There are two very important things to note when it comes to the current state of the real estate market in central Alberta. First, the number of active listings continues to shrink, down almost 25% compared to Nov. 15, 2019. Second, month to date sales this November are up 56% compared to the same time last year.
So what does that all mean to the average homeowner? The relationship between supply and demand determines price. While CMHC predicted that prices in Alberta could come down as much as 18%, the reality is that prices could be poised for an increase if the current trend continues. The current numbers don’t put our market in balance yet, but we are much closer than we were a year ago and a balanced market creates price stability, if not increases.
While the media is focused on the negative – Covid, job losses, etc., we believe Albertans are more than ever focused on the positives – Alberta’s population increased by 60,182 between July 2019 and July 2020, $2.3 billion natural gas pipeline expansion announced in October, no matter the result of the US election, Alberta is likely to benefit by increased energy exports, and ATB Economics is predicting Alberta’s economy will grow by 3.3% in 2021.
If you pay attention to the news, the world is on the brink – the Covid 19 second wave, unemployment, failing economy, negative politics and more. Fortunately, it seems a lot of the public aren’t listening. Instead they are going about their lives pretty much as normal and we are seeing that in the housing market.
Our typically busy spring market was hamstrung by the pandemic but recovered nicely in June and has kept pace with 2019 ever since. Year to date sales in central Alberta are still down very slightly by 0.62% compared to last year. What’s very interesting is that 2020 sales since June are up 18.6% compared to the same period in 2019.
The active listing count in most markets is down compared to a year ago and the increase in sales has narrowed the gap between supply and demand. A couple central Alberta markets have moved just into balanced territory and most of the rest are still buyer’s markets, but much closer to balance than they were a year ago. It is important to note again that there are markets inside markets. The lower price ranges have been very active while the high end of the market still strongly favors buyers. Prices are possibly up a little in the lower price range, but still depressed at the high end.
Central Alberta sales in the first two weeks of October were down 17% compared to the first two weeks in September this year, but are up 28% compared to the first two weeks of October 2019. The number of active listings is down almost 25% compared to last year at this time. Supply and demand have moved closer to balance which is what supports a healthy market. There have been some positives for our economy in the news lately – the Line 3 pipeline to the U.S. won another court challenge, the Trans Mountain Pipeline is quietly progressing with more construction underway, and the Alberta Government recently announced a $45 million clean energy and organic fertilizer facility will be constructed in Lacombe. These aren’t earth shattering developments, but they are the tiny glimmers of light we are looking for as we move forward.
Central Albertans have demonstrated their enthusiasm for home ownership over the last four months. No one really knew what to expect as we came out of the Covid 19 lockdown, but our homebuyers knew what they wanted. Sales in central Alberta were strong again in September, up 22.5% compared to September 2019. And year to date sales to the end of September are off compared to the same time last year by just 3%. The Red Deer and Penhold markets have moved into “balance”, while the other central Alberta markets have moved closer to balance. Spectacular results considering what we were hearing in March and April.
The majority of sales activity continues to happen in the lower price ranges, but we are starting to see interest pick up in the higher ranges which is normal. Every recovery starts at the low end and gradually moves up. What is fueling the spike in sales? In our opinion, a number of things. Five year mortgage rates under 2% (the lowest in history) combined with the lowest prices in six years, maybe even since 2006 in some cases. Also, the federal government has pumped $350 Billion into the economy over the last few months and that money has to be going somewhere. Finally, it appears that many people are tired of Covid, tired of the lockdowns and restrictions and just want to get on with living and”where there is a will, there’s a way.”
Residential sales in central Alberta were up 4.4% compared to the same period in August while the number of active listings dropped by 4%. It’s difficult to explain exactly why the market continues to do relatively well, but there are three factors we believe are having an impact:
Mortgage Interest rates below 2% are very attractive to first time and move up buyers
The federal government has pumped $300+ billion into the economy – people are spending less on entertainment and travel etc. which means they have money to buy or upgrade their homes.
People are tired of Covid and want to get on with their lives and their plans
Whatever the reason, a strong real estate market is good for the economy. Every transaction provides work for lawyers, mortgage brokers, realtors, movers, property inspectors, banks, cleaners, home stagers, handymen etc.
