The Chinese Menu Effect
Picture yourself at Chinese Restaurant - there are pages and pages of menu items that add up to hundreds of possible meal choices. You come with the best intentions, hoping to find a new favourite, but eventually become overwhelmed with the selection and go for your old familiar standby.
I read an interesting article in the New York Times today that said that increasing inventory of homes for sale can have a "Chinese menu effect" on the housing market. There is so much to choose from it becomes overwhelming and buyers decide the place they're at right now ain't so bad after all. It talked about home owners having their homes staged and prepared to sell, realizing that they loved their homes and staying put.
Kit Yarrow, professor of psychology and business at Golden Gate University who studies consumer behaviour said:
"People are making long-term commitments, and they have limited vision into the future,” she said. “That’s what the market is giving us right now. Fear of loss is super powerful to consumers — that fear of losing your house, or your money, is keeping them jittery a lot longer. It makes sense that people will think a lot longer about selling their house, even pulling out at the last minute.”
Earlier this year we saw many buyers coming into the market because of changes to the lending rules in Canada and historically low interest rates. Perception is often stronger than reality... When you consider interest rates are currently lower than they were in June '07 and '08 and only .14% higher than '09 it can't just be rising rates that are quickly cooling our housing market in Edmonton.
Sometimes you need a little push before you'll jump in, and it seems there are no "artificial pressures" pushing people to make a move right now. Sheldon refers to this as the base demand - where the sales are only influenced by people who would be moving regardless of the market. We saw this in the summer of 2008 and we are seeing it again now.
Edmonton Real Estate Market Weekly Update, June 4 2010
Here is our update on the Edmonton real estate market. (Previous week's numbers are in brackets). For the past 7 days:
New listings: 594 (504, 610, 600)
# Sales: 245 (245, 303, 292)
Ratio: 41% (49%, 50%, 49%)
# Price changes: 412 (332, 396, 346)
# Expired/Off Market Listings: 302 (142, 149, 159)
Net loss/gain in listings this week: 47 (142, 158, 149)
Active listings for single family homes: 3083 (3045, 2972, 2879)
Active listings for condos: 2151 (2147, 2108, 2049)
More of the same, lots of listings and not many sales. Last year at this time the new listings to sales ratio was double what we have now. Clearly there is just less demand than we saw a year ago. Two years ago however, the ratio was about the same as it is today.
Perhaps with the improved weather forecast this weekend we'll see more buyers out looking at homes... or perhaps everyone will "relax" and enjoy the weather on their decks and at our beautiful city parks. Have a great weekend everyone!
Edmonton Housing Market “Relaxed” in May
The REALTORS® Association of Edmonton released the monthly stats today calling the housing market "relaxed."
“Financial incentives, changes to mortgage qualifying rules and the threat of increasing mortgage rates caused the local market to peak a little earlier this year,” said Larry Westergard, president of the REALTORS® Association of Edmonton. “Buyers, sellers and REALTORS® can all relax and enter a sales transaction without pressure,” said Westergard. “That does not mean that you can delay making or accepting an attractive offer because 50-60 homes sell each day and you would hate to see your dream home snapped up by someone just a little more eager to live there.”
The average residential sale price remained almost unchanged at $340,192 (compared to $339,314 last month and $326,332 last year).
Edmonton MLS® Average Residential Sale Price
Sales were down from last month and last year, in fact sales were the lowest they’ve been in May in at least 6 years:
Edmonton MLS® Sales
Single family home sales in Edmonton continued to be the strongest part of the market, outperforming condos and sales outside the city by a large gap:
Edmonton MLS® Sales by Type
Correction – New listings were lower in May than in April, we are still seeing more new listings than normal, but less than we saw in 2007 and 2008.
New Edmonton MLS® Listings
Inventory is continuing to rise giving Edmonton home buyers more choice and more negotiating power:
Edmonton MLS® Inventory
At some point increased supply, lower demand and higher interest rates will cause prices to come down in Edmonton.