Is the Edmonton real estate market overheating?

There is always someone who has to cry “the sky is falling” and today it is a senior investment bank economist. The article below has some excellent points, and in comparing the current boom to those of the late 70′s and late 80′s does find some rather scary comparisons. What is missing though are the other factors in the economy like the strong job market and low interest rates we are currently experiencing. Lucky for us Edmonton was over-looked (as usual) in this article so I guess everything here is just hunky-dory.

Western Canadian housing market overheating: BMO-NB economist

Canadian Press
Published: Tuesday, May 30, 2006

TORONTO (CP) – Just when the U.S. home-price boom is abating, Canada’s housing market is accelerating to a potentially dangerous level, a senior investment bank economist warned Tuesday.

“Bubble-like activity” is concentrated in the West, Douglas Porter of BMO Nesbitt Burns (TSX:BMO) wrote in a report, but “that doesn’t make it any less real.”

He said the American real-estate surge is drawing to a close after sales peaked last summer, “but just as U.S. housing is finally cooling down, there are signs that the Canadian housing market is actually heating up, potentially dangerously so.”

Canadian price increases have surged ahead of U.S. trends, Porter writes, because Canadian interest rates are lower and because the boom took longer to get rolling in Canada, while Canadian employment growth has more than doubled the U.S. pace.

“To those in Central Canada, it may seem passing strange to talk about a housing boom, since conditions in Ontario and Quebec are far from frothy,” Porter noted.

“But just because bubble-like activity is concentrated in only some regions – pretty much anything west of Lake Superior – doesn’t make it any less real. The much-ballyhooed U.S. bubble was largely relegated to the coasts and sun-spots.”

Almost every major city in Western Canada has posted double-digit percentage increases in home prices so far this year, “led by a jaw-dropping 28.9 per cent spike in Calgary,” Porter said.

“Vancouver is not far behind at 21.7 per cent, and average prices there have pushed above the $500,000 barrier.”

Conditions have “become even more torrid in recent months,” and residential construction’s share of the total economy is approaching the level at the past two major cycle peaks, in the early 1970s and the late 1980s.

“While the first episode was largely justified by underlying labour force trends, the latter was not, and it ended in tears,” he concluded.

“The longer the current boom lasts and the higher it climbs, the greater the risks of an ugly end to this housing cycle.”

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5 Responses to “Is the Edmonton real estate market overheating?”

  1. Sheldon Johnston 30. May, 2006 at 7:06 pm #

    It is always interesting to see the senior analysts from Banks spout their stuff. I’d love to see his record on previous years of predictions and especially the many industries he has said were great that ended up sucking wind. Its not to say that he is incorrect but if he is where is the Bank of Montreal’s restraint in this market. They have none. They want everyone’s mortgage business just as bad as the next lender. So I’d suggest he stick to analysing senior issues like what colors will be fashionable in 2010. His fundamentals are just wrong and if they are right his bank ought to put there money where his mouth is.

    Sure the market is heated and sure it is going up but if you’re looking for a crash look to BMO stock if this guy’s picking the winners.

  2. Brent 31. May, 2006 at 5:51 am #

    At least one thing is overheating in Edmonton, okay maybe 2….the Oilers. The climate never has and never will, not my number one spot as a choice to live.

  3. Sara MacLennan 31. May, 2006 at 8:37 am #

    Lol…25 degrees and sunny today :)

    Actually, I can totally understand. As a recent import from Ontario Edmonton was definitely not my first choice. But I have been pleasantly surprised by the city and the climate. It’s so nice to be away from that humidity, and there really was no winter this year.

    Anyway, thanks for the comments!

    GO OILERS GO!!!!

  4. Brent 31. May, 2006 at 6:24 pm #

    You better make sure you get out and enjoy it sara because their few and far between. Born and raised in Edmonton, I know the summers are short and sweet. Having travelled and worked around the world, everytime i’m abroad it opens my eyes as to what i’m missing. What 80% of the population of North America takes for granted every summer, Edmonton see’s 2 days a summer.
    Granted global warming or should I say Fort McMurray warming has warmed the winters a degree or two. You don’t see the 40 days of 40 below anymore like I did as a school kid, but there still crap.

  5. Brent 31. May, 2006 at 6:25 pm #

    You better make sure you get out and enjoy it sara because their few and far between. Born and raised in Edmonton, I know the summers are short and sweet. Having travelled and worked around the world, everytime i’m abroad it opens my eyes as to what i’m missing. What 80% of the population of North America takes for granted every summer, Edmonton see’s 2 days a summer.
    Granted global warming or should I say Fort McMurray warming has warmed the winters a degree or two. You don’t see the 40 days of 40 below anymore like I did as a school kid, but there still crap.