TD Warns of Potential Housing Bubble in Western Canada

Everyone knows property prices have gone through the roof in Calgary in Vancouver, and they are at new record-setting levels in Edmonton every month. TD Economics now says there is potential for a bubble in western Canada. The important thing to note is that they state that in Edmonton "affordability remains surprisingly good."

TD warns of potential for housing problems in West
By Ottawa Business Journal Staff
Thu, Aug 31, 2006 1:00 PM EST

Housing activity in Central and Atlantic Canada has cooled down without prompting a price correction, but select cities in Western Canada are "flashing warning signs" that suggest the recent pace of price gains has been unsustainable.

That's the conclusion of TD Economics latest "Housing Bubble Watch" report.

"Canada's real estate markets appear to be in good shape and market conditions are becoming more balanced. Key exceptions are Vancouver, Calgary and Edmonton," says TD's deputy chief economist, Craig Alexander.

"The recent dramatic price gains in Calgary and Vancouver are unsustainable over the long-term, and both cities are vulnerable to significant moderation. Edmonton is also experiencing explosive price growth, but affordability remains surprisingly good."

While sales of existing homes are poised to set another record, Mr. Alexander cautions that regional developments are distorting the national story. Resale home prices rose 12.9 percent in the second quarter of 2006 from a year earlier, but excluding Alberta and British Columbia, the average rise in resale prices across the other provinces was a more moderate 7.3 percent. Alberta is responsible for almost half of the gain in the national average of new home prices.

"The dominant trends in housing markets outside of the West have been weaker unit sales, greater new listings and more moderate price growth - all of which point to more balanced market conditions and declining real estate risks."

In Ottawa, Mr. Alexander notes the pace of resale home prices has slowed, dropping from a 6.2 percent year-over-year increase in April to 1.4 percent in July. This can be partly explained, he says, by an increase in new home construction, which has put a damper on price growth.

Average Edmonton Home Now Costs Over $318,000

The most interesting bit of info in this article, is that the average home in Edmonton (not greater Edmonton) now costs over $318,000. Especially when 5 years ago only 6% of homes in Edmonton sold for over $300,000. So what does it all mean? Has the cost of housing inflated in Edmonton too quickly - will it deflate just as fast? Or have the prices here just caught up to the rest of the country, and the booming economy? In my opinion we're just catching up - it is still cheaper to buy a home here than in Montreal, and what's so great about their economy? The biggest problem is not the cost of housing (yet) but that there is nowhere to house all the people that are needed to fill all the jobs we have to offer. Don't get me wrong - we can't continue to sustain the kind of growth our real estate market is seeing, it has got to slow down. I just don't see any bubbles bursting....yet. We'll see what August's stats show in a few days.

Skyrocketing house prices create own problems
Paula Simons, The Edmonton Journal
Published: Saturday, August 26, 2006

Saturday morning breakfast. We're sitting at the kitchen table, reading the paper. My husband's snagged the front section. My daughter has the colour comics. I've got the real estate ads.

Not that we're in the market, thank God. I just have a half-giddy, half-morbid fascination with housing prices.

This morning, I almost choke on my Cheerios. A house four blocks away from us has just listed for $539,000.

"Five hundred and thirty-nine thousand dollars!" I hoot, gobsmacked at the hubris. "Are they crazy?"

Ours, to put it mildly, is not a half-a-million dollar neighbourhood. Or at least, it didn't used to be. After the last eight weeks, who can tell?

It's been that kind of a summer. Everyone, it seems, has a story. Friends of mine in Parkview are dumbfounded when the severely modest 1950s bungalow up the road from them sells for $450,000, in the blink of an eye. One of my relatives, a widowed senior, bought a pleasant condominium less than a year ago. The other day, one of her neighbours walks up, unsolicited, and offers to buy it from her for 40 per cent more than she paid for it last fall.

Around here, a house listing for $1,000,000 used to be big news. Right now, there are 12 houses with asking prices of more than a million on the local MLS listings -- with two listed at over $2 million.

Of course, in cities like Vancouver and Toronto -- or even Calgary and Fort McMurray -- prices like this are nothing new.

The market in Edmonton has been depressed for years. Part of what we're seeing now is long-overdue catch-up.

But much of it is being driven by an overheated economy -- and a certain sense of consumer hysteria. Yes, there are more people moving to Edmonton. But there is also a new sense out there of what people are willing to pay. As a community, we've crossed a psychological barrier. Prices that would have seemed ridiculous six months ago suddenly seem reasonable today.

Five years ago, says Madeline Sarafinchen of the Edmonton Real Estate Board, only about six per cent of the houses in Edmonton were selling for more than $300,000.

Last month, $303,304 was the average price for a single-family home in the greater Edmonton area, which includes places like St. Albert, Redwater and Calmar. That was up more than 35 per cent from July of last year.

Prices are trending up again in August. So far, the average selling price in metro Edmonton is $304,900. In Edmonton proper, things are trending even higher. The average selling price in the city itself right now is $318,942.

For those looking to buy a house for under $250,000 or $200,000, the competition is ferocious. Sarafinchen says it's not uncommon for sellers to get six or eight competing offers, for buyers to bid higher than the list price in an effort to get the house.

Looking for a new house in a new burb? Finding a builder, or even a building lot, isn't easy. In some cases, indeed, builders are handing customers back their deposits, because they can't deliver a new home -- or at least not at the agreed-upon price.

"Most of the builders are at capacity. Everyone's at capacity. Developers have released all the land they're capable of releasing," says Sarafinchen.

"New home builders don't have a lot of standing inventory, and most of it is priced over $300,000," agrees Richard Goatcher, a senior analyst with Canada Mortgage and Housing Corporation. "Of course, they're building as fast as they can. We've got record levels of single-family house construction. But builders are totally backed up with orders."

In a perfect, balanced real estate market, Goatcher says, there should be a "sales-to-active-list ratio" of 30 per cent. Of all the houses listed in a month, that means 30 per cent sell within 30 days.

Right now, he says, the sales-to-active-list ratio is closer to 100 per cent -- which means that pretty much every house that lists in a month sells in a month. And that, he says, can lead to panic buying, frantic bidding that pushes houses above list price.

The result? Some buyers end up bidding more, and assuming more debt than they can comfortably handle. Or they end up making unconditional offers on houses and get stuck with lemons that require major, unexpected repairs. Or they end up priced out of the market altogether.

"This situation is not sustainable," he says. "These accelerated markets sow the seeds of their own destruction. We should start to see a dropoff in sales."

Then, he stops himself and chuckles: "Mind you, I've been saying that for months and it hasn't happened."

South of the border, housing prices in key markets are dropping, along with consumer confidence. Not here. Not yet.

But our superheated economy creates its own problems. Our job market is as hot as our housing market. We need more workers -- from doctors to drywallers -- to move here. But we don't have other housing -- affordable or luxury -- to meet demand.

We've now reached the part of the column where I'm supposed to come up with some smart, glib solution. I haven't got one. There's no short-term government initiative to solve this dilemma, at least not much faster than the market can itself. (To be sure, the national energy program "fixed" our last boom, but that's not a model I'd favour.) The bittersweet truth is that these prices may be the new normal. After Edmonton's years of languishing in the real-estate backwaters, it may take us all a while to adjust.

Canadian Real Estate Won't See the Same Cooling as the U.S.

This article from the Globe and Mail outlines all the reasons that the Canadian real estate market is still going strong, and won't see the same kind of downturn as in the US. They do suggest that with the kind of price increases we've seen in Calgary and Edmonton a local cooling may be in order, but at the same time says that housing is here is so affordable relative to the rest of the country that we could just keep on trucking. A closer look at the economy in Alberta shows that it will be some time before there is any price correction here.

