2016 REALTORS Association Edmonton - Housing Forecast

 

Wednesday, January 6th, 2016

Realtors Association of Edmonton Housing Forecast - #RAEForecast 

 

Steve Sedgwick, Chairman of the Board of Directors of RAE

Gave us a recap of the MLS activity in 2015 and predictions for 2016

They predicted that MLS sales volume of Single Family homes will dip 2.5% with condos dipping 2.7% from 2015 levels

MLS sales price for single family and condos expected to dip 2.7%

Interesting fact was the number of $1 million dollar plus homes that sold shot up from 54 in 2009 to 121 in 2015

Here’s a slide on the comparison of average housing prices from across Canada. This shows Vancouver

being 2.5 times the avg price in Edmonton and had the largest increase in the country year over year @ 16%.

The national average price was still 23% higher than Edmonton @ $456K which was 10% higher than 2014.

Around the capital Region the highest priced real estate can be found in St Albert, then Sherwood Park and then Beaumont.

The commercial market as reported by the MLS saw a significant decline in volume of almost 44%

As I’ve mentioned as well the 2015 market conditions were similar to that of 2013 and it was a decent year.

 

Todd Hirsch – ATB Chief Economist

Talked about possibilities of certain economic factors

Oil hitting $80 – 75:1 – Very unlikely – as is oil hitting $20

Likely at 3:1 odds of $55

10:1 odds of interest rates going up.. more likely to go down

Our unemployment rate rate went from about 4.5% last year to around 7% right now.. 4:1 odds of it getting to 8%

City of Edmonton economist – John Rose – attributed this to the ongoing influx of new Edmontontonians moving here from other places

Todd gave a 50/50 or 2:1 odds on a net out-migration from Edmonton

2010 was the last time we saw a negative migration number

Fortunately, other than BC, the rest of Canada isn’t much more attractive for jobs than Edmonton

For those looking at the odds of the housing market to go down.

Theres a 7:1 chance (or highly unlikely) chance of it going down 20%

3:1 chance of it going down between 5-10%.. he estimates it to be most likely around the 5% mark.

In regards to economic recovery there’s a 50/50 chance of a modest recovery by the end of the year.

Unlike the last 40 years this year has the opportunity to see the best chances of our province attracting some diversity to the economy.

To sum his postion up – he thinks:

Oil will float around $35-45 for most of the year and bump up to $55 by the end of the year.

Unemployment will hover between 7.5-8% through the year

And a coin flip chance of a modest recovery to our economy and 2016 will be tough for most industries and the dollar to float between 65-70 cents as the US economy recovers.

 

The Chief Economist from the City of Edmonton – John Rose also provided some commentary.

The Edmonton regions job growth is expected to be positive year over year

His unemployment numbers showed us around the 6.5% level

On this chart.. As of November it notes that the province gained 14,000 jobs with Edmonton region gaining 24,000 jobs. This means however that the rest of the province lost 10,000 jobs.

Key points were the increase in Construction jobs as a result of whats happening downtown Edmonton and the Red Water upgrader. However these jobs are not long term.

Our biggest loss was in Manufacturing jobs and these tend to be long term well paying jobs that will have a longer impact on our economy.

 As all municipal districts in Alberta saw increases in unemployment rate (nov to nov) – Edmonton saw the lowest increase of just over 1%. Provincial average was 2% with Calgary at 2.5 and lethbridge-medicine hat area at just under 4%

He also discussed the leveling off of Consumer inflation with a forecast of 2% in 2016.

From a municipal perspective there is an opportunity now to address service and infrastructure deficits.. higher vacancy rate will improve housing affordability.. and with modest inflation and low interest rates they can contain costs for capital projects.


Christina Butchart from CMHC brought their opinions of Edmonton’s economy and housing outlook

She confirmed some of the observations that John  from the City of Edmonton made in regards to the areas job gains/losses, the growth in Edmonton’s jobs, unemployment rate and net migration numbers.

She discussed the rental market in Edmonton:

  • # of actual apartment units have been increasing for the last three years with quite a few brand new units coming available in 2015
  • Vacancy rate of apartments are expected to inch higher for the next three years.
  •  Rental rates for apartments will slowly be increasing (aprox. 2%) – not because of demand – but rather the fact that there are more newer/nicer units available now.
  • The number of condos for rent has leveled off with vacancy
  • Apartment Vacancies in Edmonton remained the lowest in the province in 2015 with the highest being in Ft Mac/wood Buffalo area and Grand Prairie at about 28 and 11% respectively.

In the resale market CMHC forecasts were trending differently then what was discussed by our real estate board and Todd from ATB.

  • They are predicting a slight increase of 2 % to both the total sales and and average price of residential real estate in the resale market.

Our last speaker from ATB Financial – Bruce Edgelow discussed some very important key elements of our economic situation and provided some interesting perspectives.

  • This is our 7th downturn since 1980 with a cycle typically occurring every 5-6 years
  • The last supply induced commodity price drop occurred in Nov 1985 and took 5 years for prices to recover
  • Interesting to note is that the average cost of a barrel of oil for the last 100 years has been around $50.. it has only been in the last 10 years that prices have exceeded $50 due largely to increasing demand in China

This chart shows the difference between the downturn in the 80’s compared to now. In my opinion I think we are in much better shape than we were in the 80’s and better setup for a quicker recovery.

We’ve seen downturns like this this before with lower oil prices however with a different provincial government in place vs the government of the past 40 years I am hesitant to think that the recovery will mimic the last downturn – which may be better or worse.

I agree that 2015 and 2016 will have been cushioned from the economic situation due to the ramp up of the construction business which employed many in our area that had otherwise lost oil related jobs. I agree with Todd that there seems to be bigger push by the private and public sector to diversify our economy and think outside the box when it comes to new industries.

I don’t think the new CMHC down-payment rules for homes over $500k will have a major impact on the housing market due to the capacity of those in that market to afford the additional 5% down over $500k.

I think that the real estate board is slightly optimistic in it’s estimate of aprox. A 2.7% decrease in sales volume and pricing this year however I also think Todd Hirsch from ATB was a bit liberal with his 5%. CHMC’s prediction is what I will respectfully call – out to lunch with a 2% increase in resale volume and average price.

I predict that a 3-3.2% reduction in both the number of transactions and average home price is reasonable expectation and reflects the consumer feed back that we are receiving.

At RE/MAX river city we expect our office sales volume increase as it did last year. We know that when the market gets tough and the percentage of homes that hit the market vs what sells declines that the consumers turn to the brand that they trust. RE/MAX accounted for over 41% of the market share for MLS Sales in the Edmonton area in 2015. RE/MAX river city accounted for over 6% - that means that, on average, more than 1 out of every 20 homes that sold in Edmonton last year was sold by one of our Associates. RE/MAX river city has the best industry training, support and with three locations it is positioned to produce the results that our clients expect from a top brokerage.

 

 

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