“When we look at the overall marketplace, there might be pockets of vulnerability but we remain quite comfortable,” said Gordon Nixon, chief executive officer of Royal Bank of Canada “Frankly, I’d like to see the rhetoric come down a little bit.”

According to CMHC, April saw the highest number of new housing starts nationally since September 2007. Nearly two-thirds of new homes last month were multifamily units, which includes condominiums — a 27% increase year-over-year on a seasonally adjusted basis.

“Wow. This report reflects unbelievable strength in Canadian housing starts, and all of the gain was in multiples again which reflect the ongoing condo craze,” Scotia Capital economist Derek Holt said in a research note.

In Toronto, sales of new condominiums in Toronto reached 6,070 units in the first three months of the year, a record for the first quarter. As many as 40 new projects with more than 11,000 units could come on the market in the second quarter, a trend that may cause inventory of unsold units to approach a record set in 2008.

In Edmonton we've seen lower than normal sales of condos for some time, but builders are busily adding new condo inventory to the market. A report from CMHC released yesterday states:

[In Edmonton] Multi-family starts, which consist of semi-detached units, rows, and apartments, increased in April by 47 per cent year-over-year to 474 units. Gains were most notable among semi-detached units where
foundations were poured for 196 units in April, up from 124 a year earlier. Multi-family housing starts within Edmonton City totalled 256 units, up from 217 starts in April 2011. The remaining areas of the CMA saw strong growth with 218 multi-family units breaking ground, more than double the amount of activity of a year previous. “With 1,596 units to the end of April, multi-family starts across the Edmonton CMA were almost 50 per cent higher than the first four months of 2011, accounting for half of all housing starts so far this year,” added Butchart.

So why are there so many new condos going up in Edmonton? I'm not sure to be honest but I have a few ideas...

• As single family home prices increase, condos become more attractive.
• Babyboomers trade in their large single family homes to free up some cash and enjoy maintenance free condos living.
• New immigrants choose to live close to jobs and cultural centres until they get established.
• New condo inventory is actually decreasing.

According to a report released by CMHC in March, Multiple unit inventories across
Greater Edmonton stood at 868 units in February, representing a 17 per cent decrease from the second month of last year and the lowest level since November 2010. Total new multi-family supply, which includes unabsorbed inventory plus units under construction, stood at 6,444 units in February compared with 5,533 units a year prior. Multiple unit supply hit a cyclical peak of 6,860 units in October of last year and has been moving downward in the past four months.

So... are new condos selling better than resale? Are new condo prices more attractive than resale condos? An answer to those questions would be purely subjective at this point.

I don't always use buyer brokerage agreements, but there are instances where I will require a signed agreement.  I'm not sure how appealing working for free is to you but its not very appealing to me. Nathan in our office recently had clients who were buying a property for their daughter, and since they were paying for it they weren’t really concerned with what she wanted. What they did want was to see almost everything on the market - house, condo, anywhere in Edmonton between $350,000 and $450,000. At last count they had been out looking 9 times and had viewed about 50 properties and written several offers that were not accepted.

In this day of mere postings the likelihood of them picking a listing that offers the buyer's agent $1.00 in compensation for all their time and effort isn't that unlikely.  In fact I almost think that it's a law in real estate that the more time I spend with someone who is looking to buy a property, the more likely it is that they will choose a property offering $1.00 in compensation. In a nutshell, that’s why I would consider using a buyer brokerage agreement in this case. It spells out what I’ll be paid and what my clients expect of me for that compensation. If you are a buyer like this, it will be increasingly more difficult to find an agent who will work as they used to (on the promise of compensation) without the protection of a buyer brokerage agreement. 

This is one of the main reasons buyer brokerage agreements will become more common place.  The competition bureau seems to want to model the Canadian real estate industry after the U.S. industry (cause that's worked so great for the U.S.).  In the States buyer brokerage has been common place for well over a decade.  In the end I won't be surprised if our MLS® looks like the states in a few years as well and thats a whole other story.

This year is an interesting year for our brokerage: it’s the first time in 19 years that we will be unrestricted free agents. In our industry some agents change companies like kids change clothes. Every Monday morning I get the latest sheet from RECA showing the agents that changed brokerages that week, and each week it's a very long list.

In 1993, we took an unprecedented step of buying a franchise. Having been a successful independent real estate company in Edmonton since 1977, I saw the need for change. At that time we excitedly chose to go with Coldwell Banker based on our years of going to Hawaii and other places in the U.S., where we saw the strength of that brand.

Well 19 years have come and gone and our company has undergone a myriad of changes in that time, just as the ownership of the master franchisor has changed a number of times. What’s exciting for us is the possibility to revisit whether we should go back to our roots as an independent, stay with our existing franchisor, or look at other franchises and what they bring to the table. You just can’t do this everyday. We have had talks with one other franchisor that has basically said before you make a decision “let us pitch you one last time.” Their enthusiasm is encouraging as we believe they are a very respectable option for us.

