Market Update– Red Deer sales maintained a good pace starting out the new year, actually a little higher than the same period in 2014.  The pending sales count indicates that we could finish up the month as almost strong as last year too.  The number of active listings is considerably higher than it was last January and is a bit of a concern.  An over-supply puts downward pressure on prices.

A bigger concern is that consumer confidence may be hurt by the constant barrage of tales of doom from the media – thousands of jobs lost in the energy industry etc.  Truth is, many of the jobs lost in Alberta were in Fort McMurray and it’s likely a lot of those people were commuting to work from all over Canada.  Their paychecks went home with them and the only contribution they made to the Alberta economy was the work they produced.  We used to hear that there were 70,000 jobs unfilled in Alberta.  Even if a lot of those jobs were energy related, some of them weren’t and have been undoubtedly filled as a result of the slack in the energy industry.  While we are cognizant of the fact that people in central Alberta have lost jobs and potentially more could, we also believe that the media is only focused on the negative and that there is much positive out there if we just look for it.  The Alberta Treasury Branch’s Alberta Economic Outlook for the first quarter of 2016 offers a realistic look at what we may experience over the next 18 months.  If offers hope that things will slowly begin to turn around in the middle of this year and slowly get better from there.  The summary of the report is as follows:

Downturns are not unusual in Alberta’s economy, which remains closely tied to the price of energy resources.  A steep drop in oil prices in 2014 – which continued and accelerated in 2015 – led to a contraction in Alberta’s GDP of about one percent last year.  Unfortunately, early 2016 holds little promise of a quick rebound.  Excess global supply form OPEC producers, coupled with uncertainty in China, Europe and the Middle East, continues to weigh on oil prices.  This has led to even greater stress on the balance sheets of the province’s energy producers as they struggle to reduce costs.  Natural gas prices continue mostly unchanged in a price range unsupportive of new investment or production.

                The strains in the oil patch are also weighing down industries peripheral to petroleum extraction, particularly manufacturing and construction.  As well, weaker consumer sentiment has resulted in reduced retail trade and residential housing construction.  All of this has resulted in an overall deterioration in the job market.

                As always, though, there remain pockets of optimism.  Agriculture, forestry, tourism – which are the province’s other major industries – continue to perform well.  Prospects for 2016 are positive, particularly with the weak Canadian dollar making commodity exports more attractive, and encouraging more U.S. tourism.

                The Economics and Research team at ATB Financial is estimating a GDP contraction of 1 percent in 2015, with a smaller contraction 0.5 percent in 2016.  Most of the economic stress on the economy and labour market are expected in the first half of the year.  Stability and even some return to modest growth is still anticipated by the end of the year.

Market Update- Red Deer sales were lower again in December, finally pulling the market into Buyer’s territory after many months when Seller’s had the advantage. The total number of active listing is back down to levels we saw last February and March. Total sales for the year are down 16.7% from 2014 but on par with or better than 2009, 2010, 2011, 2012, and only slightly lower than 2013. All that translates into a pretty normal year when considering the long term.

So, while things look a little grim based on the last quarter, the real estate market in 2015 was more robust than the media would have you believe. The truth is, Alberta’s population still grew in 2015 and there were still jobs created here. They weren’t the high paying jobs the energy industry used to generate, but certainly eased the pain a little. In the meantime, other Alberta industries benefitted from the low Canadian dollar and low energy costs. Transportation companies, airlines, logging, tourism and the public in general were all beneficiaries of low energy costs.

Unlike 2008, the rest of the world economy is moving along fairly well. There is no doubt that there will be some pain in Alberta from our current situation, but it would be foolish to assume that the sky is falling. As always, we will survive and come our stronger and better equipped to manage the next one.