As we've been reporting for well over a year, new home construction in Edmonton is still slow. A report released by Canada Mortgage and Housing (CMHC) today shows this year is even slower than last year:
- Total housing starts in the greater Edmonton area in February were 213, down from 692 last year and 1106 in 2007.
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So far this year new starts totalled 626, down from 1837 in the first 2 months of last year and 2204 in 2007.
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There were 149 single family home starts, compared to 243 last year and 576 in '07
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There were 64 multi-family starts in February, compared to 449 last year and 530 in '07
From the report:
CMHC expects single starts to remain slow throughout much of 2009. Year-over-year increases in monthly activity are not anticipated until after mid-year, provided new house inventories head lower. “Notable year-over-year increases in single-detached starts will not occur until 2010,” noted Richard Goatcher, CMHC’s Senior Market Analyst based in Edmonton.
“Developer unease over rising condo apartment inventories will cause multi-unit starts to be lower this year than last,” said Goatcher. “Provided the necessary adjustment is made this year, a gain in multi-family starts should occur in 2010,” he added.
Pretty wild numbers. I’ve been talking to a couple sales reps over at Jayman, Landmark, Daytona etc.. and things “look” a lot busier this month. But I haven’t seen many of their available lots vanish yet.
Prices are down 22% since the peak in May 2007…
There are deals out there, contrary to what doomsters will tell you.
Hhmmm…. a home at $350K now that was $450K then…..
Can it go any lower?
Maybe. By much? Maybe.
Is maybe good enough?
Maybe not…
Is your job going to be there next month? maybe? NOT!!!
I can’t speak for expat but I own my own business and sales have been better than ever. It isn’t doom and gloom in AB, yet, but I understand with your namesake you probably can’t help but be a pessimist.
Not yet, not sure I agree, but it is coming.
Even the govenment is saying things are going to get worse, much worse then was expected regarding the economy and job losses. We announced 60 layoffs in my company last week (IT) related.
Don’t know anyone who isn’t worried, personally I’m grateful each day I still have a job.
What business (general) are you in James?
I have a bold prediction.
My gut feeling is that in 20 years time, Edmonton and Calgary house prices will double (from previous peak pricing) or Triple if you take into account the average selling price today.
Why the bold prediction?
Well for starters, historically speaking, the average price of a single family home in Calgary and Edmonton HAS doubled over a 20 year time period.
Alberta will not only be the epicenter of the Canadian Economy (Which it is now), it will be the Epicenter of the North American economy as dwindling oil reserves and industrializing countries such as China and India grow at an alarming pace.
Manufacturing jobs in Ontario will be non-existent with the entire autosector industry being exported to Asia.
The migration to Alberta (interprovincial) will be alarming putting a further strain on infrastructure and essential services.
Developable land within the municipal boundaries of Calgary and Edmonton will be expensive and scarce.
You heard it here first.
I 100% agree Julian, an absolute entry level 750 sq.ft house will be in the $500,000 neigbourhood.
Bold but probably very accurate prediction. The interprovincial migration will become a huge issue within the next few years. Municipalities like Calgary and Edmonton better get ready and start planning vigarously.
I guess it probably isnt very bold.
It isnt bold because 20 years is a long time.
Sure the average starter home in Edmonton or Calgary will reach $600,000 in the next 20 years (2029) but that is not to say we wont experience problems along the way.
Hyperinflation will be a big concern 5-10 years from now. Governments are printing money out of thin air to spur the economy.
Globalization and NAFTA has exported more jobs overseas. There will be a significant wealth transfer from Eastern Canada to Alberta and Saskatchewan.
Detroit is a virtual ghost town because the auto industry is not viable there anymore. I envision Hamilton, Barrie and outlying cities in the GTA to go the same route. People from these cities and towns in Ontario will be forced to migrate out west because we have energy resources that will be in demand (Globally)for atleast another 50 years.
I bought a truckload of gold last week at
$1000 an ounce, hoping that prices will double soon and today, it’s $895 so I sold it at a big loss.
What a good investment! Thanks for the advise, Cindy!
Your estimate could be very good Julian. We’ll all have to re-convene in 2029 to see if you were right or not.
A few points I’d like to make:
First, when you look at long-term financial investments (if you consider your house an investment), it’s important to look at real dollars and not nominal dollars. If house prices double, will that be in step with inflation? While house prices in the 90s were flat in nominal dollars, they were actually declining in real dollars (bad investment).
Secondly, I don’t think there are any demographers expecting to profit twenty years out by owning homes. Holding migration constant, there will likely be downward pressure on SFH as the babyboomers age search for smaller living spaces. The babyboomers, and their changing consumption patterns, should not be underestimated. Twenty years from now, you’ll probably be wishing you had invested in health companies or retirement homes or… maybe even condos (shudder). But who knows?
I see the dramatically lower new house starts as both negative and positive in terms of Edmonton real estate.
For starters, they clearly show that the market is not as hot today as it was last year or the year before. But everyone already knew that.
