Edmonton Real Estate Bidding Wars

The following article was published in the Edmonton Journal yesterday. It is written by Ron Chalmers. He raises some good points, but misses the mark overall. My comments are in italics throughout the article....

EDMONTON - In today's tight housing market, many Edmonton homes are attracting multiple offers, some exceeding the list price -- which may punish impulsive buyers.

Whenever there are multiple offers, you can be certain at least one of them is over list price, and most likely by a fair bit.

During May, with more prospective buyers than sellers, homes sold in only 20 days on average, compared to 46 days in May 2005.

In May, for the first time in a very long time (if ever) there were more sales than new listings.

This sellers' market, especially for attractive, mid-range homes, can resemble an auction -- with the list price as a mere suggestion.

Most sellers list their homes close to the values that are signalled by recent sales of comparable properties, says Terry Paranych, owner of Re/Max Elite.

But with fast-rising prices -- up 22.3 per cent in the past year -- such comparisons could be outdated. "You may have 10 or 15 realtors bringing offers," Paranych says.

We know of one listing that received 54 offers.

"Probably seven or eight times out of 10, you receive multiple offers," says Madeline Sarafinchan, president of the Edmonton Real Estate Board.

She advises sellers to not consider any offer within the first 24 hours of listing -- because other realtors may bring better offers.

This is bad advice in our opinion, especially if it is a really good offer. We recently had clients who had one weekend to find a home, as they were from out of town. We found the perfect home for them and while we were showing it, the listing agent said they would not look at offers until Wednesday. Our buyers ended up buying another home for well over list price because they couldn't wait until Wednesday. And guess what? The next weekend we were showing another client homes and that house was still on the market. We questioned the agent and they didn't receive ANY offers. The moral of the story is.... you should ALWAYS look at an offer, regardless of when it is received.

One of her colleagues recently listed a home for $279,00, quickly received five offers, and sold it at $299,600.

All of our recent sales have sold for well over list price. Our marketing strategy for the current market is geared specifically to do just that. Check out our recent sales and the stories behind them at www.JustSoldEdmonton.com.

Competitive bidding may reveal a home's fair market value but can be dangerous for an unprepared, undisciplined bidder. People who expect to buy a home at its list price, then learn that higher offers have been submitted, may feel pressured to offer more than they can afford.

Paranych and Sarafinchan advise shoppers to arrange pre-approved mortgages and only to make offers within their borrowing limits.

Excellent advice.

Shoppers also can arrange a home inspection, before making an offer, to ensure that it can be done quickly.

An offer that is conditional only upon pre-arranged financing and inspection may beat out a higher offer that is subject to a longer delay.

Buyers who submit top-dollar bids with no conditions could be taking big risks.

"I have seen cases where a person buys unconditionally, and there is no statistical information to support the price," Paranych says.

A lender then may not approve the needed mortgage amount.

Plus, if your offer is unconditional, the seller may refuse to allow a mortgage appraiser in, which can make for a sticky situation.

The mortgage normally cannot exceed the appraised value, nor can payments exceed the borrower's ability to pay, says Jill Lindstrand at ATB Financial.

Sarafinchan says she normally will not even show a home to shoppers who could barely afford the list price "because it may end up selling higher."

Mike Dickinson, at Capital City Savings, says a pre-approved mortgage limit might be boosted if the buyer's financial circumstances have improved.

But Ian Glassford, Capital City's chief financial officer, cautions that appraisers must by guided by actual recent prices -- even when a buyer believes that prices are rising. "The lender needs the comfort of knowing that it can get its money back."

A shopper whose unconditional offer is accepted, then cannot find financing, could forfeit his or her deposit, says Jon Hall at the Edmonton Real Estate Board. Also, "the seller may launch a lawsuit for failure to perform," he says.

For example, if someone offered to buy a home for $250,000 with a closing date three months in the future, and if the seller accepted that offer and removed the home from the market -- then could only sell it for $225,000 three months later, when the original deal collapsed, he might sue the would-be buyer for the $25,000 difference.

Paranych tells buyers to arrange financing in advance, to understand their mortgage approval and monthly budget, then to buy within their limits.

If the house you want gets bid up beyond your reach, "don't give up, stay focused with a good agent, and there's always another house that you'll like more," he says.

Attention Ron Chalmers: Please drop us a line before you do your next article, I think we could share a lot of very useful information with you and your readers.