Why our housing market is better insulated
Canadian real estate may be cooling, but it's not crashing, ROB CARRICK writes, and we positively shine compared with slumping U.S. sales and prices

ROB CARRICK

The Massachusetts real estate market is just the thing to cure any smugness Canadians might have about how much their homes have gained in value.

A blast of negative news about the U.S. housing market was released this week, including a report that Massachusetts home sales continued a slide in July that began last fall. But while prices held their own previously, they posted a 3.5-per-cent decline last month that was the worst setback in 13 years.

Sean Rooney, an agent at Boston's First Choice Realty, said sellers are getting frustrated. "They've seen people selling over the past year or so and getting that high price," he said. "Now, they're not getting the prices they're looking for."

Are Canadian homeowners heading for the same kind of shock about the value of their properties? It's hard to generalize about our housing market because of differences between hot and not-so-hot markets, but the answer on the whole seems to be no, if you judge by some key indicators.

Before looking at them in detail, it's worth pointing out that the real estate market is important not just to homeowners who like to play the trivia game called What's My House Worth? The housing sector has a significant impact on the economy, both through construction and the sale of related goods and services. Also, many people have been borrowing against the increased value of their homes to finance renovations and other expenditures. If housing prices contract, that could dampen consumer spending.

The U.S.

Retail housing activity

Sales of existing homes in the United States fell sharply last month -- by 11.2 per cent from July, 2005. If you took this seasonally adjusted level of sales and extrapolated it over a full year, you'd end up with sales of about 6.3 million, which would be the weakest level since early 2004. Weakness is pervasive across the entire U.S. market. Figures from the National Association of Realtors shows that year-over-year regional sales declines ranged from 7 per cent on the low side in the South to 18 per cent in the West. Over all, the U.S. market is down about 12 per cent from its peak annualized sales level of 7.2 million homes reached last September.

Retail housing prices

Median housing prices held firm in the U.S. market in July, rising 0.9 per cent versus the level of a year earlier. But variations among regions and cities undermine the positive story told by the national numbers. Once you get past a 3.2-per-cent price gain in the South, you find small declines in the Northeast, Midwest and West. The Northeast, where you'll find Massachusetts, had the worst regional decline at 2.1 per cent.

Housing starts & building permits

Construction of new homes in the United States declined 2.5 per cent in July from June levels -- the lowest point in two years and the fifth decline in the past six months. Building permits, an advance indicator of future housing construction, fell 6.5 per cent to the lowest level since September, 1999. Evidence of a sagging new home market was seen this week in the 19-per-cent decline in third-quarter profit reported by Toll Brothers Inc., a major U.S. builder of luxury homes. Pulte Homes Inc., the second-largest U.S. builder, recently reported a 29-per-cent drop in new orders.

Hottest & coldest markets

There's only a scattering of hot residential real estate markets, and on the whole they don't match up to Canada's busiest cities. By U.S. standards, Canada's weakest markets don't look half bad. The U.S. region with the most strength is the South, where housing prices in such places as Baton Rouge, La., and the Florida cities of Orlando, Ocala and Tampa-St. Petersburg-Clearwater have all risen between 17 and 27 per cent over the first half of 2006. A census of cold markets would have to include places like Danville, Ill., down 11.2 per cent in the first six months of the year; Dover, Del., off 8 per cent; and Massachusetts.

Canada

Retail housing activity

Resale activity fell in July, but by just 2.8 per cent on a seasonally adjusted basis. "It's a bit of a cooling off," said Craig Alexander, a Toronto-Dominion Bank economist who has been tracking Canada's residential real estate market for more than a year through a series of reports called Housing Bubble Watch. "The U.S. housing market is having a correction, the Canadian housing market is cooling." While the U.S. market has been in decline for months, Canada remains strong. The Canadian Real Estate Association has predicted total sales of 488,160 for 2006, which would be a 1-per-cent increase from last year and a sixth successive year of record gains. Next year, the association predicts a 3.3-per-cent decline, moderate in comparison to what's happening in the United States. In Canada, 11 of 25 markets actually reported flat or higher sales in July, and only four reported sales that were much worse than the average decline. Vancouver had the worst decline at 26.9 per cent.

Retail housing prices

The national average price increase here in Canada was 10 per cent, which looks great next to the inflation rate last month of 2.4 per cent. Regionally, west is best in the real estate market and east is least. "You're getting dramatic price gains in Alberta, remarkably strong gains in B.C., quite solid to strong in the rest of the West, and very modest growth in the rest of the country," Mr. Alexander said. Where Canada and the U.S. differ on pricing is in the fact that price declines were widespread south of the border last month, while prices fell in only two Canadian cities. Windsor, Ont., was down 2.9 per cent and Thunder Bay, Ont., fell 1.4 per cent.

Housing starts & building permits

The most recent report on Canadian building permits is for June and it shows a slight drop of 1.4 per cent from the May level for residential construction. Housing starts in July were pretty much even with June, which suggests a total of about 236,500 new homes projected over the entire year. That's extremely elevated," TD's Mr. Alexander said. "Based on population and immigration, it should be around 175,000. Anything over 200,000 is really, really strong." Another sign of Canada's relative strength against the U.S. is that the federal Canada Mortgage and Housing Corp. has twice had to revise its forecast for new home construction upward. The reason: lots of activity in the West, particularly Alberta, and nothing dramatic in other parts of the country.

Hottest & coldest markets

Calgary blows away just about any city in the United States right now. In July alone, prices surged 44.3 per cent from the same month last year. Edmonton, the second-ranked market by price increases, gained 33 per cent while Vancouver jumped 18.6 per cent. Huge increases such as these suggest a future correction like the U.S. market seems to be facing, but Mr. Alexander said the Vancouver market is the only one where high house prices have seriously crimped housing affordability. "Quite frankly, affordability in Calgary and Edmonton is not terrible," he said. House price gains of 40 per cent are absurd, but if you look at Calgary, its affordability is cheaper than it is in Montreal." Canada's coldest markets are probably Windsor and Thunder Bay, Ont.

When the doctors and the renovators are buying investments properties to speculate, then you know the market is out of touch. I haven't heard too much about that happening here in Canada.

FRANK CLAYTON, PRESIDENT

CLAYTON RESEARCH

New homes in Edmonton, a safe investment?

Many times as a real estate agent I've been told by prospective buyers "we're going to build." This is a desire I completely understand, however I've often had mixed emotions about this. In certain cases I've been convinced that is the best alternative for my clients due to their needs and their ability to pay and understand the building process. In many cases though - especially with young couples building their first home - I've had some reservations. Take for example that they really don't have a good reference point for what they want and how that will work for them over time, especially when it comes to materials and layout. When I bring forward this reservation most young couples look blankly at me and then hurt and then that's about the last time I hear from them until they go to sell. This is where most of them realize they need a professional to assist them with all the intracasies involved, the least of which is colour choices ect.

The reality is the very helpful sales person in the showhome is the employee of the builder and for that reason they owe you no fiduciary duties. This means they owe you no loyalty, full disclosure or confidentiality (among others). In the greater Edmonton area there are approximately 32 builders who will pay your agent's fee so that you are represented. Many buyers however feel that this means they would pay more. This is incorrect. The agreement outlines that the buyer will pay the same price even if they didn't use an agent (in fact I believe the buyer receives so much beneift that even if they agent's fee was added to the price they would still receive benefits outweighing those fees).

