Our agents have noticed a lack of homes available for sale in Edmonton, both on the resale market and new construction. Industry insiders have told us their show homes have been very busy for the past month or so, and sales are increasing. Edmonton area home builders definitely responded to demand in 2012 and increased production significantly.
According to a report released by CMHC today, housing starts in the Edmonton area were up nearly 40% in 2012 compared to 2011 (12,837 compared to 9,332). While single family home construction increased in 2012, the biggest increase was in apartment style condos.
In 2012, there were 5,658 single-detached homes started within the Edmonton CMA, representing a 13 per cent increase from the previous year. Even with the increase in starts, the inventory of complete and unabsorbed single-detached homes
decreased slightly to 611 units in December 2012, down from 614 units in the same month in 2011. The median price of absorbed single family homes was up 7% in December to $481k.
In 2012, multi-family housing starts reached 7,179 units in the Edmonton CMA compared to 4,315 units in 2011. Construction of apartments nearly doubled from the
level in 2011, while row and semidetached starts increased by more than 50%.
This activity can be attributed to employment and population growth. A strong
appetite for Alberta’s energy fuelled demand for labour in the energy sector and its supporting industries. On an unadjusted basis, the primary resource sector, added 6,200 jobs since 2011. These labour market conditions continued to draw migrants to Alberta. Statistics Canada estimates that Alberta gained 24,724 people in the third quarter of 2012, more than double the same quarter recorded in 2011. The gain was mostly contributed by net interprovincial migration, which increased more than five-fold to 13,915 people from 2011 levels.
Edmonton Employment, Source: Stats Canada via CMHC
So, will it continue? Will there still be jobs later this year for all the people that moved here in 2011? The rental market is extremely tight right now, if the jobs last, more people will start to buy homes as renting becomes a less attractive option.
About Sara MacLennan
Sara MacLennan is the Director of Marketing at Liv Real Estate and a licensed Real Estate Associate. The bulk of Sara’s experience and wealth of expertise lies in on-line technology and marketing both for agents and consumers. Sara is the former National Director for Interactive Marketing for Coldwell Banker Canada where she was responsible for an extensive training program traveling to offices across the country training agents and brokers on marketing and technology. Find Sara on Twitter @edmontonblogger.
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It always amazes me when real estate bulls equate lots of building starts with a coming increase in their already owned and occupied properties. Sure, as the city grows out and out and out (Prarie Style) some neighbourhoods get more desireable, but out on the fringes in the new burbs the opposite can also happen.
Good friend owned a nice house in a southern new community for a few years. When he went to sell a couple years ago the same builder that built his house (with tons of problems by the way) was building brand new houses just down the road, with a few more bells and whistles for just a little less than we wanted to ask for his property, which by the way was very reasonable according to the listings around him and according to the realtor.
Lots of lookers that visited the property also made it clear they were looking at never owned down the road. He sold the house in decent time (lots of landscaping money and labour was a bonus) but for a healthy discount…from asking.
Builders costs (labour, wood, concrete, shingles) are variable and if you bought in the buildup or end of the boom there is a good chance brand new houses are costing less than you expect to get from yours.
Last bit of personal anecdote…friend just renewed mortage on a townhouse investment. 5 years later it is worth $30 000 less than paid. Factor in inflation and the picture is much worse. New units popping up all around it like a pimple breakout on a 16 year old….yea for less.
Real estate can be, but is not always a good investment.
Yes very true, this happened to me with the very first property i bought back in the 90′s. Morral of the story, don’t buy property in brand new neibourhoods that have tons of available land. Buying a new home in suburbia in the middle of a field is the equivalent to buying a condo in a 200 unit complex, your at the mercy of everyone else and their price, all it takes is one or two people to blow their house out at a reduced price and that becomes the new value of your property.
New areas are not any worse or better. They are just volatile. They go up further during a boom and drop deeper when there is a bust.