Huge Increase in Luxury Home Sales in Edmonton

Here is an interesting report put out by Re/Max. What they've done decided what price point makes a home a luxury home in different markets across Canada. In Edmonton that point is $500,000, and in one year the number of homes that have sold over $500,000 has increased by 177 per cent. Here is what CBC had to say about the report...

More Albertans living in luxury: report
Last updated Jun 21 2006 02:21 PM MDT
CBC News
Luxury home sales are soaring in Alberta as a record number of affluent residents demand upscale properties, according to a survey by a real-estate organization.

"Million-dollar home sales are climbing at a rate never before seen in major centres across the country," Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada, said in a release.

"If the market continues at this pace, existing sales records for all types of real estate, including upscale properties, will be shattered by year end."

The real-estate company established different thresholds in each city for what constituted a "luxury" home.

In Edmonton, where the threshold is $500,000, 144 luxury homes have sold this year, a 177 per cent increase over this time last year. The most expensive sale was $1.6 million.

In Calgary, 206 homes have sold for more than $1 million in 2006, up 124 per cent. The most expensive home sold in 2006 was $3.4 million.

The Re/Max Upper End report said luxury home sales in 12 of 13 major markets in the first five months of this year were higher than last year's often much higher. Windsor was the lone market to see luxury home sales fall.

Sales figures were taken from Multiple Listing Service reports in each city.

Re/Max officials say the luxury boom is the result of a strong economy, solid consumer confidence, limited inventory at the top end of the market, and consumers cashing in on big equity gains to reinvest in more expensive properties.

In addition, they say, more infill housing is being built in established areas close to downtown cores, "creating new upper-end enclaves."

There are also more Canadian millionaires. A report by Merrill Lynch Cap Gemini published on Tuesday estimated the number of Canadian millionaires (at least $1 million US in assets, excluding their principal residence) has risen 7.2 per cent in the past year.

Figures from the Canadian Real Estate Association said the average price of a resale home in Canada's major markets topped $300,000 in May for the first time ever.

Calgary Investors Buying Edmonton Real Estate

This was just posted on CBC.ca. In talking to our Calgary couterparts we've determined that Edmonton is just starting to experience what Calgary has been going through for the past year or two... this article proves it... exerpts below.

Hot market drives Calgary investors to Edmonton
Calgary real estate investors are buying up houses, townhomes and condos in Edmonton — a market one real estate analyst is calling the top place in Canada to invest.

Calgary residents are taking advantage of lower prices in Edmonton and travelling north to buy.

Dan Heon, a Calgary mortgage broker who is in the process of buying Edmonton apartments, said the low rental-vacancy rate means it is easy to get tenants.

"I think there is an $80,000 housing price difference, but yet the incomes are relatively the same. What that tells me is Edmonton has a lot more room to grow and so that's where I am taking my investment dollars."

Sharon Trenaman took possession of three properties in Edmonton last week. The Calgary resident has been buying single-family homes and duplexes in the Alberta capital for about five years.

Trenaman said that Edmonton real estate is moving more quickly than in the past, but she says it's worthwhile, with properties she bought in August in the $170,000 range now being worth between $225,000 to $235,000.

The jobs they are creating up in the northeast region where they are thinking of building some new refineries that are $7 billion each — that will increase the demand for Edmonton.

Thinking of investing in Edmonton?
Search all Edmonton and area MLS listings days before they are available on MLS. ca.

Alberta Housing - A League of its Own

Found this quote from an article in the Globe and Mail, it's by TD Bank economist Sébastien Lavoie:

"Alberta is in a league of its own. They are a bit like the Tiger Woods of housing -- they are at the top of the leader board on every measure."

Thought that was kind of cute. Anyway, there are more stats from CMHC and CREA below to support the above statement. These excerpts are taken from two articles in the Globe and Mail.

Canada's housing market is increasingly becoming a tale of two solitudes -- Alberta and the rest of the country -- and two key numbers released yesterday provide further evidence of the trend.

Huge increases in Calgary and Edmonton helped push the national monthly rise in new home prices to the highest levels in 17 years in April. As well, housing starts for the country as a whole barely budged last month, but those in the Prairie region, which includes Alberta, where up 9 per cent. Most industry watchers say that number would have been much higher but for a shortage of land and labour in the province.

The incredible increase in new home prices in the province shows just how wide the gap is becoming. In the past twelve months, the cost of a new home in Calgary jumped close to 35 per cent, Statistics Canada reported yesterday. In Edmonton, the increase was 18.6 per cent. For the country, the annual rise was 8.2 per cent and only one city outside Alberta had a double-digit increase. That was Winnipeg at 10.7 per cent.

