Sales in the first two weeks of
September were up slightly in central Alberta compared to August, while the
number of active listings is down. It’s normal to see slightly higher
sales in September, but it’s especially significant considering some Albertans
may be waiting for the result of the federal election before making a
move. Lacombe, Ponoka and Penhold were the ones who bucked the trend and
saw an increase in their inventories. Coincidentally those are the
markets that don’t already have large excess inventories.
Generally, the number of homes on the market in central alberta is down compared to this time last year. There are a couple of possible reasons for the change. First, some of the people who had homes on the market a year ago weren’t getting the prices they needed so decided to wait until the market improved. Second, new construction has slowed and our total inventory hasn’t been growing much. Our population has increased a little in the past year which would have absorbed some of our excess inventory.
August sales are typically a little slower than July’s as people
wind up their summer holidays and get ready to get the kids back to
school. Sales in Red Deer in August
were quite a bit lower than we expected and we aren’t sure why, other than the
economy continues to struggle. Lacombe,
Ponoka and Rocky fared a little better while Sylvan Lake, Blackfalds and
Penhold down compared to last month.
There are many encouraging signs that the new provincial government
is working hard to unravel red tape and encourage investment in Alberta, but
they have only been at it for 3 months and it’s going to take longer than that
to see the results of those efforts. We
suspect a lot of corporate investors as well as the general public in Alberta
are waiting to see the results of the federal election before making any moves.
For those who are optimistic, there is a tremendous opportunity right now to buy in a market with excess inventory to choose from at very attractive prices and relatively low interest rates. For those who want to partner with the federal government, the new equity partnership is now available. The government will invest 5% of the purchase price on resale homes or 10% on new homes interest free, but they expect to share in the profits when the house is sold.
August sales in the first two
weeks were a little slower than July’s. The number of active listings in
most markets we serve
were down, but the overall
number was slightly higher for all of central Alberta. The trend to lower
inventory levels suggests the market is slowly adjusting to the new price
reality, but more likely explanation is that historically, inventories have
peaked from April to June and then start to decline going into the fall.
There appears to be some optimism that the market is slowly recovering after almost five years of pain, but that recovery will be erratic and slow as long as our economy struggles from a lack of access to markets for our oil and agriculture products.
July was a good month for most central Alberta real estate markets
with more sales activity and fewer active listings, bringing some markets
closer to balance, defined as the place where neither buyer or seller have the
advantage. While year to date sales in
every market we serve are down compared to last year, we did do some catching
up in July which is normally a slower month due to summer holidays.
We aren’t sure what drove that more positive market last month, but
there area a couple of possibilities.
First, interest rates have come down and the federal government lowered
the qualifying rate for the mortgage stress test. Lower interest rates always stimulate sales
and a lower qualifying rate allows more buyers to enter the market.
Second, sellers are starting to adjust to the lower price environment. It’s been almost 5 years since prices started to trend down and there is no sign they will be going up soon. It appears that sellers are finally accepting the new reality and pricing their properties accordingly. Lower prices also stimulate sales and allow more buyers access to the market.
in the first half of July in central Alberta were up slightly over June, and
might be a sign of growing optimism that the economy is slowly turning the
corner. That optimism may also be reflected in the increase in the active
listing count after several months of decline.
Sellers entering the market thinking that prices have recovered will be disappointed. Price is determined by the relationship between supply and demand and there are still far more sellers in the central Alberta market than buyers. Yes, there is room for optimism, but at the current pace of the real estate market we are still many months away from prices going up.
June was a month that saw significant news events that will impact
the Alberta economy, which will in turn have a positive impact on the central
Alberta housing market. First, approval
of the Trans Mountain pipeline. Albertans
will be excused for being cynical about whether that approval will result in
pipe in the ground, but we believe there is a good chance construction will
start this year, creating thousands of well-paying jobs.