Our situation is unique in that we have zero reliance on the franchisor to deliver us business or promotional materials. Our materials are created in house by our marketing director (who actually held a similar job with our Canadian head office during the 5 years she worked there). Our online presence which is pretty dominant in the Edmonton area is also her responsibility and she has been instrumental in making us a technology company introducing us to tablets over 6 years ago and probably making us the first transactional paperless office in Alberta. For certain we were the first office to have 100% of our agents using tablet PCs for which she has custom created presentation and marketing materials for our agents. In addition she has created a program whereby she assists our agents in the marketing of their clients' properties in order to increase the likelihood that they will sell.

She has taken us to the top of search engine rankings in just about every real estate related short and long tail search term in our marketplace. Consumers find her philosophy on marketing their homes very refreshing every time I meet with a potential seller they are impressed. She has taken us to other new heights as we were the top team for Coldwell Banker in Canada for 2010 and 2011 for total units sold.  Throughout 2010 and 2011 our company consistently placed in the top 5 for offices in our size category of 1-10 agents worldwide (out of 900 offices on average in this size category).

I certainly have all kinds of love for Coldwell Banker as a brand and for numerous years bled blue and white. I have met some phenomenal people who have been great mentors and collaborators on deals, projects and ideas. In fact that is the one thing and the only thing that we would truly miss if we left Coldwell Banker. However, many of those great friends have gone elsewhere as well and we still collaborate no matter what brand is on their business cards.

I could go on about the innovations and leading edge stuff she has done for our company, and the great stuff that’s happening in our group, but that's not the point. We are so excited because chances to make operational strategic decisions like this don’t come around everyday. I think about it in terms of a great hockey player who’d like to play for the team he is with, but is also excited about what potential is unknown to him. All I know is the next six months are going to be extremely exciting as we peer in to our future.

Here is our update on the Edmonton real estate market. (Previous week’s numbers are in brackets). For the past 7 days:

New listings: 522 (531, 486, 483)
# Sales: 239 (235, 231, 256)
Ratio: 46% (44%, 48%, 53%)
# Price changes: 211 (211, 192, 186)
# Expired/Off Market Listings: 125 (124, 102, 216)
Net loss/gain in listings this week: 158 (172, 153, 11)
Active single family home listings: 2631 (2525, 2371, 2279)
Active condo listings: 1649 (1569, 1525, 1430)
Homes 4-week running average: $384k ($379k, $377k, $374k)
Condos 4-week running average: $231k ($236k, $234k, $228k)

Edmonton real estate listings and sales

Edmonton real estate prices

The REALTORS® Association of Edmonton is reporting 1055 sales for the Greater Edmonton Area so far this month, which should put us at about the same level as last year. 

In other real estate related news, Canadian Finance Minister Jim Flaherty said we should not expect any new measures in next week's budget to cool housing prices, and that he'd like to see if the market will correct itself as it is already showings signs of doing.

Meanwhile CMHC reports that Ottawa will not raise the limit on the amount of mortgages insured by CMHC of $600 billion, dramatically shrinking the growth of their portfolio. To put this in perspective, CMHC's outstanding insurance rose $170 billion between 2007 and 2010, and they expect it to rise only $30.8 billion between 2011 and 2014. Because CMHC is approaching its limit, it is rationing the amount of portfolio insurance that it sells banks to insure pools of mortgages. Spokesman Charles Sauriol said it is giving priority to insurance for individual homes:

“The allocation of CMHC’s portfolio insurance does not affect the availability of CMHC’s mortgage loan insurance for qualified home buyers and will not impact the cost of buying a house.”

The rationing could affect some lenders, and prompt them to charge more for mortgages.

The BC government is apparently in favour of keeping the market hot, by handing out cash to first time home buyers. The bonus, is a one-time refundable personal tax credit, equal to five per cent of the purchase price of a home to a maximum of $10,000, was announced last month in the provincial budget.

These are all examples of "external forces" that put pressure on the market that we often discuss here on the blog.

Have a great weekend!

The majority analysts polled expect some sort of tightening of mortgage rules this year - it could be an increase in the minimum downpayment (currently 5%), a decrease in the amortization period, or other restrictions designed to reduce household debt levels in Canada. Although the analysts agree that housing is overvalued only in Toronto and Vancouver at this time, household debt levels hit an all time high last year in this country.

It is expected that any changes to mortgage rules will come before the spring housing market, some say between now and the federal budget (expected at the end of March). Assuming the rules are tightened, how will this affect our housing market in Edmonton?

