Edmonton Home Builders Ramp Up Production Again

by Sheldon Johnston and Sara MacLennan on 10. May, 2010 in Edmonton Real Estate Market, Investing in Alberta Real Estate

New-home-construction CMHC released their housing starts report today showing that Edmonton home builders are very busy once again... There were 1047 starts in April compared with 355 last April. After four months Edmonton builders have started 3439 units compared to 1116 last year. Construction started on three times as many single family homes (620) in April 2010 compared to 2009 and 5 times as many condo units (787). This is the first time in quite awhile that more condos were started than single family homes. With resale inventory on a steady rise, and new home inventory about to jump significantly, we are going to see increased pressure on prices in the near future.
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14 Responses to “Edmonton Home Builders Ramp Up Production Again”

  1. Spud 10. May, 2010 at 6:28 pm #

    Sheldon are there any stats on what % of house builds are spec or built to order? That many specs coming onto the market will have a bigger impact than if they are built to order.

  2. A@ibidbroker 10. May, 2010 at 6:35 pm #

    Its good to see the economy and builds starting to pickup. With new inventory on the rise, I wonder what the overall avg price of homes will be…

  3. Paul Viau 10. May, 2010 at 6:59 pm #

    That’s amazing! Those numbers are great! That’s very interesting that the condo #s are up higher than the home starts. Must be a few major projects finally getting off the ground.

  4. Sheldon Johnston and Sara MacLennan 10. May, 2010 at 10:00 pm #

    Unfortunately no that stat is not available. In the quarterly report they indicate the number of completions and inventory etc but not specs vs customs.

  5. Duke 11. May, 2010 at 9:32 am #

    Spud just a quick check of two of the bigger builders in edmonton, homes by avi has 58 spec homes for sale and Jayman has a whopping 125 spec homes for sale. Sort of surprised that Jayman has so many on the go as they almost when bankrupt 12 months ago.

  6. Don 11. May, 2010 at 11:12 am #

    Of Jayman’s 125, only 67 are Edmonton/Sherwood Park/Leduc. But yes, this all seems pretty nuts in the face of the softening of the resale market. Don’t these people do any forecasting? Did the builders think the interest rates were never going to go up?

    Just a few weeks back, friends of mine and I were recalling the fate of Nu-West Homes in Calgary. They built much of what I think of as long-established suburban Calgary, but when the NEP and the oil price crash took the legs out from under the boom in the early ’80s, Nu-West went deep underwater.

    http://www.albertasource.ca/realestate/people/developers_scurfield.html

    It seems to me the end of emergency interest rates was far more predictable than the end of the oil boom was then, and still, it appears builders are determined to make the same mistakes.

  7. Sasquatch 11. May, 2010 at 12:46 pm #

    An interesting stat from the CMHC in their recently released housing report shows the average price of new homes. For the first Quarter this year they sold 650 single detached houses in Edmonton proper at an average price of around $470,000, in the first quarter on 2009 they sold 450 houses at an average price of $650,000. So prices are significantly down…I’d imagine this is because the buyers have shifted downmarket and not that there is a 200,000 reduction in house prices…but interesting nonetheless.

    Hard to say if the ramped up production will add a tonne of inventory (though the Bank of Canada has already said housing starts in Canada generally exceed demand) the numbers are drastically up from ’08 and ’09 but still down from ’07 and ’06…I guess the issue is they are building against whatever economic forecast they use (or perhaps gut instinct) without knowing what the demand will really be when they are completed a few months hence – and they don’t have a great track record…in ’06/’07 the builders were tearing up contracts because they felt they sold for too little (if you are buying one get a lawyer as the contracts gave the builders all kinds of rights and the consumers none in many cases) – in 2008 they were deeply discounting spec homes.

    I post a lot about my opinion that prices are more vulnerable in the suburbs and that’s one of the reasons why…the builder is generally pricing at a margin of 20%+ and can undercut the resale market when things get tight.

  8. steven 11. May, 2010 at 4:17 pm #

    Using the Jayman site you can build your own 2 story – 1200 sqft. 3 bed, 2.5 bath house in mcconachie for $312,066 including GST. I understand that’s a small main floor and small basement on a small lot. But it seems to be very competitive with older houses in the area. Are there lots of hidden costs for new construction?

  9. James 11. May, 2010 at 7:25 pm #

    http://www.edmontonjournal.com/technology/Edmonton+building+permits+plummet/2994521/story.html

    Building permits are typically a better leading indicator

  10. Average Joe 11. May, 2010 at 9:30 pm #

    In this case it’s a trailing indicator.

  11. Don 11. May, 2010 at 11:03 pm #

    We came close to building with them, but once we totalled up the a la carte items (pie lot, a little extra height in the basement for an in-law suite, some kitchen and environmental upgrades, &c, &c…), we had no problem adding a hundred grand to the price. This was by no means a gold plated package, either. But yes, you can get a brand new basic house in a new outskirts subdivision for a price competitive with the resale market in more established communities.

  12. Sheldon Johnston and Sara MacLennan 12. May, 2010 at 3:14 pm #

    I wouldn’t say there are “hidden” costs, but there are a lot of upgrades that can add up to a lot of coin really quickly. The other costs people don’t often think of with new homes are window coverings and landscaping. Even the simplest deck, fence, sod and tree can be quite expensive, as can window coverings when you consider you have to do the entire home.

  13. James 12. May, 2010 at 5:34 pm #

    How so?

    Building permits are what is to come and housing starts are what is happening now.

  14. Keahi Pelayo 19. May, 2010 at 11:04 am #

    If Edmonton is like Honolulu, there is pent up building demand. I wonder if there is going to be huge upswing in new projects here?
    Aloha,
    Keahi