The Red Deer market continues to forge ahead with November sales keeping pace with September and October.  In the meantime, the active listing count is still dropping, making it tougher for buyers to find that perfect home.  If the trend to fewer active listings and strong sales continues, prices will start to adjust.

There is lots of optimism that two new pipelines to take oil to eastern Canada and the US are imminent, natural gas prices are rising and it looks like the future is bright for Alberta.

Small is Beautiful – Todd Hirsch, Senior Economist, ATB Financial – Small- and medium-sized businesses (SMEs) are the heart and soul of many communities throughout the country. In fact, nearly 95 per cent of companies in Canada are considered small or medium in size. Given that, it’s a good thing that their business optimism is turning higher.

According to a survey conducted monthly by the Canadian Federation of Independent Business, the index of confidence among SMEs in Alberta rose to 72.2—more than a full point higher than the reading of 71.1 in September. On balance, Alberta businesses are more optimistic than the Canadian average, but the national figure did rise by a larger amount in October (from 62.0 to 65.6). Businesses in Newfoundland and Labrador continue to be the most optimistic, followed by Alberta and Saskatchewan.

Measured on a scale of 0 to 100, an index level above 50 means owners expecting their businesses’ performance to be stronger in the next year outnumber those expecting weaker performance. According to past results, index levels normally range between 65 and 70 when the economy is growing at its potential.

The high level of optimism in Alberta is attributable to relative stability in the oil and gas sector, as well as the other supporting industries throughout the province such as agriculture and forestry. A significant number of SMEs in Alberta are in the construction and energy sectors, and with those performing well at the moment, it is little wonder that independent entrepreneurs are seeing good days ahead.

Alberta’s housing starts hanging in, Todd Hirsch, Senior Economist, ATB Financial – Despite the anxieties in Europe, uncertainty in the U.S., and a faltering economy in other parts of Canada, Alberta remains remarkably stable. The province’s balanced housing market has been one of the most convincing indicators of that.

Construction got started on 33,127 new homes in Alberta last month (adjusted for seasonality). That is essentially unchanged from September. Over the first ten months of 2012, total housing starts are higher by 33 per cent over the same ten months of last year—a significant increase given the slowing of the housing market elsewhere in the country.

Nationally, housing starts slipped to 204,107 units, down from 223,995 in September—lower than the consensus forecast of 213,000. However, Alberta’s housing market has held up better than most other provinces. The number of starts in October is only slightly below the 10-year average for the province (34,800). And if you omit 2006 and 2007 from the calculation—the two record-setting years for housing starts—last month’s figure is actually higher than average (31,300).  A strong labour market, high average wages, and surging consumer sentiment have helped keep Alberta’s housing market on its feet. But almost most importantly, the province is once again a strong attractor of inter-provincial migrants—many of them moving to Alberta to find work. On a net basis, over 20,200 people from other provinces have moved to Wild Rose Country over the first half of 2012. That alone provides some strong incentive for home builders to keep swinging their hammers.

This is the time of year when the market goes into a slower “winter” mode.  In spite of the sudden wintery weather, October sales were strong, keeping pace with September and up from last October.  In the meantime, the number of active listings has fallen to its lowest level in years.  Strong sales combined with a shrinking supply means the market is now in balance – where neither buyer or seller has an advantage.  A balanced market is ideal, offering buyers an ample supply of homes to satisfy their needs, and sellers an opportunity to find a buyer willing to pay a fair price.  A balanced market means prices should keep pace with inflation only.

We have been conditioned to believe that strong house price inflation is a good thing, but the only winners when that happens are the banks.  Let’s face it, house prices in any market will rise and fall in unison.  It’s a mistake to think that if my house goes up 10% in value, I can sell it and move up with the profit.  Actually, the house I will buy has also gone up 10%, and I will have to finance the difference.  Here’s a tip:  Buy bank shares.

Comparing Canada with pre-housing meltdown U.S. shows all ‘we have to fear is fear itself’ Tara Perkins – Globe & Mail – Oct 31/12

Two well-known economists suggest the angst about Canadian consumer debt is overdone.  And, one says in a new report, Canadians need not fear a U.S.style real estate meltdown.

The comments by deputy chief economist Benjamin Tal of Canadian Imperial Bank of Commerce and chief economist David Rosenberg of Gluskin Sheff + Associates come amid repeated warnings for the Bank of Canada that consumers must get a handle on their record debt burden as the country heads toward an inevitable increase in interest rates.

The central bank went so far last week as to warn that it could raise rates if they don’t, though that appears unlikely at this point.  The key debt-to-income measure has been particularly worrisome, in that it has now surpassed the level at which the United States hurtled into the real estate crash.

But, Mr. Tal said Tuesday, less attention should be paid to the level, and more to the speed at which it has been rising. Several countries have had higher ratios with a meltdown, he suggested, adding that in the last three years that measure has climbed at half the speed than that of the precrash era in the United States, making it appear less threatening.

He also stressed that the quality of mortgages in Canada, as determined in large part by the credit scores of borrowers, is much better.   One-third of U.S. mortgages taken out in the U.S. in 2005 and 2006 were in negative equity positions before house prices dropped, and at least half of the mortgages had less than 5 per cent equity, making them extremely vulnerable to even a small drop in prices. In Canada, only 15 to 20 per cent of new mortgages have less than 15 per cent equity, and the negative equity position is nil, he said.

In addition, Canadian borrowers have begun reducing their exposure to rising interest rates by choosing fixed-rate mortgages over variable. The opposite occurred in the U.S., where adjustable rate mortgages remained popular until the bitter end.

Mr. Rosenberg also talked down the issue, having heard “all of the horror stories” of late. Among his points: Disposable income in Canada is “distorted” against that in the U.S. because Canadians pay for health care from taxes, household debt relative to assets is below peak levels, Canadians have more equity in their houses, wage growth in Canada is double that of the U.S., and debt-servicing abilities are “hardly being impaired.”

Mr. Tal does believe house prices in Canada will probably fall over the next two years, but there are factors to lessen the blow, leading to a soft landing. That’s what policy makers are hoping for.  Those factors include a lower degree of speculation in the Canadian market, and higher quality mortgages…..