The following story in the Edmonton Sun outlines one of the dangers of self representation. Using an agent may not have prevented this problem but a knowledgeable agent could have precautioned their buyers about the contract they were signing as well as given options of other builders ect. As a buyer you certainly want to be aware of your limited rights when dealing with the builders lawyer and agent as well. Nothing beats being represented by somebody who is trained and has your best interests in mind.

Sun, August 27, 2006
Couple lose chance at dream home
Developer returns deposit after project stalled over permits

By FRANK LANDRY, EDMONTON SUN

Alana and Brian Halliwell worry they may never get to live in their dream home.

The Edmonton couple signed an "affordable" purchase agreement with Reid-Built Homes Ltd. in January to have the house built on Blackmoor Close in Stony Plain.

They also put down a $4,000 deposit.

Six months later, the developer cancelled the $287,000 agreement and returned the downpayment.

Now the Halliwells, along with 12 other families, are preparing to launch a lawsuit against Reid-Built Homes over the mess.

"We're in our 40s. This was our one kick at the can," Alana, 42, said. "This was going to be our dream home.

"To be honest, we don't think we can afford to build now."

Shane Parker, lawyer for Reid-Built Homes, said his client did nothing illegal.

That's because under the Alberta New Home Warranty Program, a developer is able to opt out of an agreement if certain criteria cannot be met within 60 days.

In this case, the company was unable to obtain the necessary building permits. Stony Plain would not issue the documents until the lots were serviced, and that work is still ongoing, Parker said.

"Other municipalities are more flexible, but there's certainly nothing improper about what the town of Stony Plain has done," Parker said.

"It's the municipality that sets the rules; builders have to follow those rules."

According to Edmonton's Real Estate Weekly, the average single family home in this city now costs $303,304.

Since January, the average new home price has increased by an average of 10%, said Re/Max realtor Terry Paranych.

Alana, who speaks for everyone involved in the lawsuit, said all 13 properties were purchased between November 2005 and May of this year.

She said a short letter was sent later citing the cancellation clause, and deposit cheques were returned.

However, Alana said she's received no written explanation why Reid-Built backed out of the deal.

Alana said two members of her group tried purchasing their properties twice, only to have the deals fall through on both occasions.

"How many times does the agreement need to be signed for it to be valid?" she said. "How many times are we expected to purchase the same lots and homes?"

Alana said she and Brian will continue to live in their west-end home, at least for the time being.

Parker declined to say whether Reid-Built Homes sold the properties too early.

"Hindsight is 20-20," he said. "It's a matter of builder acting in good faith with an understanding of when lots would be available. That didn't happen."

BC Real Estate Benefits from Alberta's Strong Economy

Interesting article from the Journal about how much property Albertans are buying up in BC. One thing is missing for me - a stat showing how many recreational properties were sold to people from BC.... it would be interesting to compare.

Albertans find home away from home in B.C.
Shawn Ohler, CanWest News Service; Edmonton Journal
Published: Sunday, August 27, 2006

EDMONTON -- Cash-flush Albertans are taking advantage of their province's recent oil boom by snatching secondary properties from their westerly neighbours at unprecedented rates, according to a real estate research firm.

Albertans have purchased 2,219 properties in B.C. worth more than $650 million in the first six months of 2006, ahead of the 2005 pace, and drastically more than buyers from elsewhere in Canada and the United States, according to Landcor's recently released property sales report.

Ontario, in comparison, ranks second with 381 properties worth more than $200 million, followed by California (188 properties, nearly $82 million) and Washington state (98 properties, more than $47 million).

Landcor president Rudy Nielsen, a veteran B.C. landman now hawking acreages on the northern tip of the Queen Charlotte Islands, said Alberta's appetite overshadows all others.

"Ten years ago, the Germans came in to buy a lot of recreational land. If you look at what Germany's buying and what England's buying and what Alberta's buying it's Alberta. We've become the playground for Alberta money," he said.

Edmonton businessman Jay Champigny owns a 2,350-square-foot house on a 7,000-square-foot lot worth $1.75 million in the relatively undeveloped Pender Harbour on B.C.'s Sunshine Coast, but he's never actually seen it.

"I've seen pictures, but I've never been there," said Champigny. "I bought it sight unseen. But I know B.C. and I know property, and the feedback I got from people I trust said Pender Harbour is it."

Often, Nielsen said, Albertans aren't content to stop at single properties, and Champigny is proof. Before securing the Pender Harbour unit, Champigny bought a vacation home in Vernon, B.C.'s, Outback resort, and is about to nab a third at Lakestone, between Kelowna, B.C., and Vernon.

"I'm spending money now because it may not be affordable 10 years from now, and I'm quite happy to spend my six, seven weeks a year out at those properties," said Champigny, who expects Vancouver's 2010 Winter Olympics will boost the value of his Pender Harbour property to $3.5 million-plus.

Courtenay, B.C., online entrepreneur Sharleen K. Whiteside lists lakeside and coastal properties at WaterfrontWest.com, and draws 200 hits a day from Albertans despite never advertising in that province.

"Everywhere you go in Courtenay or Comox (B.C.), you see Alberta licence plates. Since Westjet started flying into Comox (from Calgary and Edmonton), it's boomed," said Whiteside.

James Askew, who sells and markets the Outback properties, said Albertans have become a dominant player in all areas of B.C. waterfront property since 2003.

When Askew sold a 54-home project in Kelowna, 35 per cent of his buyers were from Calgary, 25 per cent from Edmonton. One-third of his units on the Sunshine Coast and Ucluelet, B.C., on Vancouver Island, went to Albertans, and of 2,000 people interested in a just-announced beachfront condo in Osoyoos, B.C., half are from this province.

"The economy there is incredible. And, yes, you have places like Pigeon Lake (Alta.) and Sylvan Lake (Alta.), but because there's not many of them, everyone's descending on them in the summer, fighting for land. It's easy to get there, but they're small lakes," he said.

"Those people look to B.C., and they soon learn they can choose from Vancouver Island, the Gulf Islands, the Vancouver coastline, the Okanagan lakes, the Kootenays, the Columbia Valley. Both provinces are lucky in certain ways, that's for sure."

sohler@thejournal.canwest.com

Edmonton Journal

FACTBOX: Out-of-province boom

The top four out-of-province buyers of B.C. recreational real estate, from January 2006 to June 2006:

--Alberta: 2,219 properties worth $651,864,336

--Ontario: 381 properties worth $200,643,238

--California: 188 properties worth $81,914,279

--Washington state: 98 properties worth $47,469,459

--Source: Landcor Property Sales Report, 2006 Q1/Q2 update
© CanWest News Service 2006

The Difference Photography Makes

The Internet is the #1 place buyers look for homes, so it is extremely important that when you list your home for sale it is not only listed in as many places online as possible (especially the MLS), but also that it is displayed well. You spend a lot of time preparing your home for sale, making sure it looks its absolute best; it is your real estate agent's job to make sure it looks its best online.

At Coldwell Banker Johnston we take dozens of photos of your home using studio lighting, a wide angle lens, digital stitching software, and photo-touch up software. What does that mean? It means our listings are listings that buyers want to see, and the more buyers that look at your property the more offers you'll get and the higher price it will sell for (nothing motivates a buyer to spend more than knowing there is another buyer willing to spend more).

Wide Angle Photography makes your home appear larger, and shows more of the space:

Above: A small room looks even smaller taken with a typical 35mm camera. Below that, the same room is photgraphed using a wide angle lens, making this 750 square foot
home look much, much larger.

Digital Touch Ups make our listings stand out against the competition:

Above: Bluer skies, greener grass, cleaner driveway,in the photo on we pay attention to details including lighting, time and condition of the day among other things.
Just to make our listings stand out amongst the crowd.

