I have been reserving judgement all year on the market until we were through September and October. Well the stats are in and October and September were, as Jim Carrey would say: “smokin.”
Signs that a balanced market were coming started to show around April. There are still some unresolved issues out there in the market place, especially in newer condominiums, but overall the market has performed very well in comparison to 2007 and 2008.
If you look at equitiy markets and how they bit the bullet from October of 2008 to March of 2009 it's easy to correlate that this plunge affected confidence in real estate. Speaking to one adviser for Mawer group (an investment company with 6.5 Billion in assets under management) they didn’t see the bounce in March coming.
In real estate however, confidence in strong fundamentals improved affordability, and lower interst rates gave buyers the confidence to move forward. Slowly but surely the log jam of inventory that had been pressing prices down was unlocked. While prices were relatively stable this October, the overall picture year to date is a lot rosier in Edmonton than it was just 10 months ago.
While some problems still have yet to be worked out in the Alberta economy (stagnat gas industry and increased deficit), there have also been a lot of positives for Alberta and in particular Edmonton. With the cost of labour down, many companies have been looking forward into the future and that has played out well for Alberta so far. The chill of potentially higher interest rates to come has not seemed to dampen the market yet, but that will be a developing story in the months to come.
Here is what it all looked like:
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Mawer didn’t see the bounce coming mauybe because it wasn’t based on anything to do with fundamentals. I have changed my tune onthe Canadian economy. It is so reliant on the US. The US economy is still very sick and coupled with an appreciating CAnadian Dollar it is not looking good for companies in Canada that export. While low interest rates are good for mortgage repayments, sustained low interest rates are a sign of a very sick economy. The southern hemisphere economies are looking alot healthier due to their reliance on Asia and specifically Chine to fuel their economies. Chine is still growing strongly. Australie have even raised their interest rates signaling the first of many rises to stem inflation. Canada is not even close to being in this category and I fear some more pain in the Canbadian economy over the next 12 months.
One good sign as well is RBC’s Housing Affordability Index. I was just going through it last night, and there’s lots of good news in there.