Looking at our sales chart below, it is easy to see the annual pattern - sales tend to increase month-over-month for the first half of the year, and decrease month-over-month for the second half of the year (peaking in May or June).

The feds have made changes to the lending rules three times in recent years, and each time they have given Canadians advance notice of the changes. In October, 2008, the maximum amortization was dropped from 40 years to 35 years and the minimum down payment was increased from 0% to 5%. We almost always see sales drop between August and September, and that year there was a jump in sales in September (and then the global financial crisis happened). In April, 2010, changes were made to HELOCS and refinancing, investors were required to put a minimum of 20% down, and they introduced a rule that you had to qualify at the 5 year fixed rate even if you were going to take out a different mortgage (with lower interest rates). That year the sales peaked early (in April) and trailed off for the rest of the year. In April, 2011, the maximum amortization period was dropped to 30 years, and it really didn't seem to affect our market at all.

We will have to wait and see what changes, if any, are made to the lending rules before we can make much of a prediction on how the changes will affect our real estate market in Edmonton. At this point, we have the lowest unemployment rate in the country, and the fastest growing population which tends to lead to a strong housing market. I'm not sure these changes will have any affect on our market at all, other than to push some buyer's plans forward slightly. 

"There is some genuine concern that the housing market and households have been overstretched," TD Securities economist Mazen Issa said. "But in the absence of several triggers for a housing market decline, which are not likely to be forthcoming until at least the middle of next year, the underlying theme is of gradual moderation."

Triggers could include rising mortgage rates, or a sharp increase in unemployment.

"I would say aside from those two cities [Vancouver and Toronto], there's really little evidence whatsoever that the market has gotten ahead of itself," Doug Porter, deputy chief economist at BMO Capital Markets, said.

"Whatever strength we've seen in most cities has simply been the flip side of the decline in borrowing costs.

"Provided we don't get hit with an interest rate shock, then I think the market can adjust to a moderate backup in rates over time."

As we've mentioned a few times in the past few months, we expect Toronto and Vancouver to drag down the national housing numbers for the next while, just as it dragged them up for the past couple of years. The national real estate market gets a lot of press, but it really does little, if anything, to show what is happening in markets across the country. National stories can certainly have an affect on consumer confidence, so we will have to wait an see whether or not our strong, local economy over powers the national media.

Canada was the fastest growing country in the G8, Alberta was the fastest growing province in Canada, and Edmonton and Calgary were the fastest growing major cities when their growth was measured in the 2011 census, growing at an even faster rate than in the previous five year period.

The Capital Region — including municipalities such as Beaumont, Spruce Grove and Fort Saskatchewan — grew from just over a million people in 2006 to more than 1.16 million people in 2011. That’s a 12% increase in the five-year span measured by the national population count. Most of this growth is occurring in new suburbs and bedrooms communities.

For the first time in Canada's history, the provinces west of Ontario have a higher population than the provinces east of Ontario.

Highlights from the report so far include:

• Canada’s population grew by 5.9% 2006 and 2011, slightly faster than the 5.4% increase in the five-year period before that. Statistics Canada attributed the increase in growth rate to slightly higher fertility and to an increase in the number of non-permanent residents and immigrants.
• Ontario remains by far Canada’s most populous province with 38.4% of all Canadians.
• The number of private dwellings grew by 7.1%, to 13.3 million, compared to 12.4 million five years earlier.
• The 33.5 million people counted in May, 2011 is almost twice as many as in 1961 and 10 times the 1861 census.
• Canada is the smallest G8 nation but the fastest growing. The United States is the biggest, with 311.2 million citizens, followed by Russia with 142.9 million residents.
• Canada’s population growth for the last decade has been driven mainly by migration since natural increase — the difference between births and deaths — now only account for one-third of the growth.

Additional demographic information from the census will be released by statistics Canada throughout the year.

Meanwhile, Edmonton area home builders had a busy month in January, according to a report released by CMHC today. Housing starts increased in January to 578 units compared with 363 in January 2011. The increase occurred in both
the single-detached and multi-family sectors.

Single-detached starts in January increased by 53% year-over-year to 314 units, up from 205 in January 2011, while multi-family starts increased by 67% to 264 units.

“The gain represents a strong start to the year for Edmonton’s single-detached builders,” noted Richard Goatcher, CMHC’s Senior Market Analyst for Edmonton. “However, it should be noted that last year’s starts were hampered by heavy snow and cold temperatures which delayed
production across the Capital region,” he added.

RBC's housing affordability measure in Canada's largest cities is as follows: Vancouver 72.1%, Toronto 47.5%, Montreal 43.1%, Ottawa 39.0%, Calgary 35.9% and Edmonton 31.5%. That means it taks 31.5% of monthly income in Edmonton to own an average detached bungalow, including taxes, utilities and mortgage payments. Meanwhile in Vancouver it would eat up 72.1% of your monthly income. 