The investment aspect of real estation is the same as any other investment types. You will need good judgement and patience. Even with a sound model, even a experienced investor such as Warren Buffet, doesn’t necessarily have a positive return for an anecdote time period. It’s simply stupid to dismiss an investment type because there is no positive return for a very specific 5 year term.
The other side of the coin is that when you buy a house, you save rent. A new town house will cost about $20k / year to rent. That is $100k for 5 years. At the same time a $250k mortage at 2.5% rate would cost you about $30k in interest during the same 5 years. Count in $10k property tax and $30k price drop, buying is still $30k ahead of renting.
wsn, you forgot a couple of things:
Condo Fees
The price for the realtor commision if you sell
The opportunity cost of capitial for the downpayment AND any and all improvements (like finishing the basement)
By the way this particular condo IS rented out for $17,400 a year, not $20,000.
You are not at all ahead after 5 years. The OCC is the biggest factor people do not take in to consideration. In this case around $13000.00 for 5% paid up front (PLUS CMHC!). Now add in a bit of monthly savings and you can see how sometimes (like this time) it is better to have signed a lease, not a mortgage.
Also remember that interest rates were not 2.5% fixed 5 years ago, they were double that, and most virgin house buyers did not have the credit or taste for the risk of variable. Re-due the numbers at 5%, and in some cases, like the 0% down 40 year crowd, re-due them at 6.5%. Know personally people in this boat. Not saying it was smart or that you would do it, but LOTS did.
Not such a good investment now is it?
Inspector Gadget….love your personal stories. See them on here all the time. Would be interested to find out if you know anyone who didn’t buy in July 2007?
……as in we’re converting your rental to a Condo, you get first option to buy, this is the price, you have til next Thursday to decide. If it’s no, get out. Nothing is foolproof or risk free.
I do agree not every time is a good time to buy real estate. Your personal situation should always be factored in. If you’re secure in your job, plan on owning for 10+ years, there is very little risk to your principal. Your example above is interesting. The people that bought a 500,000 house at the peak at 5% were paying 25,000 in interest per year. Now they are paying 12,500 a year in interest. Owners got a 1000 a month decrease in their payments. Renters didn’t. Remember renters are at risk as well. Their risk is the kind of risk we saw in the 2004-2007 time frame where, vacancy rate was rapidly tightening, rents skyrocketed and people’s apartment rentals were being converted to condo’s. Landlord’s were being fair
Itchy, you may want to check your numbers.
For a 400-500K loan, you pay more than 12,500 a year interest.
For a 400K loan at 5%, your average annual interest payment for a 5 year term is 19,000. You are paying about 96,000 in interest at 5%.
edmman.
You need to read my post a little more carefully. I said a 500,000 loan at 5% is 25,000 in interest per year. Not interest plus principal plus taxes. A 500,000 loan at 2.5% rate is 12,500 in interest per year…..a little over 1000 less a month. I was simply using the numbers provided in Inspector Gadgets example.
It’s REDO. Not re-due.
real estate is a touchy subject on this forum lol
Justin: It is a real estate blog:).
I’m not sure touchy, but passionate. If a discussion can’t have all viewpoints, that I don’t believe it is a very healthy discussion.
I’m not sure who can offer a 2.5% interest rate, if you know of a place, can you please let me know where? We are looking for a house and the best mortgage rate we could get was 2.89 for a 5 year fixed. 2.84 if we were willign to pay CHMC fees (if we put down less than 20%).
Currently, you can have roughly 2.6% for 1 year fixed or 2.65% (prime – 0.35%) for 5 year variable.
You missed 2.5% by a year and 2.1% by 2 years. But it’s OK. 2.6% isn’t the end of the world.
The interest rate won’t go up for another 2~3 years. If it does go up from year 3 to year 5, it won’t be by too much and won’t offset the 0.3% you saved per year for the 1st three years.
I agree about passionate rather than touchy. It is great that our hosts offer such a forum, and it should be a very studied subject as signing a mortgage or not is one of, if not the most important financail decisions of your life. Unfortunately many young people research what super phone to buy longer than the conequences of a mortgage.