The silver lining is that if the number of new houses being built is down dramatically, it’s just a matter of time for demand to catch up with supply. So the current pain being felt by builders is good for the long term health of the Edmonton market. Also, think for a minute why builders are not building new houses? A couple of years ago, they couldn’t crank them out fast enough. They were probably making a killing. Not today. The dramatic falloff in new home construction is more likely an indicator that it has become very difficult to make money in new home construction anymore, as prices have fallen substantially.
I think two things will support a bottom in Edmonton real estate prices. The first is the replacement cost of a home, and it looks like replacement costs are equal to or greater than current prices, so I’d say that factor is currently supporting a price floor, by reducing supply.
On the demand side, people need to believe that a home is affordable and a good investment, thereby increasing demand. I don’t think we are there yet, and with the current economic situation, and recent fall in home prices, it may be a while yet before people come out again and buy up houses in droves. But we are getting there.
It looks to me like most of the correction is done. If prices fall any lower, builders won’t be building anything, and supply will eventually dry up. Of course, I’m assuming that economic armageddon is not right around the corner, but I’d be surprised if prices have more than another 10% to fall.
I do think Julian is right. In the long term, RE prices can only go up. Doesn’t mean there won’t be pain along the way, but I think we are through the worst of it. Time will tell.
EDMONTON — Northern Alberta is the best place in North America to weather an economic storm that’s becoming worse than originally forecast, said Michael Percy, dean of business at University of Alberta.
“When I look down the road, it’s going to be grimmer than I thought it would be for the next year, year-and-a-half. This is going to be an intense downturn,” he told city council Tuesday.
However, Percy said “there’s no better jurisdiction to be located in than Alberta,” particularly north of Red Deer, because he still expects companies to pump money into oilsands projects as prices improve.
“At the end of the day, so many fundamentals are positive in the case of Alberta, the best strategy is to treat this as short-term.”
CALGARY — As Alberta’s oil sands industry struggles with depressed oil prices and opposition from the environmental movement, a new front is emerging to support it — in Washington.
From the recently formed Center for North American Energy Security (CNAES), headed by former Republican Congressman Tom Corcoran, to the American Petroleum Institute (API), some of the world’s major oil companies and former U.S. ambassadors to Canada like Gordon Giffin, some big guns in Washington’s lobby community are taking up the oil sands cause.
Rather than leaving the Canadian embassy, Alberta’s government office in Washington or Canadian oil sands developers to do all the talking, American interests are throwing their weight behind Canada’s oil to protect their investments from the green agenda of President Barack Obama.
Mr. Corcoran said there has been intense lobbying in the United States to limit the use of Canadian oil sands. “The new development is that there is pushback. A number of the major oil companies … have substantial interests in Canada. ConocoPhillips, Exxon Mobil, Shell, have a corporate strategy to develop the oil sands and are well aware of the sizeable market here in the U.S.
Julian – don’t waste your breath. I have said the same thing a month ago for along the same lines of reasoning and with the number of naysayers here who listen only to TOUT TV and have no clue what goes on outside our borders the world is coming to an end. You should sell your house at a loss or small gain and move in with your parents as its all doom and gloom forever. Simpletons.
To answer a previous question, I am aware that my projections on pricing is merely a nominal projection and doesnt reflect real pricing.
I am looking at pricing comparatively.
A starter home in Calgary / Edmonton at $800,000 in 20 years is substantially different than a the price of a starter house in Thunder Bay ontario in 20 years at probably $350,000 or $300,000.
The gap between these markets (outside Alberta) will be alot more substantial than it is now.
I was talking to a realtor in Griesbach who are trying to “unload” condo units in that big building there… She told me to hurry up and buy now because owners was moving in by February but I don’t see many lit windows there at night now…
She also told me that units started at the low $400K at that time (January) but in February, their website advertised such units from the $300K… My point is that I know that their prices would go down soon but she wanted to sell at higher. With a scam like that, I’m glad that the whole building has no lights on at night!!!
Also my prediction for home resales…
Prices are down 22% since the peak.
By end 2009, prices will fall a further 5%
So a house that was at $450K at the peak is $350K now but only $330K by christmas time…
Also, oil futures are slotted for $80 a barrel for this summer (just google oil futures) this will re-stimulate Fort mac.
In E-town, home resales will go up because of that by summer 2010, resale prices will also level off (bottom out) and be more stable. By 2011, prices may start to go up, unless the stupid builders start – again – building 10000 spec homes by then…
according to:
http://www.bloomberg.com/energy/
oil futures are actually at $125 US a barrel for this summer…
That deflation will be short lived… so much for crazy Garth Turner that tells the world to run for the hills and to start living like hicks by eating squirrels.
Oil futers at $100 – $125 this summer will re-stimulate Ft. Mac?
Do the Oil companies not access to this information?
Why would they stop these massive projects if oil was going to be back up at that price in a couple months.
What exactly does the “oil futures” mean?
Don’t really see that.
Turner has been promoting a recovery in stocks and energy over the last few weeks. But his site is overrun with doomsday cheerleaders now.