"The Alberta market continued to be stuck in low gear in the first quarter of 2011. Sales of existing homes and construction of new housing units showed very modest increases," said Robert Hogue, senior economist, RBC. "While market conditions have become more balanced in recent months, owning a home doesn't seem to be getting more expensive in the provincial market at this stage. Affordability levels are still looking quite attractive."

RBC's housing affordability measures remained relatively unchanged, and below their long-term averages in the first quarter of 2011 in Alberta. The measure for the benchmark detached bungalow in the province moved up to 31.3% (an increase of 0.4% from the previous quarter), the standard condominium stayed flat at 20.2% and the standard two-storey home fell to 34.2% (down by 0.2 of a percentage point).

RBC's report notes that there are signs that the Calgary housing market is finally overcoming its protracted slump. "Calgary home prices have yet to break out of their listless trends, but they rose at their fastest rate in more than a year in the first quarter, with detached bungalows leading the way," said Hogue. "Firmer market conditions and higher prices had only limited impact on Calgary's affordability, which remains among the most attractive of Canada's major cities." (This was interpreted by a Calgary reporter to mean that Calgary is THE most attractive of Canada's major cities). 

They did not make any comments (that I could find) on the Edmonton market, even though it was the most affordable in their study. I assume that is because Edmonton is not yet showing signs of coming out of its "slump." I would suspect that will make us even more affordable next quarter (relative to other major cities). 

The majority of Canadian markets experienced weakened affordability in the first quarter of 2011. "Despite the latest erosion in affordability, provincial levels generally continue to stand near their long-term averages, suggesting that owning a home remains affordable or, at worst, slightly unaffordable across Canada - with Vancouver being a notable exception," said Hogue.

One of the things we love about this particular conference is that its not brand specific (which doesn’t mean brand loyalty doesn’t exist here). The presenters were exceptional with my favorite being Benjiman Tal. When describing Ben Bernancke's obsession with printing money he described it more humourously then I’ll do justice to here, but he basically said that Bernancke is thinking that if he blows hard enough, the pig “US economy" will fly. 

With the conference not being brand specific it's an opportunity to talk to a lot of people you wouldn’t normally get to chat with. For example, we posted recently about needing someone for a showhome for our project in Sherwood Park, so who better to ask some construction questions than Vince Laberge who was at the conference and is the incoming President of the Canadian home builders association?

Among the more notable conversations I had was one with the always enlightening Bill Buterman with Axess Capital. Bill’s company is a MIC (mortgage investment corporation) that has somewhere between 250 – 300 million dollars of syndicated mortgages under management. Bill has an MBA from Harvard (I have nicknamed him “the money man”) and is one of the council members for the Real Estate Council of Alberta, the provincial Regulator for real estate and other related industries. Mortgage backed securities or syndicated mortgages are extremely complex and until recently were not regulated. Maybe in short order I’ll do a post on this or better yet have him do it.

Then there was Wayne Moen with Remax River City who is also the president elect for the Canadian Real Estate Association. Last year he hung up on me over a year ago during a heated discussion on title insurance. To Wayne’s absolute credit he called me over and we cleared things up very easily. Wayne is a huge fan of title insurance and gets it for all his properties as well. Actually once we got a couple of minor facts sorted out we realized we weren’t that far apart in our points of view. If you want more info on title insurance Stan Gallbraith of Galbraith law did a guest post about it.  

Then there was Larry Aitken who I had butted heads with philosophically when he was president of the Alberta Real Association and I was at the regulator the Real Estate Council of Alberta. In fact some my dear friends from RECA were at the conference. The one thing I respect about Larry is that eventhough we would disagree on certain topics he would always listen to the other side. I wish some of my dear friends would do that sometimes.

I can’t leave out Ken McCoy who had served extensively on REIX (Real Estate Insurance Exchage) who provides our errors and ommissions insurance and also replaced yours truly at RECA. We chatted extensively in the corner of the AREA hospitality suite hosted by Lyle Magnusson the current AREA president who is from Vulcan AB (who also gave me a pair of Vulcan ears). By the way thanks for the compliment Ken.

And of course the REALTORS® Association of Edmonton president Chris Mooney, who is a much better singer than I would have guessed. And no I didn’t ask him about “external forces.”

It was great to see and talk to so many people, many of whom are leaders of the industry unlike us poor sods who were there “on our own dime.” One thing that Sara and I both agree on - no matter what ideas or conversations we have this conference it always stokes the gray matter fire. It engages you in a way that many conferences don’t because of its diversity. For the many REALTORS® that read this blog, we highly recommend checking it out in 2013!