Bad photos create a negative impression of your home. Many agents don't even bother to take photos of their listings, and that can affect whether or not a buyer wants to see your home, or pay top dollar for your home. Our goal is to get the most money possible for all of our sellers and we do everything we can to achieve that goal.

Above: Actual examples of photos taken by other agents and put on MLS. Whether it's taken
with a camara phone, a lens that can only take a picture of the corner of the room, with lighting
so bad you can see the photographer's reflection or it makes you wonder why the photo
was even taken, it's not good enough for your home.

The Difference Good Photography Makes:

Above: The top photo cuts out part of the windows and the fireplace. On the bottom
wide angle photography shows the whole room, plus studio lighting and digital touch ups
make the room appear warmer and more inviting.

There are currently thousands of people relocating to Edmonton from all around the world due to the incredibly good job market. Relocating buyers are typically willing to spend the most money and do their home searching online. We've had buyers pay top dollar for our listings having only seen the photos online (one sold for $160,000 over the area average).

If you're selling, be sure to research the agents you are considering listing with, and look to see how they are marketing their listings. I don't know any other agents in Edmonton that go to the lengths we go to, to make our listings look their absolute best.

Formal Complaint Against Comfree Under Fair Trading Act

The Alberta Real Estate Association has made a formal complaint to the Alberta government under the fair trading act. The journal has decided to cover this news today and my comments about the article are in italics below...

ComFree's barbs draw complaint by realtors
Website 'misleading,' Alberta government told
David Finlayson, The Edmonton Journal
Published: Saturday, August 19, 2006


EDMONTON - The battle between real estate agents and upstart ComFree has reached a new level, with the Alberta Real Estate Association making a formal complaint to the government about the company's "misleading" statements.

The 35-page complaint to Alberta Government Services under the Fair Trading Act details statements on the Edmonton ComFree website that the real estate association says "may mislead or confuse" consumers.

ComFree, short for commission-free, charges people selling their home privately a set $595 fee to advertise it on their website and in their magazine, and is in competition with licensed real estate agents in the hot housing market.

The complaints against ComFree include:

- Claiming to have 25 per cent of the Edmonton market, when a consumer survey showed 85 per cent said they listed their home with an MLS real estate agent.

And don't forget land titles records show over 90% of sellers listed their home with an agent.

- Saying a licensed agent charges $1,000 an hour, leading the public to believe these fees are standard practice.

- A "grossly misleading" statement that implies a real estate agent takes all the homeowner's equity in fees.

When in fact studies show that homes sold privately sell for 16% less on average than those homes sold with an agent (source, NAR survey of home buyers and sellers, 2005).

- Saying it performs the same services as an agent for a fraction of the fee, when the company is not licensed to trade in real estate.

And if they perform the same services, they should have to follow the same rules that real estate agents follow. Real estate is a heavily regulated industry and Comfree skirts those regulations by claiming to only be a marketing company. How then can then perform the same services as an agent?

- Claiming customers saved more than $600,000 in fees in three weeks when in fact commission rates or fees are not reported by the listing brokerages.

- Saying real estate agents operate out of self-interest, when they owe a duty to their clients and must follow their instructions.

Real estate agents are required to provide a number of fiduciary duties to our clients, first and foremost is loyalty, meaning the client's needs come first. Sure, there are some bad seeds out there, but being part of a heavily regulated industry those bad seeds are found and disciplined

Alberta's 11,000 licensed agents want the government to set rules preventing ComFree from issuing misleading or unsubstantiated statements.

"They say they have 25 per cent of the Edmonton market, but how are they measuring that? Our stats, which we get through land titles, show 91.8 per cent of sales are though MLS." Edmonton Real Estate Board president Madeline Sarafinchan said.

Don't forget how many comfree homes don't sell and end up listing with an agent. Do those homes get counted by both comfree and the board? We hear it time and again - many homeowners try comfree only to list with an agent for a higher price and net way more money in the end, including the money they wasted paying comfree up front.

Real estate agents' commissions have always been negotiable, so there's no way ComFree would know how much their clients are saving, she said.

Private sales have always been a factor in the Edmonton market, and agents can deal with that as long as it's a level playing field, Sarafinchan said.

"But they are saying things that are largely unproveable and carrying on a negative advertising campaign. All we are asking for is fairness."

Travis Holowach, ComFree's Edmonton franchise owner, said the real estate agents are just whining because they're losing money to a company that does a better job.

"We've taken 30 per cent of their market in three years and they can't take the competition," Holowach said.

Yet another example of and untrue and misleading statement. They can't even keep it true in an article pointing out their false statements!

"You don't continue to grow by misleading the public. We've got an unbelievable number of testimonials from clients who think we do a great job, so let the public decide."

Holowach said he's glad the board has finally complained to the government after talking about it for the three years he and wife Erin have had the franchise, and he's confident it will be dismissed.

"Now we can finally put this to rest."

Something tells me it won't be dismissed...

ComFree reports it had 566 new listings from Red Deer north in July, up 68 per cent over July 2005. A total of 454 homes were sold last month, making 2,644 for the year to date.

That's nowhere near the real estate board's numbers (14,909) which only include the greater Edmonton area, not Red Deer, or Fort Mac or anywhere else "north of Red Deer".

It claims sellers have saved $59.5 million in commissions since the Edmonton franchise opened in 2002.

Holowach said that number is based on the usual seven-three commission split charged by realtors -- that is, seven per cent on the first $100,000 and three per cent on the rest. Realtors may say commissions are negotiable, but it doesn't happen very often, he said.

Holowach is sadly misinformed and again misleading the public in his statements. Commissions are negotiable and many transactions do not follow "the usual 7-3 split". Our company has had dozens of different agreements with our sellers this year alone, and our sellers have made out very well - check out our recent sales stats at www.justsoldedmonton.com.

Holowach said he gauges market share by simply comparing listing inventories.

Lets see... 14909 copared to 2,644 doesn't exactly equal a 30% market share, it's 15%...and don't forget we're comparing Edmonton to everything north of Red Deer. Oh, and what percentage of their listings actually sold and how many sold below market value? We'll never know...

Eoin Kenny, a spokesman for Alberta Government Services, would say only that the department is reviewing the complaint.

dfinlayson@thejournal.canwest.com

HOW THEY WORK

ComFree, launched in Winnipeg in 1996, charges a flat $595 fee which includes advertising a home on its website and in the magazine, a lawn sign and highlight sheets for potential buyers.

The seller must decide what the property should be listed for, and ComFree does not give sales advice other than how best to present the property to potential buyers.

Homeseekers can go on an e-mail alert list so they're notified if a property they might be interested in comes on the market.

Real estate agents say that if you use a realtor you can be certain all your interests are protected in a complicated transaction.

They say they know the pulse of the current market, provide clients with an expert assessment of the value of their property, help them understand all offers and know how to negotiate an acceptable sale price.

But they don't give any sales advice...

And the Multiple Listing Service puts the property front and centre in the real estate market across Canada, they say.

A note to David Finlayson: next time you are going to report on Comfree and the real estate board, do give us a call. We'd be more than happy to share our stories of satisfied clients that we've helped purchase Comfree homes well under market value, I'm sure they'd love to tell you themselves. We could also tell you about people who tried selling their home themselves to no avail, and ended up listing with an agent for more than they were asking, and sold above list price, more than covering the real estate fees they were concerned about before listing with an agent. Some actual examples may bring some more credibility to your article.