The cost of a new home rose 4.7 per cent in Calgary in April alone, Statscan said, and it was up 3.9 per cent in Edmonton. It attributed the jump to high demand, along with higher material and labour costs and increased land values.

For housing starts, May marked the fourth month in a row of gradually declining activity in the core single-family category, Canada Mortgage and Housing Corp. said. Starts of single family homes in urban centres were down 1.3 per cent, compared with April, on a seasonally-adjusted basis. Multiple starts slipped 0.1 per cent.

While start levels are still above last year's numbers for the same period, the decline is in line with an expected moderating trend, CMHC economist Brent Weimer said. This is the "soft landing," many economists have predicted for the industry as pent-up demand wanes and rising prices and interest rates make home ownership less affordable.

The market in Alberta is anything but soft. Indeed, some economists have begun to fret that strong activity and rising prices may be laying the groundwork for bubble conditions.

Mr. Weimer does not believe the market is in danger of overheating, but he, too, said the province is bucking the national trend. "Definitely the story is different in Alberta," he said. "A lot of it is demand driven . . . You do not have a lot of units to choose from and a whole lot of potential buyers chasing those units."

Under such conditions, he said, double-digit price increases are not a surprise.

The average national price of an existing home in Canada surged above $300,000 for the first time ever in May, with actual sales activity smashing through all previous records as buyers rushed to buy a house while they can still afford to do so.

The latest data shows that despite forecasts of a slowdown, Canada's sizzling housing market continues to fire on all cylinders, particularly in oil-rich Alberta.

The price of a residential home in Canada surged 12.9 per cent from a year ago to $303,836 in May, topping $300,000 for the first time, according to sales tracked through MLS by the Canadian Real Estate Association. The 12.9 per cent rise is the biggest year-over-year increase in two years.

”May marks the fourth consecutive month in which the major market average residential price broke all previous records,” CREA chief economist Gregory Klump said.

Soaring house prices have resulted in a growing shortage of lower-priced homes in the resale market, he said, which is crimping sales of lower-priced homes and driving up the national average price.

"With prices on the way up and a shortage of listings in lower price ranges, some buyers may feel that if they don't buy now, they may not be able to afford to later,” Mr. Klump said.

Alberta's resale market led the gains, with home prices in Calgary soaring 43.6 per cent to $358,214. Home prices in Edmonton jumped 23 per cent to $242,936, in Vancouver they rose 23.7 per cent to $518,176, and in Toronto they rose 5.5 per cent to $365,537.

New listings in May hit the highest level on record, but failed to match sales, leaving the market tighter.

Mr. Klump attributed the continued strength in the housing market to a booming labour market, rising incomes and resilient consumer confidence. Those factors are boosting sales activity, despite rising interest rates and home prices.

Average Edmonton Home Increases in Value $160/day

This interesting article by Neil Waugh of the Edmonton Sun converts the average increase in housing prices in Edmonton to a daily increment. Apparently the average home owner is making $161 a day just sitting in their home! He then talks about the oil and gas industry and what is expected over the next few months, and how this relates to the Edmonton housing market. Very interesting and encouraging read...if you already live in Edmonton!


Congratulations. Since you woke up yesterday and poured your first cup of coffee this morning, you're $161 richer.

I know it's not much. But compile it over 365 days and it works out to almost $58,000.

Not bad, eh?

And all you had to do - with the exception of mowing the lawn, taking out the trash and making the mortgage payments - was sit there and watch the money roll in.

That's what happens when, as Edmonton Real Estate Board president Madeline Sarafinchan puts it, you're "riding the crest of a real estate wave."

In May, the EREB house hustlers set records in all categories over where the market was performing at the same time last year.

Home sales up 25%

There were 3,002 total sales last month, up 25.7% from last year.

For a value of $758 million - which is 58% more than a year ago.

Sales for the year are $2.48 billion - a massive 45.8% increase.

And 2,565 residential units changed hands, 22.3% more than in May 2005.

But the line on Madeline's stats sheet that most folks go to is the average single-family dwelling selling price.

And that's where your $161 daily windfall comes in.

The three-bedroom bungalow with the mugo pine under the picture window and the weeping birch on the lawn (you can substitute a catoneaster hedge if you wish) changed hands for a remarkable $282,208 last month. The same time last year it was yours for just $223,219 according to the EREB computer. Five short years ago, the May selling price was just $174,916.

Of course there is no "average" single-family dwelling. And there are many factors that can knock the "average selling price" out of whack.

But even taking that into consideration, there's no doubt that the surf's up in the Edmonton real estate market.

