus you’ll figure out the right place and a way to bring it ‘safe and sound’!

• Correspondence

Don’t forget to change your correspondence address with at least two weeks prior to the day you move! This way you’ll be sure no personal papers will get into the hands of the wrong people! Check the utilities you’re responsible for and make sure every important person knows how to reach you!
Hint: Don’t forget to make the switch from time!

• Get help

You are surely not going to be able to do everything all by yourself. Some may call their friends while others may call for professional help. There is always a way for whatever budget you may have, however you may be sure an expert will always be of much more help for you!
Hint: If you choose to do it all by yourself, you’ll need to have nerves of steel and a lot of patience. This entire experience is extremely stressful!

• Sort, sort, sort

In order to stay organized you surely need first of all to sort all your stuff! You clearly don’t need chaos now because the stakes are high and there are a lot of things going on. Try to be in control of everything and at all times, this way you’ll have a peaceful and exciting move!
Hint: The more time you dedicate to organizing your things, the easier it will be when you unpack!

• Separate valuables

From another point of view specialists utterly suggest you need to separate your valuables in order not to regret it later on. Among all the things you have to carry, there is enough space for mistakes to happen, this is why it is better to take precautionary measures!
 Hint: Try to stay organized and set your priorities. Your valuables and important papers should always be with you!
Knowing what things need to be done and most importantly when, will save you from a lot of painful headaches! Remember: you shouldn’t let everything on the last day! You’ll panic and you’ll not be able to face up the stress!
When the details of such an important event tend to overwhelm you, take a break! You need to relax and think clearly – a bit of organization will only help you in moments like this one!
All in all, moving may become a really great experience if you know how to handle things! Don’t hurry, this is clearly not the time for this! Take it all step by step and just enjoy!

Where is the real estate market going in 2015?

Every day there seems to be more doom and gloom reported for the economy and the real estate market in Calgary and beyond. What can we expect over the next year, will we boom or bust?

There are many factors that will contribute to the impending market in 2015. The first, of course, is how long oil prices will stay low and how that will affect the resource industry in our province. Without a doubt, oil and gas are important factors in how we fare in Calgary and Alberta. Many oil and gas giants have already decided to pull back the reins on spending and have cut costs and budgets. Aside from impending layoffs, what I find even more troublesome is the fact that many projects and future expansion have been put on the backburner in anticipation of the oil price recovery. This will mean a decline in "employment growth" within this sector.

One of the major contributing factors in real estate growth is a steady influx of "in migration" from other parts of Canada, and the rest of the world. If employment growth is hindered, will that slow the population growth in Calgary and the rest of the province? It could very well mean we will have less folks moving to our neck of the woods. It can take quite some time for a slumping market to affect the new home industry, I would suggest we will start to see some of that affect happening over the next few months with a slowing in the new build aspect of the market.

Over the past year we have seen outstanding growth in our luxury home market (see previous Blog) that was a major contributor to our average and median price growth. I suspect that this portion of the market has a finite pool of potential buyers, and I would suggest that many that may potentially be in this pool this year may very well decide to hold off on purchasing a home and take a "wait and see" stance moving forward due to the uncertainty of the economy. If we see a significant decrease in this sector of the market, it will adversely affect the average and median prices right across the board.

This week saw a drop in the Bank of Canada lending rate. "This decision is in response to the recent sharp drop in oil prices, which will be negative for growth and underlying inflation in Canada." (Bank of Canada) This drop in lending rates, in combination with a lower Canadian dollar and lower costs of gas at the pump may very well trigger economic growth in the manufacturing sectors, mostly based out of Ontario. Will that further pull people from our province to Central Canada is search of employment?

Perhaps the most concerning news over the past while for the real estate market is the fact that sales are significantly lower for the first three weeks of the year, as a matter of fact, the second worst in 15 years! (Check out my Tweet earlier today!) That, in combination with a large increase in new listings may be a harbinger for the months to come. Customarily, the first two months of the year are seasonally slower than the rest of the year, however, it would seem that many potential sellers are trying to get in front of the curve with the turbulent media reporting's of the economy and where we are headed. I would further suggest that many that would typically wait until spring to list their property may be listing early.

We will need to keep a close eye on the inventory to sales ratios in the weeks and the months to come. If potential sellers see a glut of inventory, many may very well decide not to list. Others may find themselves in a position where they have to sell their homes, whether it be due to finance, layoffs, relocation or perhaps they have been building a new home over the past few months.  We also need to pay special attention to buyer confidence over the next few weeks. As I mentioned above, many may decide to wait to see how things work themselves out in anticipation of "getting a better deal" if the market retreats. What is important is to retain a certain sense of urgency so that we don't have a huge amount of "fence sitters" as we did in late 2008 and 2009.