A note to our readers: not all agents are created equal, and not all agents provide the same service. If you are considering selling (even if you are considering selling on your own) make sure you interview more than one agent, read our article on the top 10 questions to ask the agents that want to list your home. If you are considering selling on your own, read our article Tips for Selling on Your Own.

Get a free online evaluation of your home.

Top 10 Questions to ask the Agents That Want to List Your Home

If you are considering selling your home, you've probably already thought about preparing your home for sale, where you are going to move to, what sale price you'd like for your home. Another very crucial step is to interview at least three successful real estate agents who sell homes like yours in your area. Even if you think you can sell your home alone without professional help, the agents you interview won't mind. They know most do-it-yourself sellers fail and within 30 to 60 days list their homes for sale with one of the agents already interviewed.

Each agent will have a "listing presentation" during which they will outline their skills, experience and marketing strategies. Here are the key questions to ask each agent if they didn't already answer them in their presentation:

1. How much can you get for my home? Not:

• what is my home worth?
• what price should I list my home for?
  

These questions are important, but the most important thing what your home will actually sell for. The best agents will get you the best price. Be careful though, many agents will try to "buy your listing" by giving you a highly inflated price. Each agent should justify his/her answer by giving you a written CMA (comparative market analysis). This CMA should show (a) recent sales prices of comparable nearby homes, (b) current asking prices of neighborhood homes like yours listed for sale (your competition), and (c) asking prices of recently expired comparable listings, which didn't sell (usually because they were overpriced). Less frequently the report will include actual examples of the agent's sales and how they compared to the average.

After interviewing three (or more) potential listing agents, you can then compare their CMAs to see if they used the same comparable recent home sales prices to justify their opinions of your home's market value. Watch out for agents who estimate an unjustifiably high price or too low.

2. How will you market my home?

At a minimum, each agent's written plan should include a for sale sign on your lawn, putting your listing on the MLS (the most powerful sales tool available to listing agents), and showing your home's photo and information on the agent's web. Will the agent take photos of the home and when will they appear on the internet? It seems simple, but so many agents are not even bothering to put pictures of their listings on MLS these days. Ask to see examples of how the agent has marketed recent listings so you get a feel for the quality of their efforts.

3. How do your sales compare to the area average?

Some agents may tell you that their listings sell on average for 95% of list price, or some may say 110% of list price. In today's market if an agents listings are selling below list price, they are not getting the best price for their listings. On the other hand, if an agent is selling all their listings over list price, they may be purposely under pricing listings so they can make that claim. The important thing is whether their listings are selling about or below average for your area. If they can't provide these details then move on.

4. How many listings do you currently have? Will I be dealing with your or an assistant, and how often will you contact me about sales progress?

Assistants are often the sign of a highly successful real estate agent. But watch out for a "numbers agent" who takes too many listings, knowing a percentage will sell, and forgetting about the rest. You want to avoid becoming just another listing to a numbers agent.

5. How long have you been selling real estate? Are you a full-time agent? What professional courses have you completed?
The best agents will already have answered these questions in their listing presentations or in their professional brochure. There are a lot of part-time agents in this business, and generally speaking they are not nearly as involved in the market, and are often less aware of current trends than full timers. Don't necessarily dismiss a full-time, highly motivated new agent, they could be much better than an "old pro," experienced agent with too many listings to give your home sale the attention it deserves, and little understanding of the internet and online marketing.

6. What suggestions do you have to make my home more marketable? Do you recommend staging it?
Agents hate to answer this question before obtaining the signed listing for fear of insulting the seller. But smart home sellers want to know. Often a minor change, such as replacing the 1950s outdated shag carpet with a neutral fashionable carpet, can change a home's character.

Or maybe the agent will recommend removing your old-fashioned furniture and having a professional designer "stage"your home to make it look up-to-date. Staging a home for sale has become very common among the most successful agents.


7. Do you have a list of client references?

If an agent does a good job, they should be able to provide a list of testimonials from satisfied clients.

8. What sales commission rate do you charge?

Negotiating a low sales commission can be self-defeating if a lower sale price or even no sale results. If you decide to list with a so-called "discount broker" or flat-fee agent you will usually receive reduced services, and a reduced sale price.

10. Other than yourself, who is the best real estate agent in this area?

If the agent evades answering, then ask each agent what he or she thinks of the other agents you are interviewing. Respect each agent's answers. Of course, verify any negative information received about a competitor agent.


SUMMARY: I realize I skipped #9, but a top 9 list just isn't that interesting and I could only think of 9 questions, so there you go! Remember: fall is the second-best home sales season. To assure your home selling success be sure to ask each listing agent you interview lots of questions and then list your home for sale with the best agent for your situation.

Get a free online evaluation of your home.

Homewoners Sell Record Number of Houses

CREA's monthly report shows a slowdown in July, lead by Calgary and Vancouver. Edmonton's market increased significantly, but not enough to raise the national average. An important thing to note, these stats only include resale housing, and Calgary and Vancouver both had record sales of new homes which could account for the difference.

This month in Edmonton we (at Coldwell Banker Johnston) are seeing fewer listings get multiple offers, it doesn't seem to be the feeding frenzy now that it was in August. There appear to be more listings for sale - I don't have any hard stats to prove this, it's just something we are feeling. My bet is when the stats come out for August there will still be lots of records set in Edmonton, but price increases will be less, the number of listings will be greater, and the number of days on market will be longer (July set an all time record for days on market in Edmonton).

Here is the article from CBC News:

Sales of resale homes are heading for another record this year, despite a slowdown in July and the expected softening of the market over the next few months.

Average home prices have climbed by 10.1 per cent in a year. (CBC) Average home prices have climbed by 10.1 per cent in a year. (CBC)

In its regular monthly report, the Canadian Real Estate Association said resale housing activity edged down by 2.9 per cent in Canada’s major cities last month, to 27,231 units.

But the industry's performance in July did little more than tarnish what has been a record-setting pace for the first seven months of the year. Sales are still 2.6 percentage points over the comparable period in 2005, and heading for another record, while seven major cities have broken volume records for the first seven months — Calgary, Edmonton, Saskatoon, Winnipeg, Ottawa, Montreal and Saint John.

Homeowners also did well at the bank. The average price of a house rose to $294,924 in July 2006, up 10.1 per cent over the year, with record levels in Edmonton, London, St. Catharines, Ont., and Montreal.

Resale homebuyers are on track to break new volume records this year, but CREA chief economist Gregory Klump warned that a slowdown is imminent. He expects the sales pace to decline slightly in coming months, leading to a higher inventory of unsold houses and a levelling of prices.

The CREA numbers refer to existing houses, condominiums and townhouses sold through the Multiple Listing Service, adjusted for the season. The data does not include newly built homes.

Most of July's decline was in Vancouver and Calgary, two cities that have seen record sales of new homes in recent months and record levels of construction.

"Demand for resale homes remained strong across Canada’s major markets in July 2006," Klump said, pointing to stable interest rates, strong employment levels and rising incomes.

CMHC Predicts Another Housing Downturn

Today CMHC released another report forecasting a cooling housing market. For almost as many years as we've seen record breaking housing results, CMHC has been forecasting a downturn. I think now they just realize that if they stick with the same message, eventually they'll be right.

Interest rates to temper housing demand
ROMA LUCIW
Globe and Mail Update

Rising interest rates will help cool Canada's booming housing market by next year, but that doesn't mean prices are about to fall.

According to a quarterly outlook from Canada Mortgage and Housing Corp., housing starts will rise to 227,900 units in 2006 from 225,481 last year, before sliding to 209,100 units next year.

