Garth Turner is at it again…but this time I have to admit he is not so doom and gloom as he has been.  In his latest post he has made some predictions as to how much the value of Real Estate will go down in certain cities in Canada.  For Calgary he predicts a 15% drop.

So the first question I will get is whether I agree?  Well I have to admit that I do think we may see more of a drop, particularly in the first half then what I have recently suggested, but overall year over year it should not approach 15%. Why?  Well for the answer we need to analyze why and how real estate drops in the first place?  You got it…Supply and demand.Garth and his readers suggest that we will have a significant increase in supply in late February and March to “take advantage of a spring market”  On this unfortunately I agree with him.

The problem he suggests is that the market will not be there for those sellers, and once again I tend to agree with him, but not to the same extent.  The market will be soft but it will not be non-existent.  Let’s look at it another way, in order for the average price to drop you need to have sales! I believe there will still be a segment of the population that will come on and “want” to sell, not “need” to sell and therefore once they see how low they will have to sell their house for, they will either not even bother entering the market (this will be a good thing) or they will exit the market within 90 days once reality sets in.I simply believe there is not as many people in 2009 who will NEED to sell as there was in 2008.

In 2008 we largely dealt with speculators who bought investment homes and condos for flipping.  Those people who did not sell in 2008 will either be back or they succumbed to renting, or others did eventually sell, either way there is less of them that will be back in 2009 to try again.  Finally when those people do come back presumably they now have the reality on what they need to price their home at to sell, and will then sell it.Housing starts are down significantly from 2007 to 2008 so simply put there will be less people in the market.On the other side of the coin I believe there is plenty of pent up demand in Calgary as the underlying economy is still ok, yes even at sub $30 oil.  The media will be playing up the story that there are great deals out there and those buyers will finally jump in by late spring and summer, and they will get good value and the sky will not fall.The length of time when we reach a balanced market is entirely dependent on how much inventory we see come on the market in February and March.  keep your fingers crossed…and if you have friends who are going to list their home to see if they can sell for a huge gain, tell them to stay away from the market, they will only hurt themselves and others.

Interesting article written by the President of the Canadian Bankers Association where she is trying to dispel some myths about the Canadian banking system and deflect some of the recent criticism her members are receiving lately. Myth 1: Banks are not lendingShe says bank lending to business increased by 13.4%  in the 12 month period November to November.  My immediate suspicion is that some of this increase may have happened in the the first four to six months of this time period.  What is more relevant ion my opinion to dispel this myth is what are the numbers in the past 6 months?“All the evidence shows that bank lending continues to increase and banks are stepping in to provide credit to consumers and businesses that have seen their access to other sources of funding reduced.”Pretty vague if you ask me?  Myth 2: Banks are making it more difficult for credit worthy customers to get loans“Banks have not changed the criteria that they use to decide whether or not to provide loans. If you are a credit-worthy individual or business, Canada’s banks are open for business.”That is such a load of crap I can’t believe it.  I suppose it serves her well to have people believe this but is clearly not true.  Ask the small businessman who can’t get a renewal on his line of credit he has had for 10 years?  Ask the self employed plumber who has been in business for 15 years and has excellent credit who can’t get a mortgage approved for 5 or even 10% down?I can tell you from being in the wholesale mortgage industry for over 15 years that the current lending environment has receded at least 5 years or maybe more in innovation and access to credit.  I get that many people think some of this was necessary because mortgage credit was becoming too easy…Ok, but then don’t try and tell us that underwriting criteria has not changed because it CLEARLY has!Myth #3: Banks should match Bank of Canada Interest rate cutsShe of course outlines what many of us now know that the Bank of Canada rate is only one source for banks to lend money and that other sources for money has increased the cost of funds so they can not necessarily match the Bank of Canada rates.  No problem Mr. Carney is smarter then them.  His last rate drop of .75% (predicted by me on this blog) was really only that severe because he knew the banks would not match him.  He really only needed or wanted them to go down by .50%, which they did.  Mission accomplished.  he knew that if he went down by .50% they would have only came down .25%.Based on this theory I suspect that he will drop rates again by .75% at the end of January.I hate when people who so clearly have a hidden agenda are able to write in the papers and be so one sided in their editorial.  Some things she says are likely true but have some perspective and show all sides to the argument…that is how you gain credibility