Nate,
They always say things have been “busier” but inventory of new homes available in Edmonton is the highest in at least 15 years.(http://business.theglobeandmail.com/servlet/story/RTGAM.20090311.whousing0311/BNStory/Business/home)
I’ve heard certain builders with alot of spec inventory have been giving fairly substantial discounts on their already built homes (a friend just offered 50K less then then already reduced asking price and indeeed (House was for sale in Jan 2007 for 520K, last month the same house was down to 399K, sold for 349K; 1800 square foot house in the new part of Riverbend).
If the average house increases to 600K in 20 years as has been suggested that would indicate we should invest our money elsewhere as the return on that would be an annualized 2.85%, slightly less then what inflation will be over the same period of time. However, excluding booms and bubbles, historically Edmontons housing market has appreciated at a slower rate then inflation so I’d say the number could be right.
For those suggesting Edmonton will be the centre of the North American economy, I’d suggest is a tad less realistic. Right now, as everyone knows, there is a focus on “Green Innovation” developing alternative energy sources and efficient technologies (Hybrid and fully electric cars are clear examples, there are many breakthroughs around the corner in clean energy). So in the short term I see a recovery in energy prices but in 20 years I see out oil fields being of far less economic relevance then they are today. We’re the dinosaurs of the new economy and while other oil producing countries like Norway and the United Arab Emirates have taken thier Oil profits and invested in a diverse economy we have not…if our policy makers don’t catch up to these trends we’ll be left in the dust.
http://en.wikipedia.org/wiki/Futures_contract
It means that with all of the production cuts, the price of oil is going to go back up to/around $100.
We had demand destruction last year which drove the price of oil down. Now we’re having production destruction with low oil prices.
Projects in Alberta were going hopelessly over budget due to the boom and the labour crunch, now that things have slowed down, projects can slowly ramp back up at more realistic price points.
I will gladly sell you all the oil you want for $125.00 this summer. Sadly you are looking at the prices for Heating Oil which isn’t the Crude we produce here. On the bloomberg page you should be looking at crude prices, the futures for June are presently $47.00
http://futures.tradingcharts.com/marketquotes/index.php3?market=CL
Those prices are for Light crude which is typically drilled and easy to refine. In the oil sands we produce heavy crude – which is harder to refine – and thus sells $7.00-15.00 less per barrel then light crude (also knows as brent crude or light sweet crude). Futures on heavy crude for June are 35.70 at the moment.
You guys are hilarious. Another Oil led recovery? This summer? Dream on.
Oil led recovery? Your words, not mine.
Bob Truman posted his Edmonton stats for 1-10 March…
SFH are down $2K or 0,5% this month, MOM so far.
Some builders might go out of business?
Good for them! They’re the ones who ruined the market in Alberta, not lack of buying. The builders overbuilt by the thousands during the peak and now we have a glut of their poorly build pieces of garbage on the market.
I won’t be crying when I hear some are going out of business.
Good riddance.
I would laugh my @ss off if some builders went out of business, like I’ve said in previous posts, had a horrible time with some of them. Won’t mention names (last time I did I was censored). But I would not shed a tear.
They took advantage of the times and did not think of the people or the future.
Let them burn…
You might as well lump most (all) housing trades in your vendetta. All trade prices went up, and are now starting to go down. I know one builder that was not building Spec homes and could barely keep up with presold homes. However, looking in hindsight many of those presold homes were built for speculating customers who have since defaulted, whose fault is that?
I have no problem with someone/company doing well in good times, Its when they treat people like they lucky they are even talking to you that I have a problem with. When they change prices from one day to the next and tell you if you don’t like it there is a line of people behind you who will take. When they think of only today and not the future, when they treat people poorly.
Those trades that did the same can burn with the Home Building companies.
What goes around comes around.
Treat people how you yourself want to be treated.
burn baby burn! I better start working out and stock up on some guns for when anarchy happens. I play lots of video games so I should be fine.
hahaha… You’ll be wishing you didn’t sell your gold 2-4 years from now! you have to think LONG TERM! You can invest on emotion and sell if you see something going down over a short period.
We’ll likely see a stock market rally over the next little while. Dow may get back up to 8500… The Analysts will say the market has bottomed and is on the way back up… but then it’s going to get clobbered again! DOW 4500 – 5000 is my prediction.
“I play lots of video games so I should be fine.”???
LOL!!!
You’re as smart as the speculators who bought 6 homes in spring 2007!
Having said that, yes, builders were cocky. I talked to one of the “master builders” types in late 2006, and they had no time for me when I asked for a price reduction or a discount to finish a basement (they wanted $67K to finish a 700 sq ft area!) The same builder told me (its Klarvatten development) in spring 2008, that he would finish the basement for free if I would buy one now…
Yes they can burn in hell. Their greed played a huge part in what’s happening now,
Also, the city of Edmonton selling those puny cat litter box size lots for $150K was a stupid move.
Here in Ontario where I live now, a bigger lot goes for $60K and that same home goes for at least $125K less. Savings close to $200K.
Andrew, I agree with your analysis of the likely return of Julian’s prediction, but if we’re looking it as a place to make money, rather than just to live in don’t forget to factor in leverage and cash flow.
I also agree that the energy reality in ~20 years is going to be starting to look quite different from today, but I also think that Alberta’s making the right types of investments (ARC, UofA and other institutions).