Market Update –  CMHC held their Annual Housing Market Update in Calgary this past week.  The information provided was very comprehensive and well presented and offered an economic perspective for Canada, Alberta and most of the larger cities in Alberta.

Good news!  Canada is on sound economic footing.  The average Canadian has equity in their homes and have not over-indulged on credit they can’t afford.

Most of the jobs lost in the recession have been recovered and we are on the way to economic recovery, how quickly will be determined by how well the United States and some European countries get through the next year or two.

There are many positive things happening in Alberta and even closer to home in central Alberta.  Oil and natural gas land lease sales are up.  Drilling activity in Alberta is up.  Exports from Alberta are up.  Job growth has re-appeared after being lost for 2 years.  And more people are moving into Alberta than out.

Oilsands projects that have been on the shelf are now being dusted off which will put thousands of people to work and create economic activity and royalty revenues to benefit the whole province.

So, how will all this impact you and the housing market?  Well, it’s all going to take some time.  Prices are not going to magically go up to the levels we experienced in 2007 any time soon.  There is still an abundance of homes available for sale and buyers are not going to be quick to jump into the market until they are very sure that things are getting better.

So, we continue to expect gradual improvement in the market for sellers.  Of course, improvement for sellers means less advantage for buyers.  Those who have been waiting for prices to go down might want to consider some of the signs.  Gradual improvement will mean less choices, higher prices and maybe even higher interest rates.  Things that make homes cost more.

For those who are waiting to sell until their homes increase in value, you might be getting closer, but it’s going to be a while before things are like the good old days, and while you are waiting, remember that the house you want to buy will go up an equal amount.

Truth is, there’s no gain in waiting to sell if you are going to turn around and buy back into this market.  In fact, it might be better to sell and buy now while interest rates are at historical lows and you still have lots of buying choices.

Market Update – “Gradual improvement” is often used these days to describe the Alberta economy.  The world economic situation is still described as tenuous but Canada continues to be the bright spot, although we are still very dependent on the rest of the world, especially the U.S., for economic prosperity.  Alberta has typically led Canada out of the doldrums.

 While no one can accurately predict the future, there are some fundamentals that we watch to get a sense of where our real estate market is going.  Real estate prices are driven by the number of properties available in relation to the number of buyers actively looking.  When there are more sellers than buyers, prices will moderate.  When there are more buyers than sellers, competition will drive prices up.

 Job creation causes population growth.  Population growth creates buyers for homes.  It’s really that simple.  We can’t easily track population growth, but we can watch for signs of job creation.  In Alberta the quickest way to create jobs is to see improvement in energy demand and therefore, energy prices.

 The “supply” of homes for sale is gradually shrinking and we are seeing signs of job creation (demand).  If that trend continues, home prices will stabilize.  We are not predicting much in the way of price increases because the next step in the process is a “balanced market” where supply and demand are in balance.  Substantial price inflation requires a move to more buyers than sellers and we don’t see that happening anytime soon.

 There is some risk in waiting to buy if you are hoping for prices to go down.  The other factor for home buyers to consider is interest rates.  Economic growth will almost certainly cause rates to go up, and an increase in interest rates is exactly the same as a price increase for anyone who needs a mortgage to buy their home.

 Energy sector seeing gradual improvement – By Dan Sumner, Economist – Alberta Treasury Branch

 It has been a long tough period for many companies involved in Alberta’s energy sector, but according to the Canadian Association of Oilwell Drilling Contractors (CAODC) activity in Alberta’s most important sector is projected to continue to gradually improve this year and next.

 The CAODC forecasts that there will be an average of 400 active drilling rigs in Western Canada over 2011, and the utilization rate will average a respectable 45%. That compares with an average of 327 rigs projected for 2010 and an average utilization rate of 41%. Moving into the typically busy fourth quarter, activity is projected to rise from current levels, with the utilization rate forecast at 50% over the last three months of 2010.

 The CAODC also noted in its forecast press release that the focus of activity has significantly shifted towards oil, at the expense of natural gas. This shift is expected to continue in 2011 and will spell good news for some areas of Alberta and not so good news for others.

 Although the CAODC does not make specific forecasts for Alberta, with much of Western Canada’s oil exploration occurring here, drilling activity should follow this general up trend.  The gradual recovery in conventional energy exploration will definitely be very good news for Wild Rose Country, as the industry is the fundamental driver of so many other sectors in the province.

 Although activity is far from the boom days of the mid-decade, the current pace of activity is enough to support gradual, sustainable economic growth. It is very fortunate that many energy producers are able to shift their focus towards oil, with natural gas prices so weak, because if this was not the case, the current economic landscape in Alberta would be a lot shakier.