Second, the UCP Government reduced corporate tax rates by 1%
effective July 1 with another 1% reduction scheduled for Jan 2020. Those reductions are a signal to the world
that Alberta is open for business. It is
also an opportunity for Alberta businesses to expand and invest that money that
would have gone to government revenue.
The elimination of the carbon tax also put more money back in consumer’s
pockets and into the cash flows of businesses that really needed it.
Third, the City of Red Deer just released the results of the 2019 census and the population has recovered the losses we experienced in 2015 and 2016. While the gain isn’t huge, it is enough to lower our vacancy rate and fill some of the houses that have been sitting empty. Steady population growth creates the need for new construction and jobs are the result.
Alberta sales in the first half of June are up slightly compared to the same
time in May. While the Red Deer numbers are disappointing, there are
currently 40 reported pending sales which suggests the month could end strong.
number of active listings compared to this time last month is up in a little
Red Deer, Sylvan Lake and Ponoka and down in Lacombe, Blackfalds, Penhold and
Rocky. When compared to last year at this time, the active listing count
is down significantly in almost every market. That brings the sales to
listing ratio and the market closer to balance and suggests the days of
declining prices may be over.
are eagerly waiting for an announcement on June 18 about the Trans Mountain
Pipeline. A positive result will surely contribute to improved consumer
confidence. In the meantime, mortgage rates have dropped with 5 year
terms available as low as 2.97%. It’s still the perfect time to buy, but
the window may be closing a little.
It’s hard to
accurately calculate how much house prices are down since they last peaked in
2014, but we believe the average drop is 10% – 12% depending on a number of
factors – location, age, price range etc.
For those who purchased homes in 2014 and paid those higher prices,
there is some good news. If you borrowed
$400,000 over 25 years at 3.5%, 5 years ago, you will have now paid that
mortgage down about $55,000 to $345,000.
The value of your home may be down, but you should now have your
original equity (or more) back.
That leaves people who had no options in 2016, ’17 and ’18 with equity and the ability to move on if they wish. The house they buy after they sell their current home has been price adjusted too. The biggest obstacle holding back the housing market now is the, irrational for Alberta, mortgage stress test that CMHC and the federal government continue to defend and are likely to maintain. Hopefully the Provincial Government’s promised solution is coming soon.
Central Alberta sales in the first two weeks of May kept pace with the same period in April, but Red Deer sales didn’t. The number of active listings is up in every market we track except Blackfalds which remained steady. Generally, inventories in central Alberta are well below last year’s levels. Lower inventory levels means movement toward a balanced market and less choice for home buyers, although it is still a buyer’s market in most price ranges.
We have noticed more activity and a higher confidence level in the last few weeks and are hoping it will translate into firm sales going forward. Recent decisions by the Senate on Bills C69 and C48 have the potential to further boost confidence in Alberta. On a gloomier note, the Bank of Canada seems convinced the mortgage stress test is still appropriate for the whole country which probably means the federal government will leave it in place. That makes it more important than ever for the Alberta government to see what they can do here.
After a good start to the month, the trend continued, and April MLS
sales in central Alberta finished up 44% compared to March. Our prediction that the election would
trigger a surge of confidence appears to have been accurate as we are seeing
evidence of an improving market on a daily basis.
The large banks are now starting to put public pressure on the federal
government to remove or at least adjust the mortgage stress test. They have admitted that the unintended
consequences are massive withdrawals of first time buyers from the market as
well as a dangerous trend from conventional mortgage funding sources to
alternate lenders who charge higher rates but don’t follow the stress test
rules. That pressure just before an
election may encourage some consideration for the rest of Canada that didn’t
need the rule in the first place.
What we need now is for the new Alberta government to fulfil its promise
to work with Alberta financial institutions to remove that massive stumbling
block as well. Every real estate
transaction contributes about $55,000 to the local economy. Fixing the inequities in the mortgage process
could provide a very quick and effective boost to an Alberta economy that still
badly needs help.