“Higher mortgage carrying costs, due to modest increases in mortgage rates and rising house prices, will temper housing demand in Canada in the latter part of this year and next,” said Bob Dugan, the CMHC's chief economist.

Low borrowing costs, strong economic growth and a solid labour market have sparked a real estate boom in Canada. If the CHMC forecast holds, housing starts will top 200,000 for the sixth consecutive year in 2007.

Existing home sales, as measured by the Multiple Listing Service, will slip to 481,700 in 2006 from 482,788 last year, although that would still be the second-best year on record. Sales of existing homes are expected to ease to 462,200 in 2007.

”A rising supply of listings will give home buyers more choice thereby reducing the spillover effect into the new home market,” the report said. ”However, marginally higher mortgage carrying costs will ease demand for existing homes in many centres across Canada.”

The price of an average home will increase 12 per cent from $249,365 last year to $279,300 in 2006. The 12-per-cent price increase, a 17-year year high, will slow to 6.4 per cent in 2007, when ”higher listings and lower MLS sales will move the resale market toward more balanced conditions,” the report said. The average price of house in 2007 is forecast to hit $297,100.

New home construction in Alberta, where record-high energy prices have led to mass migration, is expected to reach 49,000 units this year, surpassing the previous record of 47,925 in 1978. That pace of growth will slip in 2007 to 45,000 units, CHMC said, as the rising cost of ownership bites into demand.

Central banks in Canada and the United States have been hiking interest rates, making mortgages more expensive. In the U.S., sales of both new and used homes have slowed but Canada's housing boom has yet to moderate.

In a report released late last month, the Canadian Real Estate Association forecast that home sales in major markets will set a new annual record this year. Between January and June of 2006, 186,177 homes were sold — a rise of 3.6 per cent from last year's record pace.

According to CREA, average prices climbed 11.8 per cent from December of last year to $304,328 in June.

Alberta Land Titles Backlog

Brisk house sales cause backlog in land titles
Last Updated: Friday, August 11, 2006 | 4:14 PM MT
CBC News

People buying homes in Edmonton and Calgary are now waiting three weeks or more for their mortgage and land title paperwork to clear the system.

Normally, the wait is two to six days.

Eoin Kenny, spokesman for Alberta's Government Services, says brisk real estate sales and the inexpensive cost of second mortgages are causing the record-breaking backlog.

"For instance, in 2004-2005, we did 5.8 million transactions. Last year it was 6.5 million transactions. And we're looking to break 7.5 million this year. So that gives you some sense of just how busy those offices are."

Officials in land titles offices in both cities are working evenings and weekends to deal with a record number of mortgages and title transfers.

Kenny says homeowners can speak with their real estate agents or lawyers about how they can still safely take possession of their properties even if the paperwork isn't ready. He expects the backlog to be cleared up in September.

***More on this in a day or two but basically you need to find a lawyer and lender who accept "western protocol" in order "safely take possession" of your new home.

New Office Building in Downtown Edmonton - First in 17 Years

So we're finally getting some new office space in downtown Edmonton. It's been a long time since something commercial has gone up - 17 years to be exact - a sure sign that this city is growing. Commercial rents are up 70-100% in the downtown core, further evidence of the tight market. It's a three-story project at Jasper Ave, and 104 st., the article below also outlines some other upcoming changes to the downtown landscape....

Edmonton's joining the office space party
Oil money is driving the Alberta capital's commercial real estate renaissance

CATHIE BARTLETT

Special to The Globe and Mail

EDMONTON -- Something unusual will happen in downtown Edmonton next month -- for the first time in 17 years, construction is scheduled to begin on a commercial office building.

It will be modest by any standard -- just three storeys -- but it's significant given that downtown Edmonton has not seen a new commercial building since 1989.

And it speaks to the commercial property resurgence that the city is currently enjoying as part of the oil-fuelled building boom in Alberta.

Not that downtown Edmonton has been without construction, Jim Taylor, executive director of the Downtown Business Association of Edmonton, points out. Indeed, the Alberta capital's downtown has seen plenty of development on the residential side.
Print Edition - Section Front

In the late 90s, the city brought in a residential grant program to encourage home building downtown -- and that's what happened, with 12 condo high rises and four low rises added to the horizon, along with historic warehouses and less desirable redundant office space converted to living quarters -- some of which came with some commercial space on the ground floor.

While Calgary has captured most of the ink in the latest boom, Edmonton has quietly enjoyed the updraft as well.

Office vacancy rates are at a record low and industrial land is at a premium. Rents are up, space is tight downtown, and out in the suburbs, commercial properties are springing up.

Vacancies have dropped to 6 per cent from 9.5 per cent while rents have escalated 70 to 100 per cent in the past 18 months, says Todd Throndson, managing partner of Avison Young Commercial Real Estate in Edmonton.

Especially noteworthy is the change in attitude -- to a landlord's from a tenant's market -- with landlords adamant about getting the rents they seek and walking away from potential deals that don't look promising enough, Mr. Throndson says.

His colleague, Dean Wulf, general manager of Avison Young's Edmonton operation, says the tight downtown market is a ripple effect of the frenzied energy industry.

The lawyers, accountants, consultants and ad agencies who serve the industry are growing and taking up the downtown space left idle when government layoffs in the early 90s sent the rental market into a tailspin.

That, combined with the dearth of downtown office development, means any available office space is being snapped up, especially prime double-A and single-A space.

"Now, these tenants are facing sticker shock when they renew or expand," Mr. Wulf says. "They're coming off rents of $6 to $8 a square foot and your landlord gives you a renewal for $18 to $21 -- that's sticker shock."

Parking costs are rising as well downtown, which could push offices out to the suburbs, where parking is usually free, says Mike Parker, president of Cushman & Wakefield LePage in Edmonton. "We anticipate we're going to see some construction in the office market in the suburban areas."

On average, parking goes for $240 to $250 a stall a month in the downtown core.

Suburban tenants, on the other hand, typically get 2½ to three stalls per 1,000 square feet included in their office rent.

Mr. Parker predicts high land and labour costs will hinder new construction in the city centre. "If you were to put up a new building downtown, the landlord would need $28 net rent plus another $10 for operating costs and taxes. If you go out to the suburbs, the net rental rate would be $18 to $20 with $8 in operating costs."

But one developer is determined to make a go of it downtown, however modestly.

John Day says leasing arrangements are in the final stages for the first floor of the three-storey building he is developing and will co-own at the corner of Jasper Avenue and 104th Street on the site of the now-demolished Cecil Hotel.

He will only say the ground floor will be occupied by a "food tenant," while the upper floors will be large offices.

The new building, which will have 60,000 square feet, not including the 50 underground parking stalls, "will really clean up that corner" of downtown and accent Edmonton's renewal project along 104th Street in the warehouse district, Mr. Day says.

Which is why Mr. Taylor of the Downtown Business Association is enthusiastic about the new building.

"We're incredibly excited because it's not just a new building on the corner of Jasper and 104th Street . . . It's the end of an ugly derelict building that was causing all kinds of problems as the surrounding area was being revitalized."

And he's ecstatic about a planned high-rise addition to Petroleum Plaza, now a two-tower office complex on 108th Street that will add more than 215,000 square feet of office space.

The last big commercial building to be built was Commerce Place in 1989. The project marks "a significant corner we've turned in the downtown area," and Mr. Taylor says he thinks there will be more downtown office construction, given the low vacancy rate.

Jim Hewitt, vice-president of KingStreet Capital Partners, confirms the company has been granted a development permit for the Petroleum Plaza project. There is no start date yet, because, as Mr. Hewitt says, "it's still very preliminary."

