Local housing outlook optimistic
Residential builders and real estate agents have reason for optimism, says a market analyst with Canada Mortgage and Housing Corp.
Régine Durand was one of the presenters at CMHC’s housing outlook conference in Calgary on Tuesday.
That gathering came a few weeks after the national housing agency forecast that housing starts in Red Deer will number 640 this year, up 15.3 per cent from the 555 starts in 2011, and that the figure will hit 680 in 2013, a further 6.3 per cent increase.
Speaking to the Advocate on Wednesday, Durand said one factor contributing to activity in the home construction sector is job growth. Statistics Canada has calculated that 3,000 full-time jobs were created in Red Deer between September 2011 and September 2012.
“As a result, the number of unemployed persons was cut by 21 per cent over this period,” said Durand.
“More people are working, so more people will be able to make a down payment on a home.”
A second factor relates to the fact that active Red Deer listings on the Multiple Listing Service has tumbled 28 per cent since last fall. That’s reduced the options for home buyers and pushed many onto the new home market.
Thirdly, said Durand, the number of completed but unsold new homes in Red Deer is down about 50 per cent from a year ago, to just over 40. That’s given builders a greater incentive to break out their hammers and saws.
Finally, she said, there’s a good selection of new serviced lots in the city, with properties available in Vanier Woods, Timberstone, Garden Heights and Johnstone Park, and many more in Vanier Woods just a few weeks away from completion. In the case of the resale market, CMHC is projecting 4,200 MLS sales in Central Alberta this year, a 13.9 per cent improvement on the 3,689 sales in 2011.
For 2013, the figure is expected to climb another 2.4 per cent to 4,300.
Key among the reasons for this strength are continuing low interest rates, said Durand. These are contributing to relatively low home carrying costs — about $1,000 a month in the case of a modest condominium. That’s 10 per cent lower than a year ago and 13 per cent below the five-year average, she said.
A related factor is the lower income now required to support home ownership. For an entry-level condominium, said Durand, an annual income of about $40,000 would likely be sufficient — 10 per cent less than was needed a year earlier.
She pointed out that the cost difference between renting and owning has shrunk about 16 per cent over the past year, to about $500 a month.
“So, by adding $500 to his rent, someone could afford to pay a mortgage.”
Finally, said Durand, the price difference between resale homes and new homes has widened by about 22 per cent over last year, making the former option more attractive.
“Now the price difference between a new and an existing single-family (home) is around $145,000.”
When it comes to the average price of resale homes in Central Alberta, CMHC expects the number to hit $280,000, up 7.2 per cent from the 2011 average of $261,258. For 2013, it’s anticipating the average price to climb another 2.3 per cent to $286,500.
“We looked at the fact that there is a steady turnover of active listings in the market right now,” said Durand of CMHC’s rationale for the higher prices. “Three out of every 10 homes listed are being sold.”
Also fueling demand for new and resale homes, as well as rental accommodation in Red Deer, has been a steady migration of people into the province. Durand noted that approximately half of these ended up in communities other than Calgary and Edmonton in 2011.
“Usually, it’s like 80 per cent to Calgary ad Edmonton.”
During the first half of 2012, just over 43,000 people moved to Alberta, she said. If they followed the same settlement pattern as the previous year, that would mean about 4,000 migrants ended up in Red Deer.