I was speaking today to a perennial top producing Realtor today and he said “There will be blood in the streets” as we discussed the current condo market in Calgary.

There are currently over 2500 listings of Condos on the Calgary MLS right now.  The rub is that a lot of these listings are from speculators.  It is these people that are doing it to themselves.

I’ll give you an example of a client I know about right now that his story is very similar to a lot of other condo speculators.

Bought the condo at the peak of the peak in late 2006 for $635,000.  Took possession last month and immediately wanted to put it on the market at a price that would move it in 60 days.  He had at the time 5 other competitive listings in the same building.  My realtor friend gave him a price of $569,000!  Then what? Within a week 7 more competitors came on the building (because they are all starting to take possession) and now there are 13 new listings in the matter of two weeks.  This person just dropped their price to $529,000 and will be glad to take a deal at $500,000 net of commissions!!  OUCH a $135,000 dollar loss.

What can he or many others do?  You can’t rent them, the market there is also saturated, and you can’t sell them for what you have in them. The less sophisticate, and there are lots of them, will be in trouble and don’t be surprised if you see a glut of foreclosures in the near future.  Gasp…Foreclosures in the hottest city in Canada?  I know hard to believe.

So now what?  Easy, if you are well healed then you already know that when there is blood in the streets you get opportunistic.  There are definitely deals and it will only get better go get ‘em tiger.

If you are a speculator then I am sorry for the bad news but you will have to take your medicine and believe it will taste bad, but you will have no choice.  Don’t chase profits that are not there.

I was speaking today to a perennial top producing Realtor today and he said “There will be blood in the streets” as we discussed the current condo market in Calgary.

There are currently over 2500 listings of Condos on the Calgary MLS right now.  The rub is that a lot of these listings are from speculators.  It is these people that are doing it to themselves.

I’ll give you an example of a client I know about right now that his story is very similar to a lot of other condo speculators.

Bought the condo at the peak of the peak in late 2006 for $635,000.  Took possession last month and immediately wanted to put it on the market at a price that would move it in 60 days.  He had at the time 5 other competitive listings in the same building.  My realtor friend gave him a price of $569,000!  Then what? Within a week 7 more competitors came on the building (because they are all starting to take possession) and now there are 13 new listings in the matter of two weeks.  This person just dropped their price to $529,000 and will be glad to take a deal at $500,000 net of commissions!!  OUCH a $135,000 dollar loss.

What can he or many others do?  You can’t rent them, the market there is also saturated, and you can’t sell them for what you have in them. The less sophisticate, and there are lots of them, will be in trouble and don’t be surprised if you see a glut of foreclosures in the near future.  Gasp…Foreclosures in the hottest city in Canada?  I know hard to believe.

So now what?  Easy, if you are well healed then you already know that when there is blood in the streets you get opportunistic.  There are definitely deals and it will only get better go get ‘em tiger.

If you are a speculator then I am sorry for the bad news but you will have to take your medicine and believe it will taste bad, but you will have no choice.  Don’t chase profits that are not there.

The traditionally busy spring real estate market is fast approaching – it’s time to take a close look at what we can expect. Whether or not you will think the news is good or bad will depend on whether you are a Buyer or a Seller. The only exception to this rule is when we are in a balanced market. We’re not; and my analysis reveals exactly who will benefit in this market.

Real Estate Buyers or Sellers; in 2008 who will be the winner?

Without question, it will likely continue to be a buyer’s market for the balance of 2008. A look at the data will tell us why.

First, short-term interest rates will fall significantly throughout the year, making your real estate purchases more affordable and/or allowing you to purchase something that was out of reach a mere year ago.

Secondly, the current Calgary real estate year over year has significantly slowed.

The Facts:
Inventory is more than double what it was a mere 12 months ago.
• January 2007 inventory = approximately 3,300 listing
• January 2008 inventory = almost 8,000 listings
• Janurary 2007 sales = 10% increase over January 2006
• January 2008 sales = 31% decrease over January 2007
•
The bottom line is that with supply more than doubling, and sales down by 31%, prices can only do one thing…go down.

Thirdly, we have been in a steady decline since November of 2007, and the sales trend is most definitely downward.

The Facts:
• December 2007 sales were down 28% year over year
• January 2008 sales were down 31% year over year

Fourth, according to a Royal Bank Study on real estate affordability, affordability levels for Calgary are now comparable to levels reached in the late 1980’s at the peak of the housing market bubble. The result? Buyers will force prices down.

