2018 started out promising for local realtors.
Richard Pochylko said the first two months were not the best January and February he’d had in 21 years selling homes, but they were in the top five.
Then March came.
“Then all of a sudden it started to slow. Everybody noticed a big slow down in the spring time,” said Pochylko, a Century 21 Advantage associate broker and the new president of the Central Alberta Realtors Association.
“Then in the last three months of the year the slowdown was even more noticeable. The volumes of sales dropped.”
In Red Deer, 1,331 homes were sold last year, down from 1,397 in 2017 and 1,522 in 2016. Go back to a good sales year — such as 2014 when the numbers of homes sold was 2,019 — and the difference is even more stark.
“That is a massive drop,” he said on Thursday. “Whenever you have a drop in volume like that you’re creating an inventory that doesn’t get sold and it creates a weight on prices and prices have to come down.
“The people that managed to get homes sold last year tended to be those that were willing to accept reality and willing to say ‘OK I’ll take what I can get and move on.’”
In the last few years, house values have been slowly eroded as the provincial economy has struggled.
“In four to five years, you’ve lost at least 10 or 11 per cent. That’s the minimum you would have lost,” he said. “But there’s a big possibility you lost 15, or as much as 20 per cent.”
Hardest hit are higher-end homes, which have a smaller pool of potential buyers. Pochylko knows of one home that was purchased for $805,000 in 2014 and sold this year for $665,000.
While that is an extreme example, even homes in the average price range of $370,000 would have likely sold for around $400,000 in 2014.
Pochylko believes several factors came together to take the wind out of real estate sales. New mortgage rules, including a tougher mortgage stress test that kicked in at the beginning of the year, forced many homebuyers to downgrade their ambitions.
As well, early optimism that 2018 would be a turnaround year for the economy began to fizzle as hoped-for good news story such as the Trans Mountain Pipeline fizzled.
The impact of fewer home sales goes beyond sellers and realtors, he said. A recent independent study found a home sold in Western Canada generated $54,900 in economic spinoffs.
For Red Deer, using that formula would mean nearly $38 million less money was injected into the economy last year, compared with 2014.
“When you see numbers like that you go, ‘Holy cow, that has a major impact.’”
Many economic forecasts are predicting Alberta will continue to face lean economic times in 2019.
Pochylko is not expecting a banner year in real estate but believes there will be an improvement in sales numbers, maybe to around 1,400 homes. There is some pent-up demand matched by buyers who have waited long enough and are now willing to sell at market price.
“I think we should start to see a bit of an up-tick, probably a bit later, through the spring and summer of 2019.”