Of course, the great Edmonton housing boom is not something to be taken in isolation.

There's a two-word reason for all this buying and selling. Oil and gas. Although I guess you could throw in oilsands, too.

The real estate market is hot, hot, hot. And there's not even a storm cloud in sight in the Gulf of Mexico yet.

Last week, the U.S. Department of Energy put out its short term energy price outlook. With a "special focus" on the hurricane season, which officially kicked off on June 1.

During last summer's mother of all hurricane seasons, oil and gas production in the Gulf of Mexico was "significantly disrupted," 162 million barrels of crude production was lost, 784 billion cubic feet of natural gas production was suspended and "some of this production remains shut in today."

With America's main oil and gas production area in turmoil and more production threatened in risky parts of the world, where "Yank" is a four-letter word, the premium of safe Alberta energy reserves suddenly grows a new focus.

The storm chasers are once again predicting a "very active hurricane season this year," the DOE's Energy Information Administration report said.

Although it did admit that "the location and intensity of future tropical storms are difficult to predict."

Still, looming storm clouds "could add volatility to near-term prices." Especially in late summer.

U.S. gasoline price hike

So the benchmark West Texas Intermediate crude will average $68 US a barrel at least for the next two years. Retail gasoline in the U.S. will be 39 cents a gallon higher than last year.

While world petroleum consumption will jump from 1.7 to 1.9 million barrels a day next year.

"Most of this consumption growth will be met by increases in non-OPEC production," the document predicted.

Which sounds like the Athabasca oilsands to me.

Of course, all of this is only true "barring new, unanticipated supply disruptions."

If the Gulf's energy complex gets hammered again, then all bets are off.

And who knows, the $161 you made in the last 24 hours could grow larger.

Easy money. Unless you are on the other side of the deal trying to buy an affordable house in a wild market like this.

Tips for Selling Your Own Home

We have recently helped a number of our clients purchase homes from sellers using Comfree to market their properties for sale. This has turned out to be a great deal for our clients as they have bought these properties well under market value. It seems many home owners think they will save money by selling their home themselves instead of using a real estate agent.

But that's not the point of this article... There will always be people who sell their home themselves, and our recent dealings with homes for sale by owner (FSBOs) have certainly not gone as smoothly as those where both sides are represented by agents. There have been numerous complications leading to late closings and unexpected expenses, that could have been avoided if the seller was better prepared. So, I have some suggestions for those FSBOs out there trying it on their own:

1. Hire a very good real estate lawyer. A couple of months ago one of our clients bought a home marketed on Comfree. They got it for a great price. Anyway, it is supposed to close in just over a week, and the discount lawyer that the seller hired has yet to forward all the necessary documents to our client's lawyer, and even lost a deposit cheque! This means it is going to close late, and it is going to cost the seller a lot of money. A reputable real estate lawyer would have made sure everything was taken care of well in advance to ensure a timely closing.

2. Do not have a friend who almost has a real estate license, or used to have a license help you out. We recently had a client offer significantly over list price to a FSBO but the "friend" helping out didn't even deliver the offer to the seller. How is that helping a friend out? Three weeks in real estate school does not make anyone an expert. I have years of experience in this industry and am still learning because it is always changing. You are trusting your biggest asset with someone who barely knows anything more than you do about real estate. Plus, your friend will get in a boatload of trouble if they are reported - but they should already know that since they are almost a real estate agent.

3. Get a current real property report - not one that is 1 or 2 or god forbid 10 years old, a current one. The real estate purchase contract used by real estate agents in Alberta states that the seller must supply a current real property report. It takes time to get the report, and you've got problems if it doesn't comply. The buyer's mortgage company requires a current report in compliance, that shows the current state of the property. If it is more than six months old it is likely that the mortgage company will require a new one in order to provide funding to the buyer, especially since it's a FSBO deal (the mortgage companies are much more finicky when it comes to FSBOs). That funding is what is going to pay you for your property, so it is in your best interest to get a current report ASAP.

4. Work with agents representing buyers. Over 90% of buyers in Edmonton work with real estate agents. If an agent has called you and would like to show your home, that means their buyer is under contract with them, and the only way that buyer could buy your home is through their agent. Should that buyer decide to make an offer on your home, you will be presented with a Customer Disclosure Form which basically states that the agent is representing the buyer, not you - you are unrepresented. The good news for you is, at least the agent will know what is going on and help move the process along as smoothly as possible.