Meanwhile, work continues on retrofitting the Devonian Building at Jasper Avenue and 111th Street, the former site of the province's Department of Education. Murray Brown, president of Canterra Developments Corp., says he considered converting the two-tower property to residential space, among other options, after buying the property three years ago.

"We are retrofitting this building in anticipation that there will be demand for high-end office space in the near future."

The base building will be finished late this year and ready for tenant improvements in January. "At that point, it will be the largest block of contiguous vacant space ready for occupancy in Alberta," he says.

Another downtown corner could look different in the not too distant future. The former Bank of Montreal building in the heart of downtown was recently sold to Dundee Real Estate Investment Trust of Toronto from Worthington Properties of Edmonton and may be demolished.

Edmonton is braced for the spinoff benefits associated with the more than $125-billion worth of industrial projects slated for development in northern Alberta's oil sands over the next decade.

A big challenge will be keeping pace with demand for both office and industrial space -- and labour shortages are a key issue, says Dave Young, vice-president and manager of the national investment team at CB Richard Ellis in Edmonton.

"My concern is not availability [of land]; my concern is construction costs and availability of labour . . . We're operating at almost full employment now."

Interest Rates to Stay Put

The following report from Bloomberg predicts that the Bank of Canada will not raise interest rates for the rest of the year, because the unemployment rate has increased and the dollar has dropped. Here is most of the article...

Canada Lost 5,500 Jobs, First 2-Month Drop Since 2004 (Update2)

Aug. 4 (Bloomberg) -- Canadian employers unexpectedly shed 5,500 jobs in July, marking the first consecutive monthly declines in almost two years, strengthening the case for the Bank of Canada not to raise interest rates again this year.

The unemployment rate rose to 6.4 percent from 6.1 percent in June, which was the lowest since 1974, Statistics Canada said today in Ottawa. Economists surveyed by Bloomberg News expected 23,500 new jobs in July and a jobless rate of 6.1 percent.

The report suggests one of the most robust aspects of Canada's 15-year economic expansion may be weakening, because of a strong currency higher borrowing costs. Economic growth stalled in May for the first time in eight months.

``This reinforces expectations that the Bank of Canada will remain on the sidelines,'' said Paul Ferley, assistant chief economist at the Bank of Montreal in Toronto.

Canada's dollar fell to 88.50 U.S. cents at 9:09 a.m. in Toronto from 88.85 cents late yesterday. One U.S. dollar buys C$1.1300. The currency reached a 28-year high of 91.44 U.S. cents on May 31.

The currency has weakened since then as investors anticipated Canada's central bank would stop raising rates. The Bank of Canada paused on July 11 after seven consecutive moves. Two days later, Governor David Dodge said he expected the high dollar and slower U.S. growth to curb demand for exports, in particular manufactured goods.

Manufacturing

Manufacturing led the July decline with 33,300 jobs shed, the industry's biggest loss since January. The related transportation and warehousing sector shed 16,900 jobs in July. Factories have fired 224,000 workers since the end of 2002, or 9.6 percent of their staff, StatsCan said today.

Canadian Dollar

The dollar's 40 percent rise since the end of 2002 has slowed exports to the U.S., which make up a third of Canada's C$1.1 trillion economy, the world's eighth-largest. Exports fell to the lowest in a year in May as energy and lumber shipments dipped, StatsCan said July 12.

The job market has been volatile in the past three months, swinging from a near-record 96,700 new jobs in May to a loss of 4,600 in June, and the July decline that was the biggest since December.

Carmichael said the average growth of 29,000 jobs during the past three months shows the market hasn't collapsed.

Employers added 21,600 full-time jobs last month. They shed 27,000 lower-paid part-time staff, StatsCan said today. The labor force, the number of Canadians 15 and older holding or looking for a job, rose by 64,200.

Hourly Wages

Average hourly wages advanced 3.7 percent in July from a year earlier, faster than June's 3.5 percent gain. The consumer price index, the main measure of inflation, advanced 2.5 percent in June from a year earlier, and StatsCan reports the July consumer price index on Aug. 22.

The 10,100 jobs lost in the last two months compares with a loss of 25,500 during July and August 2004, the last time employers shed workers in two straight months.

There are other signs the economy isn't slipping much. The price of an existing home rose 12 percent in June from a year ago, to a fifth-straight record, the Canadian Real Estate Association said July 17. Exporters are adjusting to the higher dollar and interest rates and consumers are still spending, Governor Dodge said July 13.

Still, StatsCan's report on economic growth in May, which was released July 31, also showed declines in areas that have fueled the economy during the last few years. Retail sales, construction, and oil and natural gas production all dropped, the report said.

Full Capacity

Record retail sales, construction and oil and gas production had helped push Canada's economy past the limit of what it can make without rapid inflation, the central bank said last month. The currency and interest rate will slow economic growth through 2008 and return the economy to full capacity, the bank said in its July 13 monetary policy report.

Canada's economic growth will slow to 2.9 percent next year from 3.2 percent this year, the central bank's report said.

U.S. employers created 113,000 jobs in July, fewer than economists expected, the Labor Department reported today in Washington. The U.S. unemployment rate rose to 4.8 percent, from 4.6 percent.

Edmonton Real Estate Investors Changing Formulas

The following is an article from "The Business Edge" News Magazine. I have taken out some parts not relevant to the Edmonton area. Overall the point is that its not too late to invest in Edmonton real estate, but you have to do it with a plan that makes sense.

Investment niches attract growing interest
By Joy Gregory - Business Edge
Published: 08/03/2006 - Vol. 6, No. 16

...Even with Calgary's residential market hitting record highs earlier this summer before taking a bit of a break from its frenzied pace, investors like Madeleine Ficaccio of VEA Group Inc. say the Alberta real estate investment market is good, albeit more complicated than a year ago...whose company wholesales properties under contract and buys, holds and manages properties with joint venture partners.

A strong market with high housing costs also prompted another change in focus. While she and her husband/business partner Dan still target properties with positive cashflow, Calgary investors used to be able to find properties that delivered mortgage paydown, cashflow and equity appreciation.

In Calgary's current market, you can focus on paydown or cashflow, but it's tough to get both, says Ficaccio, whose company uses interest-only financing to make higher-priced revenue properties work.

Because their business focuses on cashflow, they look for properties with additional income (basement suites and garages) and multiplexes with at least four units.

With a growing list of investors now coming to VEA with their money and their deals, VEA is also pursuing larger deals. One U.K.-based client wants her help finding deals worth $10 million-plus. He tells Ficaccio that his research says Alberta is "probably the strongest place in the world to invest your money right now."

Others seem to agree. Ficaccio's list of people she regularly contacts with news of potential deals has stretched to 600 e-mail addresses, one-quarter of which are from outside Alberta. A growing number also seek information on what some consider to be Alberta's hottest market, Edmonton, where VEA already has some investments.

Tyler Uzelman, a partner in Edmonton-based real estate investment firm Libertas Holdings Inc., says the company holds 45 revenue properties with 35 investors, about 25 per cent from Ontario.

Libertas deals with single-family homes, and while they welcomed investors with $15,000 a couple years ago, today's market demands minimum investments of $25,000 to $30,000.

Like Ficaccio, he warns against thinking the current market is too hot for newcomers. "There's a big perception out there that to become a real estate investor, you have to get the deal.”

Libertas, on the other hand, goes after the properties they want.

"We're not flippers. We don't buy real estate and sell," says the former financial planner. Instead, Libertas takes a buy-and-hold approach that's about long-term wealth creation, a strategy that's heavily dependent on what the investment business calls quality tenants and quality properties.