Anyway, my dear itchy, every one of the examples I share are real Edmonton people. Of course not everyone bought in 07, but thousands did! I didn’t (thank god), many of my friends and coworkers didn’t as well. However, both of the adults in my family have a very large group of co workers and there is a large young (starting their careers) cohort within this group. We are both very curious and interested in ecomonmics and therefore have lots of opportunity to draw from conversations for such “stories”.
I have seen many of these young people put in real financial hardship by frivolous spending, gambling on the stock market (not to be confused with investing), and over extending on real estate. I have also seen a fair number of people make a ton of money in real estate, and I have done quite well myself mostly from luck, but also from reading and studying and not being blind.
Just trying to do my part to spread some information.
Actually, you do raise a very interesting point and one of my pet peeves regarding young adults and money. I find there simply isn’t the level of knowledge in this younger generation. I know, I know, old guy saying damned kids
. I have no idea why they stopped teaching home economics and general money management in school. A lot of these kids are woefully unprepared for managing their finances. My father really rode me about being responsible, saving for a rainy day, and the fact that everything is about choices, as one can’t have everything they want, whenever they want it. My kids roll their eyes, every time I get on that horse, but they have learned and I’m pretty proud of that. Anyways, I wish they would at least teach kids the basics, the way I was in high. Credit vs debit, compound interest, how stock markets function, simple budgeting.
Itchy, I think it’s intentional.
For instance, the single most stupid thing a young guy would buy is a new pickup truck not for work. If they get smarter and buy Corolla/Civic instead, the UAW/CAW would be in even more trouble and needs further bailouts.
Same goes with other areas. If the purchase pattern changes, and becomes more rational, the North American manufacturing will decline further as they have higher legacy cost and will be unable to transform to suit the new market.
@Inspector Gadget
1) Condo fee – Then buy a property without condo fee. Such as a $300k half duplex with single attached garage. Not bad for a starter.
2) Realtor fee – Why sell it in five years when it serves you perfectly well? Move to another city? Then, there is a cost with breaking a rental contract too.
3) Interest rate – I did a refinance in 2008 at 2.5% (prime – 0.5%) and a new purchase in 2011 at 2.1% (prime – 0.9%). That’s my own anecdote example. That’s a very realistic and accessable rate to anyone (at least at time).
4) We are discussing the investiment aspect of real estate (including self use). Then we should use the best available rate that is offered to the majority of people. If someone chooses to lock in 5 years at 6.5% in the past 5 years, I can only say that person is stupid and will lose money no matter what he buys. He would probably lose it faster in the stock market. Or perhaps use it on drugs if he doesn’t invest at all. Then it becomes a discussion of education and self-discipline. It has nothing to do with real estate.
As I stated most high leverage new buyers opt for fixed rates. True then, true now.
The people I am referring to did like most of their peers.
Keep trying to convince us that being 30k down plus fees and occ is not a bad thing.
The owners would not agree.
People choose their own circle. If you feel like to compare to stupid people who would lock in at 6.5% 5-year term, and thus feeling superior, go ahead.
For me, I am not comparing myself to anyone. I am comparing the return on investment between real estate, stocks and other potential forms. Using the best available tools/policies of course.
Keep this in mind:
If rates are at 6.5% then inflation will be higher than it is today as well.
Interest rates generally do not increase unless inflation is increasing.
That means…
1. house values, in keeping with inflation, will rise faster (on average, over time).
2. rent prices will increase at a higher rate along with the higher inflation rate (on average, over time).
Gotta love those builders.
Every time the real estate market is about to stabilize along come the builders to glut the market and kill house prices for several more years to come.
I can speak to the first part of the story. In my showhome i had 15 realtor deals out of 20 in the last 6 months of the year. An insanely high number… Some builders are now focusing more on specs then pre sales. Unfortunately Last year lots of builders were caught with not having enough specs available