After a steady diet of bad news, the Canadian real estate market got some favourable stats to chew on last month.
The Canadian Real Estate Association reported that April home sales across the country were up 11.2 per cent from March, on a seasonally adjusted bases. That marked the biggest jump in five years and the third consecutive month that both residential sales and their average price had increased.
This positive trend is one that Derek Austin, president of the Central Alberta Realtors Association, has observed locally.
“There are more things selling, more interest and more inquiries, more people going to the banks trying to get pre-qualified,” the owner of Innisfail’s Century 21 Your Realty said recently.
“There’s more confidence out there as to the future.”
In April, the number of homes sold through the Multiple Listing Service in Central Alberta numbered 341 — the highest figure since last fall.
Even on a seasonally adjusted basis, residential sales have climbed sharply since December, said the Central Alberta Realtors Association.
The 2009 numbers are still down from the corresponding months in 2008, but the gap is narrowing, said the association. April’s sales figure was 25 per cent lower than the 456 homes sold in April 2008, but four months earlier, the year-over-year difference was 40 per cent.
Canada Mortgage and Housing Corp. isn’t declaring the real estate slowdown over, however.
In a forecast issued in May, the national housing agency projected 3,550 MLS home sales in Central Alberta this year and 3,770 in 2010. Three months earlier, its projections were more optimistic: 3,750 sales in 2009 and 4,000 in 2010.
In 2008, Central Alberta produced 4,214 MLS sales.
Regine Durand, a market analyst with CMHC, said many people are still reluctant to buy following the rapid run-up in prices in 2006 and 2007.
“There is still that buyer’s resistance, that aversion to price growth,” she explained.
Other factors contributing to CMHC’s pessimistic forecast is a belief that the high sales volumes from 2006 to 2008 absorbed much of the demand for homes, and the drop in the migration of people to this region.
MLS transactions in Alberta have been declining since mid-2007, said CMHC in its forecast. This slowdown was initially a reaction to the rising prices but more recently has been the consequence of economic uncertainty, the weaker job market and the reduced in-migration of people to the province, it said.
Homeowners’ concerns that they will have trouble selling their existing property if they buy another has also created a drag, said the agency.
CMHC cites an anticipated improved economy, and the lower prices and mortgage rates, as reasons it expects the resale market to improve later this year and through 2010.
Austin questioned the accuracy of CMHC’s downgraded forecast, and wondered if the cool spring didn’t make the market appear more sluggish than it is. He’s also skeptical that the forecast didn’t give current low interest rates and government stimulus programs the weight it should have.
The recent strengthening of the energy market should also give the local oilpatch a boost, said Austin.
“Oil prices are up and the guys should be going back to work when (spring) breakup ends.”
As for the “aversion to price growth” that Durand described, Austin doesn’t think that’s what’s keeping buyers on the sidelines. He points to the tighter lending practices of banks as a major impediment for many.
“I think they (the banks) are slowly starting to turn around, but stuff that they would have just put through no problem before, they’re holding back on.”
Also affecting demand is some people’s hope that prices will slide further and even better deals will emerge, said Austin. But that’s a risky game, since the market’s bottom will only become evident after it’s passed.
Similarly, low interest rates won’t last forever, said Austin. With the current cost of borrowing, a buyer can pay much more for a house than he or she did in 2006, and still have lower monthly mortgage payments.
“The numbers show that financially it makes sense right now.”
Austin is confident in the long-term strength of the local real estate market. He pointed to the equity gains of home owners even after the recent drop in prices, and noted that people have to live somewhere.
But the reduced activity in his industry has been a relief for him and many of his counterparts.
“You had to be there 24/7, because it only took an hour and you’d miss out for your client on a property.”
The red hot market was also stressful for buyers, who often couldn’t impose conditions on their offers and had to act quicker than they wanted.
“It’s nice to see a normalization.”