Lastly, and probably the most telling of indicators, is found when you analyze the absorption rate. For those of you who don’t know, the absorption rate indicates the average selling time for real estate. As the time on the market increases, sellers drop prices to sell faster. The Calgary Real Estate Board defines a balanced market when the absorption rate is between 2 and 3.5 months.

In January, the absorption rate was 5 months, and in February we dropped to 4 months. If the absorption rate is below 2 months, then historically 79% of the time the price increases. If it is above 3.5 months, prices drop 100% of the time.

So there you have it. The Doctor does not lie – and as of right now it looks like we are facing declining prices and therefore a Buyers market in the foreseeable future.

So what to do?

If you are a buyer…stop waiting. Jump in! There are, and will continue to be good deals in the market.

If you are a seller, you need to do two very important things. One, make sure your home shows very well. This means repairing any blemishes, removing clutter, and make for a very warm and inviting showing. Secondly, be patient. Consider putting your property on the market 4 – 6 months before you need it to sell. This is not the time to leave it til the last minute. The alternative option is not to buy a home until you sell your current one. As mentioned, Buyers don’t have to worry.

There you have it. If you have further questions or need mortgage advice, I encourage you to contact your Mortgage Planner to revisit your mortgage strategy. Perhaps this year would be a good year to look at refinancing your home rather than selling it to take advantage of our declining interest rates. In that same vein, if you are selling a home now might not be the right time to go it alone. Rather, enlist the services of an experienced realtor who can get the job done.

Another sub-prime mortgage lender in Canada has decided to get out of the business.  Xceed Mortgage corp. which was an industry leader in the Canadian sub-prime mortgage industry.  They will now only entertain deals that will have CMHC insurance.

As I have reported in the past, it is becoming extremely difficult for borrowers with weak credit or income problems to qualify for mortgages.  Realtors, and sellers need to be aware that deals that could have been done a year ago, may not get done this year.

What does this mean for those who have less then ideal credit profiles?  Refinancing your current home or buying a new home will cost significantly more.  We are back to the days before institutional sub-prime mortgage lenders came, with high rates and fees.  Don’t be surprised to see 12% loans with 3% fees from here on in.

Another sub-prime mortgage lender in Canada has decided to get out of the business.  Xceed Mortgage corp. which was an industry leader in the Canadian sub-prime mortgage industry.  They will now only entertain deals that will have CMHC insurance.

As I have reported in the past, it is becoming extremely difficult for borrowers with weak credit or income problems to qualify for mortgages.  Realtors, and sellers need to be aware that deals that could have been done a year ago, may not get done this year.

What does this mean for those who have less then ideal credit profiles?  Refinancing your current home or buying a new home will cost significantly more.  We are back to the days before institutional sub-prime mortgage lenders came, with high rates and fees.  Don’t be surprised to see 12% loans with 3% fees from here on in.

Central bankers around the world AGAIN bailed out the markets and provided desperate liquidity to the market.  How much linger can they continue to do this?  Or better question why do investors and the investment community continue to think that they will?  When will they face their brutal realities.  They will when the bottom falls out.

The US Federal reserve alone put in another $400 billion dollars, and allowed investors to use Mortgage backed securities as security on these short term loans, now that is a scary proposition.

“This will not turn the economy around or fix all the problems in the markets, but it should reduce the liquidity issue, at least for now,” said Ian Shepherdson, chief economist at High Frequency Economics.”

“Is this going to cure what ails the economy? I would guess everyone realizes the answer to that is going to be ‘no,’ ” said John Lipsky, the IMF’s first deputy managing director. “Is this going to be helpful in addressing the strains in financial markets? For sure, the answer is ‘yes.’ ”

So what should you do?  probably get out of the market and go into commodities, especially gold, and get out of debt.  Cash is king in times of uncertain economics.

Central bankers around the world AGAIN bailed out the markets and provided desperate liquidity to the market. How much longer can they continue to do this? Or better question why do investors and the investment community continue to think that they will? When will they face their brutal realities. They will when the bottom falls out.

The US Federal reserve alone put in another $400 billion dollars, and allowed investors to use Mortgage backed securities as security on these short term loans, now that is a scary proposition.

“This will not turn the economy around or fix all the problems in the markets, but it should reduce the liquidity issue, at least for now,” said Ian Shepherdson, chief economist at High Frequency Economics.”

“Is this going to cure what ails the economy? I would guess everyone realizes the answer to that is going to be ‘no,’ ” said John Lipsky, the IMF’s first deputy managing director. “Is this going to be helpful in addressing the strains in financial markets? For sure, the answer is ‘yes.’ ”

So what should you do? Probably get out of the market and go into commodities, especially gold, and get out of debt. Cash is king in times of uncertain economics.