This year it will be more important than ever to be sure a house is priced aggressively. Overpriced homes will sit on the market longer, and may very well become stigmatized the longer they sit around. Due to many economic factors, there will most probably be a "price correction" early in the year, so we must be very aware of previous sales and competitive listings. If a home is priced correctly right off the bat, they will be less likely to have to catch up with a potential falling market.

A listing will also have to set itself apart from other similar listings. Aside from appropriate pricing, staging, presentation and marketing will be paramount when competing for a buyer. A buyer will expect more for their investment.

If you would like to discuss the market further, I would be happy to sit with you to go over your specific needs. It will be an interesting year ahead!

Calgary Housing Market - 2014 in Review - part one of two!

What a crazy run we have had in the Calgary housing market over the past year. Inventories in some sectors of the market were extremely low, and the average price of homes in the City increased 7% from the previous year. It is interesting to note that sales of homes over a million dollars increased by 21% and sales of all homes over $600k increased by over a third! Sales of homes under the $600k plateau, which includes entry level homes affordable to first time home buyers, increased by only 2%. As a matter of fact, homes under $400k saw a dramatic drop in sales by over 25%!

 

I believe there were a few contributing factors to all of these facts and figures…

Although the upper echelon of sales seems to have taken off this past year, looking at a good number of these sales actually show dramatic decreases in the originally anticipated value of the properties. In most of the communities I was involved with this past year, I saw some amazing price reductions. In Hanson Ranch in the NW there were two homes that were reduced over $100k with similar stories in West Springs, Mount Pleasant and Bridgeland. Although there were some high sales, many saw reductions from their original pricing by well over the $100k mark, some reductions were over 25%. Assuming the original listing prices were accurate when the homes first went to market, that is a dramatic reduction in market values. So even though we saw many high sale prices, keep in mind a good portion of these were well below their original anticipated values.

A second point to ponder would be the fact that the higher priced sales was a major factor contributing to the “average” and “median” price gains. The question remains, did we see an actual increase of value of 7% in across the board, or have the sales of high-end homes skewed the numbers?

Looking at the entry level home, - let’s say under $400k - we can actually see a decrease in sales by over a quarter year over year. Does this mean that prices are moving out of this category throughout the City? A couple of thoughts here… the first is the fact there have been some policy changes both from the federal government and the major banks. For example, it is now much tougher to purchase a second home as an income stream. Many banks require a 30% deposit by the purchaser. This has reduced the pool of first time and “Ma and Pa” investors to the market. This sector of the market is typically in that lower price category.

It is also tougher to qualify for a new mortgage, so many potential “move up” buyers from the lower priced homes may have decided to stay put for the time being, until they build a little more equity into their investment either by an increased value, reducing their mortgage, or both. A couple of months ago I was dealing with three competing offers for a lower priced home. It is interesting to note that, even though all of the bidding buyers knew there were other offers on the table, all three offers were within $5,000 of one another, even after negotiating for the final sale. Buyers (and Banks) are not like they were in 2006 where bids were many thousands above asking price… Buyers are well informed and are willing to pay only what they feel the value of the property is, perhaps a small percentage above that. They are much more patient than they were eight years ago and are more willing to wait for the next property.

Having said that, buyers have also been very quick to react to a property they feel is priced appropriately over the past year… although they don’t want to abundantly overpay, they have been willing to pull the trigger very quickly.

Another type of buyer has been formed over the past little while, that would be the middle to larger builder. Many of the major builders in the city have formed companies that are redeveloping within the city, most specifically in the city core. With the municipal policy of reducing much of the “urban sprawl” we have seen in past – largely due to the capacity of our waterworks system – builders are looking to a different income stream in redevelopment. This sector of the market is looking strictly to land value within a specific area, and whether that value sustains a new development within a community. This buyer is different than a buyer looking for their own home as there are a completely different set of perimeters. Often this past year we saw competing offers in “prime communities” specifically for this type of land.

 

Many factors have contributed to our success this year in the Calgary housing market, including my thoughts above. What are we in of in the coming year? Will we be able to sustain our growth? Will oil prices and a dampening economy change our direction? Stay tuned for my next segment, "what to expect in the coming year!"