Garth Turner and Calgary real estate bubble? Crap I say!

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What's the old joke, even a broken watch is correct 0.14% minutes of the day?

Any one who tells you real estate values have to come down are going to be right as long as they say it long enough. often enough.  But, for how long will real estate prices stay down, how much will they go down, and what locations will they go down in value?

Here's why I think Garth's predictions that Calgary real estate values will decline by 20-25% because he sees Calgary prices as being over-valued.

From 1984 to 1989, Alberta saw signifcant negative net interprovincial migration.  One year over 20,000 migrated out of Alberta because of lack of employment in Alberta or greater employment opportunities in other provinces.

And, in 2009 and 2010 Alberta has seen job losses, and in the last quarter of '09, for the second quarter in a row we saw inter-provincial net migration that was negative for Alberta growth.  2800 more people left to another province than came to Alberta.  However, this is not close to the net negative interprovincial migration that produced the losses of the 80's in Alberta.  

Bubbles result in a surge of demand, lack of supply for the demand, a ramping up of production of the hot property, and an almost over-night realization there is no sustainable need for the amount being produced.  

March 2010 single family home unit sales in Calgary beat 2009 by 29%.   That is a big number.

But, we know the value increases that create bubble conditions was evident in 2006 in Calgary.  In March of 2006, single family homes new listings were 2422.  Sales that month was 2049.  That's a new inventory to sales ratio of 1.21 to 1.

Fast forward to March 2010, and new inventory is 2988.  Sales in March were 1396.  That's a new inventory to sales ratio of 2.14.

From a super heated market to now, there has not been a big gap in the new inventory coming on to sales.  Average and median price increases are a modest 5%.   Prices have kept  in check with a stable population.  Alberta population has had a slight growth even with net negative interprovincial migration the past two quarters.

This is a stable market now, but the cautionary is to watch employment.  If unemployment rates shrink while net migration expands- we may see rapid unsustainable prices that will lead to a bubble.  Then Garth Turner will be right.

But, recessions typically have a period of economic growth but low job creation.  There is lots of time on the clock before Garth is right. For now, I say, "Bubble? Crap!"