In spite of a recovering market, prices are the lowest they’ve been for years. Those low prices combined with very low interest rates means there is still tremendous value for homebuyers. This is likely the opportunity of a lifetime.
The housing market in central Alberta continued to rebound in August with sales up 21.6% compared to August 2019. Year to date sales have not quite caught up to last year’s, but are only down 6.4%, which is remarkable considering what was happening in April and May. In the meantime, the number of active listings in almost central Alberta market is down. The result is a return to balance or close to balance in most of those markets which will keep prices stable.
It’s important to understand that there are markets inside our markets. The vast majority of the activity in central Alberta in recent months has been focused in the under $400,000 price range. Multiple offers on those properties are not uncommon, while listings at the high end of the price spectrum may go months without even a showing. It takes time for activity generated by sales in the lower price ranges to filter up to the high end. That creates a tremendous opportunity to move up for those who have that option.
Historically low interest rates under 2%, massive government financial stimulus and attractive prices are driving the central Alberta market at the moment. It’s difficult to predict what the future holds, but we firmly believe that Alberta will survive to lead the county economically for the foreseeable future.
August is turning out to be another good month for real estate sales. While central Alberta sales in the first two weeks in August haven’t quite kept up with July, they are ahead of last August so far. And, the health of the market (demand relative to supply) is also getting better with inventories continuing to fall in most of the markets we serve.
Every cloud has its silver lining and this is it. The opportunity to move up has never been better with strong demand in the lower price ranges and lower demand in the higher price ranges. This is the time every buyer dreams of – to sell high and buy low. And it gets even better with those very low, sub 2% mortgage rates.
Sales in central Alberta in July were up 23% compared to July 2019 while the number of active listings is down almost 29%. Year to date sales in central Alberta are down almost 10% compared to the same time last year but it was predicted to be much worse. A strong start to the year combined with a good recovery in June and July is rapidly erasing the losses experienced in April and May. Our individual local market results vary slightly but are generally similar to the big central Alberta picture. When demand goes up and supply goes down, prices are expected to go up, but it’s a little early to make that declaration until we see the trend continue for several months. Prices certainly haven’t fallen drastically as CMHC recently predicted and as long as our recover holds, they will stay stable. There are good reasons for first time buyers to enter the market and great reasons for people living in those starter homes to move up. Five year mortgage rates are hovering just under 2% and there are still plenty of great homes on the market at prices well below the peak of 2014.
The central Alberta real estate market continues to recover nicely in the first half of July with sales up 15% compared to the first half of July 2019. The number of active listings is down 19% compared to last year and that decrease in supply coupled with the increase in demand means prices should remain stable.
Forecasting the future is difficult without knowing what lies in store for our area. Central Alberta continues to beat the odds when it comes to Covid infections, but it would be naïve to suggest we couldn’t have an outbreak. That would almost certainly have a negative impact on the local real estate market.
The other factor is the national and provincial economies and how well they recover. We need jobs and the resulting economic security to ensure a long term stable housing market. Albertans are resilient and tough and the experience learned from several downturns that will allow us to find solutions for today’s challenges.
MLS sales in central Alberta recovered nicely in June, back to the levels we experienced in June 2019. In fairness, June 2019 sales weren’t spectacular, but it’s great to see how well the market has recovered from the Covid-19 shutdown. To put things in perspective, central Alberta residential MLS for the first half of 2020 are down 18% compared to the first half of 2019 and a whopping 48.7% compared to the first half of 2014.
We often are asked what has happened with prices over the past few years as well as where we think they are going in the coming year. Neither question is easy to answer but it appears that pre-Covid prices in central Alberta were down about 10-12% compared to the peak in 2014. It’s more difficult to identify what prices have done post-Covid. That would require finding similar homes sold before and after Covid and there just aren’t enough of those in our small market to accurately evaluate a price change. Our best guess would be 1-3% depending on the price range.
Where are prices going in the future depends on supply and demand. Some central Alberta markets moved close to balance in June because supply is low, probably because of Covid. When markets are in balance or moving toward balance, prices should stay stable. The unknown is how the Alberta economy is going to impact demand going forward.