Levelling in real estate market sets stage for stronger 2008

Magrath

Levelling in real estate market sets stage for stronger 2008
7 c% ~' i4 E% @/ d% N4 g. ^0 G
. C! k- L$ d- l1 e. HGary Lamphier
The Edmonton Journal
' n8 ~* |$ c. H6 t* W/ o3 j
Tuesday, August 21, 2007

2 I: U4 S( Z, K3 gEDMONTON - The stats don't lie: Edmonton's once-torrid housing market is showing clear signs of cooling off, setting the stage for what some observers say could become a buyers' market over the next six months.
' a9 k. H! k9 \/ f3 L/ z0 v# K
) J# S) P  _# _* tWith Alberta's economy still red hot, oil prices remaining high, and $150 billion worth of oilsands projects, upgraders and related work in the pipeline, no one is forecasting anything like an '80s-style housing crash, of course.

9 L" D8 e3 e1 o) q# ?. s' kIn fact, quite the opposite.
" m, V' K, ?+ n% L; ?/ t1 k
1 a, J' R; N7 C" a9 \  Z& k2 NAccording to Canada Mortgage and Housing Corp.'s latest forecast, average local MLS prices for all of 2007 will undoubtedly show healthy gains, even if second-half prices are basically flat.

Moreover, CMHC and most local builders predict another strong year for the housing market in 2008, once the resale market manages to digest the current bloated inventory of unsold homes.

But that will take a couple of quarters to happen, they figure. And that could give buyers the upper hand, at least for a while. Speculators who hoped to flip properties for a quick profit may not be so lucky.

1 v1 F/ R4 x2 U* ^"Over the last couple of months, most new home builders -- in terms of sales -- have hit a wall. That's partly because it's summer but also because there's too much choice out there," says David Bates, sales and marketing manager at Edmonton's Reid Built Homes.
) O" O) d" F4 P$ V
Gregg Becker, Jayman MasterBuilt's Edmonton-area general manager, sees the same trend unfolding.
' @" q$ d8 B" z* p% w/ s3 a3 G
0 U3 @7 x7 w. ~"We're looking at inventories now that are higher than anything we've seen since 1994. We also saw a resale price drop in June for the first time in a long while, and a lot of the major home builders are sitting with a good number of homes in inventory," he notes.
, o' n  h  ~8 _# _
"I don't really want to use the word 'softening' because I think this is more of a normalizing market. We were super-heated, and now we're coming down to something that's more reasonable."

& l* b9 l! _; ~$ s3 QAs the Journal's Ron Chalmers reported a couple of weeks ago, the latest monthly stats from the Realtors Association of Edmonton show average single-family house prices slipped $115 to $417,150 in July, while condo prices rose 2.5 per cent to $271,908.

6 r# D2 i) [7 n, }  d- P( `  KThat translated into an average July price for all housing types of nearly $355,000, up 1.9 per cent from June.

The July uptick offset a drop of 1.8 per cent between May and June, which ended 17 straight months of eye-popping gains.

+ m+ v& F' k) a8 {, v# H, ]During that stretch, average prices soared by 46 per cent, making Edmonton the hottest housing market in Canada.

Despite the modest price gains in July, sales levels were the lowest for that month in five years, while the inventory of unsold homes on MLS hit a record high 8,183 units, up 340 per cent from July, 2006.
+ l: `9 }# q, j7 R- W
Not much has changed over the past few weeks. Indeed, if one includes the current inventory of unsold homes on ComFree, there are roughly 11,000 unsold homes on the market at present, and that's making some players nervous.
0 K" t* K8 v. @
"It's a very different landscape now than it was, even three or four months ago, and it's definitely different than this time last year in terms of the supply-demand relationship," says Richard Goatcher, senior market analyst with CMHC's Edmonton office. "This time last year we had an accelerating market with huge price increases and virtually no inventory. Now there's lots of resale inventory. In terms of new inventory there's not much now, there but there's a lot coming."
& T" @  [: w1 q5 s
; ~; p. \4 ?0 ~In other words, the second shoe is about to drop. More than 8,000 new housing units are under construction currently, Goatcher notes, including 6,000-plus condo units. That inventory will also have to be soaked up for prices to advance.

"We're looking at a record number of singles under construction and a 25-year high for multiples under construction. So I sense there is some unease out there," he says.
9 w' O  w. k) u: f8 W
8 M, H( r& R* e% O"Investors need to be cautious. People who are considering venturing into buying properties for investment purposes, they should consider where we are in the cycle. We've gone from being in an accelerating market to a sellers' market to a balanced market in just three months. And if these trends continue, we'll potentially be in a buyers' market by the fall."

2 v  X- d& K, b" A6 cErin Holowach, co-president of ComFree, says Edmonton's housing market looks set to undergo the same kind of readjustment that Calgary experienced last year, when prices flattened out to allow inventory levels to shrink.

( X0 e" h0 H# _* N, c"Over the last year when Edmonton was going through this phenomenal growth Calgary was seeing a little softening. The sky wasn't falling. It was just a bit of an adjustment," she says. "What I see for the next six months is that our inventory is going to stay high through the fall and winter, partly for seasonal reasons until we see some price equilibrium. Then we'll roll into next spring with price increases and a strong and solid housing market."
. C) R* [( s' R1 {
& x: c0 L4 z& T% B" ]" p$ rPat Adams of Aldritt Homes says he's still amazed by how much prices have risen in Edmonton. "There's a house around the corner from mine that just sold for $1.75 million. I would not have believed that anybody would pay that for a 2,800-square-foot, two-storey home."
$ J* N- Q& I0 {6 m+ z
, b7 S, j& ^+ a2 `" E& Iglamphier@thejournal.canwest.com

; @/ K0 v; e; H2 z- }EDMONTON HOUSING MARKET OUTLOOK

YEAR / TOTAL HOUSING STARTS / SINGLE DETACHED HOUSING STARTS / NEW HOUSING PRICE CHANGE / MLS SALES / MLS AVERAGE PRICE / RENTAL VACANCY RATE / AVERAGE RENT
% j- p' A9 f" T. F
2 O7 X# M+ j3 G* r  e- 2006 / 14,970 / 9,064 / 28.9 / 21,984 / 250,915 / 1.2 / 808

4 N! O9 u7 I3 V" u, e+ W) l  a$ N- 2007* / 14,750 / 8,250 / 35.0 / 25,000 / 345,000 / 0.07 / 950

- 2008* / 13,600 / 7,600 / 20.0 / 23,500 / 380,000 / 0.05 / 1,090
8 k% o0 {7 J: |. \$ k1 ^7 b© The Edmonton Journal 2007

smalltown

I don't see that prices will go up as there are so many houses on the market.

11000 resale homes + 8000 new homes, that's almost 20000 homes. We need more people coming.
' E% P& O" q( r! K
$ Z& V" Q, s8 C* `4 t% RRealtors and home builders are always hoping house prices keep going up. That's their best interest.