The Word of the Day is “Average” at the 2012 REALTORS Housing Forecast Seminar

The REALTORS Association of Edmonton gave their real estate market forecast for 2012 this morning during the 24th annual REALTORS Housing Forecast Seminar, and as usual they invited some friends to speak about the Edmonton and Alberta economy. The invited speakers talked about Edmonton’s strength and business climate, development trends, economic and financial trends, and how it all affects the housing market for both new construction and the resale market on MLS. By the end of the morning, the repeated buzzwords seemed to be “on track”, “average”, and “more of the same” … which I thought was good, considering the rest of Canada and the world are having much more difficulty than we are in Alberta. Another major emphasis from all speakers is that real estate is local … meaning everything you hear in the news about the overall Canadian real estate market probably doesn’t apply to Edmonton, which is doing much better than pretty much the rest of the country … so always get the straight goods right from your local real estate experts, the Howard Team with RE/MAX Real Estate! (Hey, it’s my blog, I can make all the blatantly gratuitous plugs I want. :)  )

I won’t go into too much detail on what many of the speakers discussed during their presentations, simply because it was a lot of statistics, numbers and slides on the economy and strengths of Edmonton. Overall, the oil and gas sector in Alberta is going to continue leading the Canadian economy and the forecast is generally good. 2011 saw almost 15,000 people move into the Edmonton area, job growth was rapid during the year (much of this was replacing the jobs eliminated from downsizing the previous few years), and the unemployment rate is trending downwards. Average weekly earnings are on an upward trend. Housing affordability is good, especially compared to other major markets across Canada, and will continue to be good with the current low interest rates expected to hold through 2012.

The main concerns to Edmonton and Alberta’s growth are ones we’ve already heard before. Market volatility in the United States and Europe will continue to be a big wild card, and pretty much everyone was in agreement that some plans need to be put into place fast to deal with the rising debt levels before stability and growth can happen. While this doesn’t affect us directly here in Edmonton, our markets are obviously tied to the world economy and bad news elsewhere will hold back the good news that we feel here.

So how will all this affect the real estate market for 2012? The last two speakers of the morning, CMHC’s Richard Goatcher and the new RAE President Doug Singleton, both seemed to come to the same general conclusion … a continuing trend of stability and moderate growth.

CMHC tracks lots of information and statistics regarding real estate markets as well as the general economy and area growth, and made predictions for new construction, resale (MLS), and rental housing. For the resale market, the number of sales in 2011 trended slightly below the long term average but is edging upwards with moderate gains of 3% predicted for 2012. The sales-to-active listings ratio is hovering just below the 20% level (meaning each month, 20% of the active listings will sell) but we need to see an increase to about 25% to start seeing decent price growth. The market is still favoring buyers, so price gains will be moderate and the prices for 2012 will increase 2-3% but will still be below 2007 peak levels. In new construction, single-detached starts were well below year-to-year numbers in the first half of 2011 but the gap closed fairly quickly and 2012 volumes will be close to the longer term average. New house prices are still below peak levels but will edge upwards slightly during the year. Rental vacancy rates will move lower due to improved demand, and with that rents are forecasted to rise 3%.

CMHC - Edmonton CMA - Forecast Summary Chart

(Sources: Statistics Canada, CMHC, RAE.  (p) indicates their projected estimate, as their final numbers weren't in yet)

The seminar wrapped up with the forecast from the new president of the REALTORS Association of Edmonton. As in previous years for this seminar, the incoming President’s forecast often mimics that of the CMHC speaker so it seems like the speech is short and sweet with lots of graphs of various measurable indicators of the outgoing year’s real estate market. He also included some interesting price comparisons of Edmonton to other major Canadian markets, as well as how the various sub-markets in and around Edmonton compared to the city itself. I’m reproducing the graphs here for those who are curious like me, followed by the forecasts for the various sub-sectors of the Edmonton real estate market.

AVERAGE RESIDENTIAL PRICES

EDMONTON SUB MARKETS - METROPOLITAN (prices for month of December 2011)

EDMONTON SUB MARKETS - EXBURBS (prices for month of December 2011)

(I'm making a small comment on this Exburbs chart - the average price is for sales only during that month. I live in Sherwood Park and the prices are usually higher than this amount, and the month previous was $40,000 more. Other centres are probably off of "normal" amounts, and December traditionally has the fewest number of sales. I will have to chart out the trend in a future blog.)

RECREATIONAL AND ACREAGE

And finally ....

RAE FORECASTS FOR 2012

Forecast - Commercial

• Industrial and commercial development plus refurbished commercial properties create churn
• increasing population creates more "Mom & Pop" business start-ups and warehouse condos
• REALTORs continue to serve investorys, entrepreneurs and SMB's
• FORECAST: Higher commercial activity in 2012

Forecast - Multi-Family Sales

• Conversion activity much reduced
• CMHC expect rents to increase
• Oversupply of unabsorbed condos enter the rental market, depress sale prices
• Concern about construction quality and builder warranty
• New Condo Act revisions due this year
• FORECAST: profits to be made but proceed with caution.

Forecast - Residential Sales - Single Family Dwelling

• New home construction continues to provide opportunities at the outer edges of the community
• Strong demand for home renovation materials
• Strong preference for a "home of their own" with increased privacy, independence and the "joys" of home ownership
• Labour shortage in Alberta will create in-migration and maintain the demand for home sales
• FORECAST: prices fluctuate through the year with 2% annual increase in prices and slightly increased sales

Forecast - Residential Sales - Condo

• Condo purchase is a lifestyle decision
• Singles, young couples, empty nesters, first time buyers make the bulk of the condo buyers
• Families prefer property with yard and independence
• Condo/SFD ratio is dropping (condos 35% of total res. sales in 2007, 26% in 2011)
• FORECAST: Condo prices increase just 1% over the year with very slight increase in number of sales

MLS SALES FORECAST - TOTAL

Still there?  Thanks for reading. :)