5. Answer your phone and be available to show the property. There are a ton of people relocating to Edmonton these days. Out of town buyers almost always have an agent and almost always look at properties during the week, during business hours. If you can't take appointments and show your home at these times you are missing out on the most motivated category of buyers out there, and motivated means they are willing to pay!

6. Consider listing with an agent. The last three homes we've helped clients buy that were listed on Comfree sold for $30,000-$50,000 below market value, including the fact that our fee was added into the purchase price. On a $200,000 property our company's listing fee is typically $5000, which means if those sellers had listed with us they would currently have $25,000-$45,000 more in their pockets, let alone the fact that we routinely sell our listings well above market value (see www.JustSoldEdmonton.com for examples).

I am the first to admit not every real estate agent is created equal, and I have seen cases where home owners have hired real estate agents and in the end would have been better off selling on their own. So perhaps really what I'm trying to say is, listing with the right agent will net you more money than selling on your own. Finding the right agent is the key. Interview more than one agent and ask them to show you examples of recent sales and what they sold for compared to the market, ask to see examples of how they market their listings. Remember, just because one agent says they can sell your home for way more than another doesn't mean they can - ask for proof. And lastly, you set the asking price for your home, not the agent, and most importantly, you decide how much and what offer you will accept for your home.

Learn more about how we market our properties at http://sellformore.edmonton-homes.ca.

Edmonton and Calgary New Home Prices

Surprise surprise, Alberta is boosting the country average in new home sales prices too. This article is from today's Globe and Mail and talks about statistics released by stats Canada. On a national basis new home prices have gone up 8.2% in one year, in Calgary that number is 34.8% and Edmonton is 18.6%. Compared to resales, new homes have increased slightly less with resale prices up 23% in Edmonton since last May. Here are the complete details:

New-house prices shoot higher
ROMA LUCIW

Prices for new homes shot through the roof in April, recording their largest monthly rise in 17 years.

Statistics Canada said the new housing price index rose by 1.2 per cent from May, the most significant national price increase since April, 1989.

As has been the case for months, Alberta's two major cities drove the increase, as the oil-rich province continues to benefit from an influx of people and a flood of construction that have created tight housing market conditions.

Contractors' selling prices have jumped 8.2 per cent from a year ago on a national basis, Statscan said. The 8.2 per cent year-over-year topped consensus expectations for a rise of 7.6 per cent, and was the strongest 12-month change since the January, 1990, increase of 9.5 per cent.

”New house price gains are trending toward levels not seen since the real estate boom of the late 1980s,” said Ted Carmichael, an economist with J.P. Morgan Securities Canada Inc.

New house prices are being boosted by continued gains in land values, building material prices and labour costs, he said. ”The rise in new house prices will gradually feed into the CPI for shelter, putting steady upward pressure on core services inflation.”

The Statscan report showed that the new housing price gains were widespread, rising in 14 of the 21 metropolitan areas.

Alberta led the charge, with prices in Calgary jumping 4.7 per cent on a month-over-month bases and Edmonton experiencing a rise of 3.9 per cent in May.

On an annual basis, prices for new homes in Calgary surged 34.8 per cent - leading the way for the seventh straight month - followed by Edmonton, which saw a 18.6 per cent rise.

”High demand for new housing, coupled with higher material and labour costs and increased land values, were cited as the main reasons for these increases,” Statscan said.

Stewart Hall, a fixed-income strategist at HSBC Securities Canada Inc., said that growth in new home prices has been running at almost five times the rate of growth for core inflation.

”Rising land prices, labour and material shortages are now constant fixtures in the report, and hint at the existence of bottlenecks in the sector,” he said. ”Despite lofty pricing metrics for housing relative to other domestic pricing measures, there appears to be little concern emanating out of the Bank of Canada that Canada faces an asset bubble in this particular sector.”

Although the market continues to expect the housing sector to settle down over the course of this year, the pace of activity continues to defy expectations, Mr. Hall said.

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Edmonton Real Estate Prices Jump Again in May

Prices are up again. Here are the brief real estate market stats for the month of May in Edmonton. More details coming shortly when the complete stats are published by the real estate board...

-3,002 - # of sales (previous record 2,448 in June last year)
-$242,936 - average price
-$282,208 - average price single family home
-23% - percent prices are up over May 2005
-$2.48 billion - record volume in real estate sales for the first five months, up 45.8%
-20 - average number of days on market (last year....46)
-1,857 - number of homes for sale at the end of May

wow!

Looking to buy? Time is of the essence in this market! Don't wait for new listings to appear on MLS.ca - get them by e-mail as soon as they're listed.