Using figures from the Edmonton Real Estate Board, Uzelman predicts today's market hasn't reached its peak. Nor are today's price increases unprecedented. Between 1966 and 1982, a period also characterized by dramatic economic growth, the average single-family home in Edmonton went from $11,516 to $96,380, an increase of 736 per cent.

From 1999 to now, the price has moved from $113,245 to well over $250,000, a figure Libertas expects to keep rising.

Lower housing prices elsewhere in Alberta are attracting investment dollars out of Calgary and Edmonton, too. Ficaccio has property in Red Deer and markets in several smaller centres. Uzelman's group targets Edmonton and area, although they recently looked at a place in Lethbridge.

Inspections M.I.A. in Edmonton

The following article from the Edmonton journal should be a warning to sellers and buyers in the Edmonton area. That's right, buyers AND sellers.... Sellers who could have been made aware of problems via a buyer's inspection can face a costly situation down the road; if indeed there are problems the sellers could have disclosed or known about, the buyers may choose to sue.

It is however an oversimplification to say inspections should be mandatory. If the inspection industry was properly legislated with a mandated code of conduct, required errors and omissions insurance and training minimums, I would think the lending institutions themselves would require inspections from such inspectors. Until that time, not all inspectors or inspections are created equally, atleast in my opinion, and buyers should be as careful in the hiring of their inspector as their real estate agent.

Hot real estate market burns home inspectors
Desperate buyers waive conditions on purchase

Richard Warnica, The Edmonton Journal
Published: Wednesday, August 02, 2006

While everyone else in Edmonton's housing industry scrambles to find workers, Michel Bourgeois -- a home inspector -- is laying off staff.

Bourgeois's business has plummeted 45 per cent in the last four months, even as home sales have soared in the other direction. Business is so slow, Bourgeois recently had to lay off one of his six inspectors.

"May, June and July have been just terrible," the owner of North Edmonton's Pillar to Post inspection company said.

Right now, more houses are being sold and at higher prices than ever before in Edmonton's history, according to the Edmonton Real Estate Board.

But fevered competition among buyers means more sales are being completed without a home inspection. And homebuyers who sign contracts without a detailed inspection are running "huge" risks according to many in the industry.

But when the average home for sale lasts just four to five days on the market and more than half are selling above list price, buyers often have no choice; you either buy as is or you don't buy at all.

"People are getting so anxious to buy a home," said Jean Sills, an agent with Realty Executives Challenge.

Sills sold a house recently which had 12 offers the day it was listed and was sold by that night.

Her experience is not unusual.

In July, eight houses listed with the real estate board sold in two days, according to John Hall, the board's marketing manager. The average length of sale, which should sit around 18 days, is down to four or five.

While sellers are seeing their property disappear in record times, buyers have to slog through house after house before closing a purchase.

One realtor Hall knows recently took a client to 14 doors and made 14 offers, but the client kept getting outbid. Another realtor lost a house after bidding $80,000 over the list price.

"The market becomes irrational because of the desperation of a single buyer," Hall said.

So irrational in fact, that house prices in Edmonton were up an unprecedented 31 per cent in July compared to the same month last year.

Buyers often make home purchases conditional on a number of factors, including, usually, that the house be inspected. But when there are multiple offers on a single property -- as is the case in 74 per cent of house sales in Edmonton right now -- sellers can afford to demand that buyers waive those conditions.

Or, as is more often the case according to Hall, desperate buyers can make unconditional offers, convinced is the only way they will close a deal.

Sills says she always urges her clients -- buyers and sellers -- to have an inspection. "It can save the seller too, that's the irony of it," Sills said.

But according to many in the home inspection business, many buyers are not taking her advice.

Shawn Kroeker, owner of Inspect Express Home and Building Inspections Ltd., has seen his business fall dramatically since spring.

In March, his company inspected 35 to 40 houses a week. Today, he's lucky to do eight to 10 in the same stretch.

Not all home inspectors agree, however. Edgar Castillo, who owns a franchise in a large home inspection chain, says the hot market has not affected his business. But most of those The Journal spoke to say the surge in housing sales has meant fewer, rather than more, home inspections.

Buying a house without an inspection can have devastating consequences.

Steve and Norma Dima spent more than $250,000 on a home just west of Stony Plain in April without having it checked by an inspector.

Within weeks they discovered cakes of toxic mould packed into the walls of their basement. The growth drove them from their home; they now sleep in a van in the yard and face possible bankruptcy.

Michel Bourgeois says he has inspected a number of houses after they have been sold. Often buyers don't realize the extent of the renovations the home will need, he said. Already stretched by prices in the overheated market, they cannot afford to fix the problems they did not know were there.

Some inspectors want house inspections to become mandatory.

But that is unlikely to happen, says Petar Juric, a board member with the Alberta branch of the Canadian Association of Home and Property Inspectors.

Edmonton Real Estate Market Still Hot

Here is the latest from the Edmonton Real Estate board. Inventory is still very low, demand and number of sales are still very high which leads to increasing prices. When you compare July to June, the rate at which prices are increasing is slightly down, but compared to July of '05 everything is through the roof.

Housing shortage causing business challenges

Edmonton, August 2, 2006: Everyone in the housing market this year is aware of the shortages being experienced in Alberta. The prices of new and resale homes have increased dramatically and availability dropped. The current inventory of available residences on the Edmonton MLS® is just 1,856; down from over 4,400 homes available on July 31, 2005.

Strong economic performance of Alberta business is creating new jobs and opportunities. Workers want to move to Alberta but are facing difficulties finding housing when they get here. REALTORS® are working harder than ever to find suitable homes for their clients. Multiple offers and sales over the list price are now common. However, employers who manage to attract workers from out-of-province are hard pressed to find places for them to live once they get here. Some business owners report that new employees are returning home because they cannot find a place to live even though they have a good job.

“Everyone with patience and money will find a home, but REALTORS® are concerned that the housing pressures are severe at the bottom end of the market,” said Madeline Sarafinchan, EREB President. “Thousands of workers coming here to take the $10 or $15/per hour jobs are not able to find accommodation in their price range. Rental vacancy rates are low and rental rates are rising. We need the workers but our community also needs to meet their housing needs. What are the provincial and federal governments doing to provide affordable housing?”

Even a person working for $20/hour will not qualify for a mortgage on an average priced home or condominium in Edmonton.

The average* price for single family dwellings in July was $303,304; up 1.6% from June. Average condominium prices went up 1.1% in a month to $188,831 in July. Duplexes and townhouses sold for $228,691 average – an increase of just 0.4% from last month.

The average residential price (includes all resale housing types) has increased from $254,240 in June to $256,489 in July.

“REALTORS® are frustrated when they cannot find a home for their client,” says Sarafinchan. “We want to help everyone but if the homes aren’t there we cannot sell them. If business owners cannot find homes for their workers then labour shortages will begin to stall the economic boom that is driving Alberta today.” She called on government to consider social policy that will make housing available for workers at all income levels.

July 2006 activity	Record *	% change from 2005
Total MLS®® sales this month	2,268*	21.70%
Value of total MLS® sales - month	$601 million*	61.80%
Value of total MLS® sales - year	$3.76 billion*	45.80%
Residential¹ sales this month	1,953*	21.30%
Residential average price	$256,489*	31.00%
SFD² average selling price - month	$303,304*	35.40%
SFD² median³ selling price	$293,450*	40.40%
Condo average selling price	$188,831*	33.70%

¹. Residential includes SFD, condos and duplex/row houses.
². Single Family Dwelling
³. The middle figure in a list of all sales prices

* Average prices indicate market trends only. They do not reflect actual prices, which may vary.