Central Alberta builders have been busy swinging hammers as housing demand gets stronger.
“As far as my business, I’m all out. We’re busy,” said Beacon Homes owner Courtenay Whitehouse.
While the number of residential permits in the City of Red Deer is down so far this year, there is plenty of activity in the region, said Whitehouse, who is a smaller builder focusing on rural and lakeside properties. As of the end of July, the city had handed out 336 residential building permits this year, compared with 430 over the same period last year.
The house building business has faced a number of challenges. Lumber prices soared late last year, peaked this past spring before stabilizing.
“Lumber is just one of the pricing issues and it’s been up and down,” said Whitehouse, who is president of BILD Central Alberta, whose 120 members represent just about every aspect of the residential construction industry, from building and land development to financing and product manufacturing.
The one-year average for 2x4s was US $1,113. It fell to $820 by Aug. 5, but the one-month average has now crept up to $875, according to a Government of Canada website.
Inflation is driving up the prices of many components, not just wood, which typically accounts for roughly 10 per cent of a new home’s cost.
“Besides that, we’ve had increases right across the board for everything. There have been multiple pricing increases for the last couple of years over and over again. It’s not very nice.
“I don’t think there’s anything in a house that hasn’t gone up since COVID.”
Despite that, he is still taking plenty of calls from people looking to build an acreage home, he said.
What impact rising interest rates will have is not clear.
“So far, in my market of building we’re still going steady.”
Supply chain issues, which were a significant issue earlier this year, remain a challenge. But as long as builders order in advance it is a manageable issue.
“Our biggest issue is windows. Windows have been kind of a sore spot, in getting those in a timely manner.”
Supply chain issues tend to have more of an impact on bigger builders, who are turning out many homes and need products on tighter schedules, he said.
Mason Martin Homes managing director Hugh MacBeth said the local housing market is strong for builders, partly because of falling inventories of pre-owned homes.
“We’re finding that as soon as our homes are finished they are selling, which is great,” he said.
There was some speculation demand may fall as increase rates increased, but so far higher borrowing costs have not had a big impact.
“It actually hasn’t affected us that much. Central Alberta has some of the best value on new homes in Canada,” he said.
While interest rates are climbing they remain affordable. “We’ve been spoilt with low-interest rates. But the rates are still super attractive. Getting into a new home for new home buyers, you still can’t beat the prices we have in central Alberta.”
The numbers back that up.
According to the Re/Max Canada 2022 Housing Affordability Report, Red Deer has the most affordable housing costs in the country. The report, which compares the percentage of people’s incomes, compared to how much they spend on mortgage payments, ranked Red Deer at No. 1 in Canada for affordability in a Top 10 listing.
Red Deerians, on average, spend about 26 per cent of their incomes on mortgages, compared with just under 30 per cent in Edmonton and nearly 40 per cent in Calgary.
MacBeth expects local housing prices will start to rise as people are drawn back to their area, lured by jobs, low taxes and the many amenities.
“We are experiencing people migrating out of Edmonton and Calgary and coming to this area because of all the amenities we have.”
For builders, supply chain issues have improved significantly and lumber prices have improved. The weather has also co-operated with plenty of sunny days without the rainstorms that slow building projects down.
“I’m very bullish. I’ve done a lot of reading and it’s all positive for Red Deer and central Alberta. This fall, I think we’re going to see a lot more action as far as houses going in because people are coming to central Alberta and our inventory is drying up.
“We don’t have any completed homes right now that we can sell. We have maybe one in inventory where normally we’d have tow or three or four.
“And I think all of the other buildings are in the spot. As soon as they’re finished (houses) seem to be absorbed by the market.”