Impervious to economic storm
By NEIL WAUGH, EDMONTON SUN
Now the numbers are starting to hit home.
For weeks Premier Ed Stelmach and his government seemed impervious to the pain being felt across the country and around the world.
It's like they were walking against an ever-increasing economic storm with not a worry in the world.
Sure there were warning signs. The sudden disappearance of multi-billions in oilsands and upgrader investments that went on all last fall, almost too numerous to name.
Then there was the bizarre energy strategy document released by Steady Eddie's struggling Energy Minister Mel Knight before Christmas.
Nearly two years in the making, it did nothing to stem the flow of raw bitumen, upgrader projects and jobs to Illinois, Ohio and Texas.
For which Mel and his cabinet buddies got rewarded with a 30% wage boost in June. And there's more where that came from.
The disturbing tumble in house prices is more evidence of tough times ahead.
It's getting so bad the Edmonton and Calgary real estate boards now appear to be fudging the stats after the Edmonton single-family dwelling price peaked at $426,028 in May 2007. The Calgary SFD crested at $505,920 two months later.
Last week both boards reported their December numbers. In Edmonton the price had tumbled $74,158 since the happy times. Calgary's average single-family dwelling haircut came in at $88,322.
This comes out of the calculator as a 17.4% loss of equity for both big cities.
Clearly some folks who got in at the top of the boom are getting close to negative-equity territory. When the mortgage is more than the value of the house, bad things can start happening.
Edmonton Real Estate Board prez Marc Perras claimed the capital city's housing market was "responding in an orderly manner."
His Cowtown counterpart Ed Jensen insisted 2008 was a "reasonable year." But Jensen also noted that "consumers are sitting tight at the moment."
I wonder why?
Yesterday Statistics Canada reported "significant 12-month declines" in new house prices for both Edmonton and Calgary in November.
Edmonton's 7.9% drop was the largest since May 1985 while Calgary's 2.5% tumble hadn't happened since November 1991.
But a lot of that is paper profits. You don't lose it unless you are selling.
And there's nothing wrong with buyers hanging in for a lower price.
It was Statistics Canada's Labour Force Survey last Friday where the rubber really hit the road.
"While employment edged down in most provinces," the Ottawa number crunchers noted, "Alberta recorded the largest loss."
But aren't we supposed to be recession-proof?
It gets worse when the survey reveals that, of the 34,000 job losses across the country, 16,000 came from Alberta, where the PCs' Oilsands Gone Wild policy built a boom that was never supposed to end.
OK, at 4.1% unemployment we're still the lowest in the country. And we also had the highest hourly wage at $24.50. Don't hit the panic button just yet.
Meanwhile the premier and Finance Minister Iris Evans are ramping up to declare a "technical deficit" so the government can start spending the $7.7 billion sustainability fund, while at the same time preaching restraint in the February budget.
Talk about a mixed message. And that's before news of the MLAs next little salary increase leaks out.
The same problem plaguing both Edmonton and Calgary city councils hits home in the legislature when MLAs are scheduled to get another 5.5% wage increase on April 1, unless the Alberta Weekly Earnings Index crashes between now and then.
Big city councillors are already taking heat over showering themselves with wage hikes, while property taxes are being jacked up, because of the wage index formula that was originally invested by House Speaker Ken Kowalski.
This comes after Kowalski's member services committee quietly rewarded MLAs with large wage hikes in June (over and above the April 1, 2008 4.5% boost), allegedly because of extra committee work.
And a few days later cabinet declared Christmas in June for the premier and his ministers.
That's called NOT leading by example.
Now the numbers are starting to hit home.
For weeks Premier Ed Stelmach and his government seemed impervious to the pain being felt across the country and around the world.
It's like they were walking against an ever-increasing economic storm with not a worry in the world.
Sure there were warning signs. The sudden disappearance of multi-billions in oilsands and upgrader investments that went on all last fall, almost too numerous to name.
Then there was the bizarre energy strategy document released by Steady Eddie's struggling Energy Minister Mel Knight before Christmas.
