Through the middle of may the raspberry canes are coming along very nicely. Even nicer than the raspberry canes was the first five months of the housing market. Many eyebrow raising sales were featured here over the past couple of months. Here are some observations
Inexplicable (to me) sales of inner city property that I think have poor outlook for future value - not to disparage someone’s dream home but I saw too many sales of houses that I’d stay far from. Houses that have poor future development potential have sold for really strong numbers.
demand is strong but supply is massive - so many investors are using 2021 to purge the flock of their worst, run down or worn out units. Other sellers are people that have needed to move for personal reasons for the past five years but held on stubbornly. So strong is the cult of real estate that most people assume price growth when they buy a property and it forms part of their identity. They can’t then sell at a loss for reasons like pride or whatever. Some of them are now finally able to move on with their lives by dumping a property into a sellers market.
the biggest factor is it is really irresistible to buy an asset with leverage, even one that comes with upkeep and ongoing taxation, when borrowing is done at suppressed money cost vs the real interest rates. We’ve entered into some serious inflationary pressure yet why not buy if you take on a loan at 1.5%. It is really cheap to make a payment on an expensive home with these rates.
new build prices are higher than ever before so old houses have more component value. At this point everyone has heard about lumber prices but it is also copper, plastic, metal and virtually everything. Buyers want to jump in the market because new prices have to escalate, possibly by a lot.
so it appears we have a market with pent up demand from the last few years which weren’t great for sales volume, and are adding fuel to the fire by pulling forward future demand into today with cheap money. The end result is the hottest market in calgary since 2014 or even longer. Another factor is prices are simply lower in calgary than other similar cities and calgary offers a pretty good lifestyle vs much of Canada.
the danger with all of this market activity is a lot of these buyers of older homes may not know how scarce manpower is and how costly major rehab work will be. I can see how many buyers will jump in and buy something and only later find out that the repairs needed were not scoped out properly by them and their helpful realtor pre purchase. To get the house fixed to a level they’d be comfortable is probably why someone such as myself would pass on a lot of these ‘deals’. With a real reno budget realized the end value is too low, so the purchase price needed to be discounted more to provide more room to pay for repairs. Then there is a six month period of stress and hardship to factor in too. And real cash is needed to fund repairs, not the banks credit line.
despite all of these factors, it is more fun to operate in a good market than a slow or declining market that we’ve been in now for years. Where the market goes I don’t know but I remain upbeat. The high cost to build now should trickle down to those five year old infills and support some appreciation. Land values are overheated and the builders are still bidding them up. Shortages are reported for many products meaning less homes are going to be built than otherwise would. This also suggests building, for those that can finish a job, will have a good buyer pool.
Expect another raspberry update when the fruit is ripe and the summer market is tapering out!
Nice looking raspberry cane growth in may.