The president of the Central Alberta Realtors Association is questioning some of the assumptions Canada Mortgage and Housing Corp. made when arriving at a pessimistic forecast for the region.
In an update of its housing market outlook released on Tuesday, CMHC projected that 3,550 homes will be sold through the Multiple Listing Service in Central Alberta in 2009, down from 4,214 in 2008. It expects that number to jump to 3,770 sales in 2010.
An earlier forecast released by the national housing agency in February said home sales in Central Alberta would reach 3,750 this year, with the number swelling to 4,000 in 2010.
Derek Austin wondered if the late arrival of spring might have made real estate activity in Central Alberta appear more depressed than it really is.
He also thinks CMHC could have underestimated the positive influences that low interest rates and government stimulus programs will have on the market as the year progresses.
“It’s taken longer for that turn-around.”
Austin pointed to the recent strengthening of energy prices as another reason the local real estate market could prove more robust than some expect.
“Oil prices are up and the guys should be going back to work when (spring) break-up ends.”
Austin believes the market is improving, and said he and other Realtors have noticed greater interest from buyers as the weather improves.
Regine Durand, a market analyst with CMHC, said the forecast in part reflects the fact that much of the local demand for homes was absorbed during the frenzied buying period leading up to 2008. She added that there has also been a decline in the number of people migrating into this region.
Rather than demand having been absorbed, Austin believes a big reason many people aren’t buying now is the tighter lending practices of banks.
“I think they’re slowly starting to turn around, but stuff that they would have just put through no problem before, they’re holding back on.”
Many people want to buy real estate, he added, but can’t get the money.
Durand also said that some people are reluctant to buy real estate following the run-up in prices in 2006 and 2007.
“There is still that buyer’s resistance, that aversion to price growth,” she suggested.
He thinks people’s reluctance to buy has more to do with speculation that prices could come down further. With interest rates lower now than they were previously, the monthly cost of owning a home is, in many cases, actually less than it was when prices were cheaper.
CMHC also downgraded its outlook for the local residential construction sector.
It said housing starts in the city of Red Deer would number 425 this year and 515 in 2010. Last year the tally was 572.
The updated numbers are both down from CMHC’s February predictions, when it said starts would hit 550 this year and 675 in 2010.
Durand said the lower housing start estimates for Red Deer reflects the high inventory of unsold homes and an increasing gap between the price of new homes and the price of existing homes, which is pushing some buyers onto the resale market.