Nearly two years in the making, it did nothing to stem the flow of raw bitumen, upgrader projects and jobs to Illinois, Ohio and Texas.
For which Mel and his cabinet buddies got rewarded with a 30% wage boost in June. And there's more where that came from.
The disturbing tumble in house prices is more evidence of tough times ahead.
It's getting so bad the Edmonton and Calgary real estate boards now appear to be fudging the stats after the Edmonton single-family dwelling price peaked at $426,028 in May 2007. The Calgary SFD crested at $505,920 two months later.
Last week both boards reported their December numbers. In Edmonton the price had tumbled $74,158 since the happy times. Calgary's average single-family dwelling haircut came in at $88,322.
This comes out of the calculator as a 17.4% loss of equity for both big cities.
Clearly some folks who got in at the top of the boom are getting close to negative-equity territory. When the mortgage is more than the value of the house, bad things can start happening.
Edmonton Real Estate Board prez Marc Perras claimed the capital city's housing market was "responding in an orderly manner."
His Cowtown counterpart Ed Jensen insisted 2008 was a "reasonable year." But Jensen also noted that "consumers are sitting tight at the moment."
I wonder why?
Yesterday Statistics Canada reported "significant 12-month declines" in new house prices for both Edmonton and Calgary in November.
Edmonton's 7.9% drop was the largest since May 1985 while Calgary's 2.5% tumble hadn't happened since November 1991.
But a lot of that is paper profits. You don't lose it unless you are selling.
And there's nothing wrong with buyers hanging in for a lower price.
It was Statistics Canada's Labour Force Survey last Friday where the rubber really hit the road.
"While employment edged down in most provinces," the Ottawa number crunchers noted, "Alberta recorded the largest loss."
But aren't we supposed to be recession-proof?
It gets worse when the survey reveals that, of the 34,000 job losses across the country, 16,000 came from Alberta, where the PCs' Oilsands Gone Wild policy built a boom that was never supposed to end.
OK, at 4.1% unemployment we're still the lowest in the country. And we also had the highest hourly wage at $24.50. Don't hit the panic button just yet.
Meanwhile the premier and Finance Minister Iris Evans are ramping up to declare a "technical deficit" so the government can start spending the $7.7 billion sustainability fund, while at the same time preaching restraint in the February budget.
Talk about a mixed message. And that's before news of the MLAs next little salary increase leaks out.
The same problem plaguing both Edmonton and Calgary city councils hits home in the legislature when MLAs are scheduled to get another 5.5% wage increase on April 1, unless the Alberta Weekly Earnings Index crashes between now and then.
Big city councillors are already taking heat over showering themselves with wage hikes, while property taxes are being jacked up, because of the wage index formula that was originally invested by House Speaker Ken Kowalski.
This comes after Kowalski's member services committee quietly rewarded MLAs with large wage hikes in June (over and above the April 1, 2008 4.5% boost), allegedly because of extra committee work.
And a few days later cabinet declared Christmas in June for the premier and his ministers.
That's called NOT leading by example.
Labels: Housing Market
1 Comments:
At 8:00 AM ,
Mike Leibel said...
Neil Says: “But a lot of that is paper profits. You don't lose it unless you are selling.”
Many people have been hearing this statement for so long without giving it thought, that they actually believe it. Be assured that home owners have already lost their equity regardless of whether they have sold or not. Just because a homeowner doesn't crystallize their gains/losses until the sale is no reason to think that they are somehow sitting pretty is ludicrous. It can’t be dismissed as a paper loss. That is trying to ice over the facts. We have all lost equity already, from the highs a year ago. If one were to sell today they couldn't get what you might have a year ago. They've already lost their equity just as surely as the guy in the casino believes that the chips he lost at the blackjack table is just a "paper loss" because he hasn’t yet cashed out.
Consumers should never postpone a move believing it to be true. If you are postponing a relocation because you believe that if you sell you'll lose money -- don't! Remember, the home you'll be buying has also come down so you're really on a level playing field. Either way, be assured that a small part of your often substantial equity has already evaporated.
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