The declining cost of home ownership has prompted Canada Mortgage and Housing Corp. to adopt a more optimistic view of Central Alberta’s real estate market. And the national housing agency expects local home builders to be much busier next year than their counterparts elsewhere in the country.
In its housing market outlook released on Thursday, CMHC projects that 3,700 Central Alberta homes will be sold through the Multiple Listing Service in 2009. It is anticipated that this number will rise more than five per cent the following year, to 3,900.
An earlier forecast issued in May called for 3,550 MLS sales this year and 3,770 in 2010.
CMHC is also anticipating higher average prices on the local resale market: $269,000 in 2009 and $277,000 in 2010. That compares with its previous forecasts of $264,000 and $271,000 respectively.
“Typically, what we’re seeing is affordability is improving because of the drop in resale prices,” said Regine Durand, a market analyst with CMHC.
Those reduced prices, combined with lower interest rates, have made home ownership more appealing.
“Mortgage payments on average have dropped by 18 per cent from January to July,” said Durand.
“This is boosting MLS sales, and next year we are expecting to see more of that also.”
She added that the cost difference between renting and owning has decreased — narrowing 36 per cent on average from January to July, and luring many tenants into the market.
Although resale prices in Central Alberta next year are expected to increase by about the same percentage as for Alberta as a whole, sales volumes here are projected to climb five per cent, as compared with three per cent for the province.
CMHC has also modified its forecast with respect to new home construction in Red Deer.
As of May, it was projecting 425 housing starts this year and 515 in 2010. Those figures have changed to 430 and 490.
Durand said the increase for 2009 was motivated by signs the new home market is strengthening.
In July, she pointed out, residential construction starts were 16 per cent higher than in the same month of 2008. In the case of single-family starts, the year-over-year jump was 76 per cent.
“We are seeing that the market is picking up a bit faster than what we were expecting.”
One of the factors boosting this demand is fewer options on the local resale market.
“Active listings were down 14 per cent in July,” said Durand.
CMHC’s decision to reduce its 2010 housing start forecast for Red Deer by 25 units was motivated by the surplus of multi-family units still on the market.
“Inventories of singles in July were down 39 per cent, year-over-year, but we still had 111 multis in inventory, which is three times more than last year,” said Durand.
But even with the reduced forecast, Red Deer’s 2010 housing starts would be 14 per cent higher than the figure forecast for 2009, she pointed out. That’s a slightly bigger increase than the 13 per cent residential construction growth expected provincewide, and more than twice the six per cent increase CMHC has pencilled in for Canada.
The numbers are still much lower than in 2008, when there were 4,214 MLS sales in Central Alberta, with an average price of $278,000. The year before that, sales numbered 5,075 with an average selling price of $270,494.
On the construction side, 572 homes were built in Red Deer last year and a record 1,558 in 2007.
Nationally, CMHC pointed to improved resale activity and lower inventory levels in both the new- and existing-home markets as factors that should prompt builders to increase construction.
However, CIBC World Markets economist Benjamin Tal suggested that the recovery in housing starts would be much slower. He believes slower population growth and higher costs for new homes after provincial sales taxes are harmonized with the GST in provinces like Ontario and B.C. next year will soften near-term growth in new home construction.
Scotiabank economist Adrienne Warren also sees a slow recovery in new home building due to oversupply in some major markets, particularly in the condominium sector.
But Warren said the CMHC forecast is yet another sign Canada’s real estate market is on the rebound, and performing better than previously thought.
With CP files.
hrichards@www.reddeeradvocate.com