The number of active listings is down again, a very good sign that the economy and housing market are heading in the right direction. Sales were off a little in the first two weeks of October compared to the same time in September, but still very acceptable, all things considered.

The most active market continues to be between $300,000 and $400,000, which also has the highest number of active listings. A good balance between supply and demand in that price range means buyers will continue to have lots of choices while serious sellers will continue to have buyers for their homes.

Housing Starts Rebound – Todd Hirsch, Chief Economist, ATB Financial

Shiny new condominium projects and charming new subdivisions have become familiar sights in Alberta, but there’s no question that the pace of new home construction has been slowed by the recession. However, new data from the Canada Mortgage and Housing Corporation are more positive.

After hitting a multi-year low in August, housing starts in Alberta roared back in September. Builders began construction on nearly 29,000 units last month, up from less than 20,000 the month prior. (The figures are seasonally adjusted to take into account regular and predictable fluctuations that occur each month; they are also presented at annualized rates, meaning the number of homes that would be built in an entire year if the same pace of activity was maintained for 12 months).

There are few economic statistics that are better indicators of consumer sentiment than housing starts. The drop in new home building activity over the last two years—illustrated clearly in the graph below—suggests Albertans have become a bit more hesitant to make a major purchase like a new home. It also reflects weaker demand as fewer people have been moving to Alberta. Over the last 12 months, total starts are down 32 per cent compared to the previous 12 months.

The good news is that home builders are pulling back on supply in reaction to softer demand—and that has helped keep the residential real estate market in reasonably good balance. New home prices have been virtually unchanged in Alberta’s two major cities throughout the downturn.

Sales in Red Deer in September kept pace with July and August’s, demonstrating continuing consumer confidence in the local real estate market.  The number of active listings dropped just over 5%. However, the slight increase in sales relative to a drop in the number of active listings pushed the market further into balanced territory.

Sales in September were most active in the $250,000 – $350,000 price range, which coincidentally, is also where there are the most choices for buyers. This appears to be the ideal market for buyers with plenty of choice, very low interest rates and the likelihood that the market is gradually starting to improve.

There are positive signs for energy prices in the months to come. OPEC has finally made an effort to work to manage oil supply suggesting that higher prices may be in the future. Oil prices over the $50US mark would definitely help some of our struggling oil companies while bolstering consumer confidence.  Recent activity in the central Alberta real estate market seems to support that idea.

Sales in the first two weeks of September are up dramatically compared to the same time in August, and even up from the same time a year ago.  The number of active listings is up very slightly from last month but quite a bit higher than they were a year ago.  The level of sales this month so far suggests we are heading in the right direction when it comes to balancing supply and demand.

The most active price range was between $250,000 and $450,000, although there was activity across most of the price spectrum, even two sales in the $750,000+ price range.  It is an encouraging sign that there is still confidence in the local market when people are investing in higher priced homes.

Another sign of confidence in the Alberta housing market is evidenced in the article below.  Albertans are spending money at a record pace, renovating their existing homes even if they aren’t buying new homes.

Home renovations holding up well – Todd Hirsch, Chief Economist, Alberta Treasury Branches

As THE OWL reported yesterday, the slow economy may be wearing on new housing starts in Alberta.  But it doesn’t seem to be tempering the enthusiasm for renovating existing homes.  In fact, the most recent numbers suggest spending on residential renovations are near an all-time high.

In the second quarter of the year, home owners spent $1.56 billion on expansions or improvements to their properties.  The data include renovations on primary residence as well as cottages or recreational properties.  And because the survey captures only major renovations (i.e., those which must be done with a municipal building permit) it probably underestimates the total value of renovations—minor, unreported renovations such as new flooring, paint or lighting are not captured.

Renovation spending in the second quarter would, in fact, be a new record high if it was not for the spending that was registered in late 2013 and early 2014.  The renovation spending during these quarters were elevated by the southern Alberta flood in June of 2013 when millions of dollars were spent restoring houses that were devastated by the rising water.

The recent enthusiasm for renovation is a good sign that many Albertans are still investing money in their homes.  They may not be snapping up new properties to the same extent as they were a few years ago.  But they’re still finding the cash to put into their existing properties, creating homes and cottages that are larger, more modern and perhaps more energy efficient.

August sales in Red Deer kept pace with July’s and, for the first time this year, were higher than the same month last year.  The number of active listings was down just a little and the market manage to stay just inside the balanced territory.  All in all, a very positive result in a difficult economy.  The strength in the Red Deer market continues to be in the $300-000 – $450,000 price range where supply and demand are in balance.

When the economy slows as it has over the past two years, the housing market is surely going to slow as well.  Sellers have to adjust their expectations when there are fewer buyers and more competition.  Recent sale results provide proof that there are still buyers for competitively priced homes.  Very low interest rates are contributing to better than expect market activity.

In spite of some continuing economic gloom, news of falling supply and increasing demand for oil in the world market provides home that prices will get past the magic US$50 mark for good in the coming months.  Energy companies have become streamlined and more cost efficient and will be able to generate profits at that price and put some of our unemployed workers back on the job.  Ultimately that is what will help get the Alberta economy back on track.

Red Deer sales in the first two weeks of August were down slightly compared to the first two weeks in July.  The number of active listings is down slightly, so we don’t see anything in this market to be too concerned about.  We will only be concerned when the ratio of sales to listings goes below 10% for an extended period of time.  A slower market is a function of our current economic reality, but as long as supply and demand remain in reasonable sync, it’s just a slower market, not a calamity.

June’s wholesale trade numbers bring some good news, Nick Ford, Economist – ATB Financial

Wholesale activity managed to jump up in June. According to this morning’s wholesale report, June’s sales grew by $181 million, or 3.0 per cent from May (this figure is adjusted to account for seasonal variation). Despite the monthly incline, wholesale trade still remains 7.6 per cent lower than where it was at this point last year.
Wholesale trade is often forgotten, but is crucial to an economy. Wholesalers sell products to governments, institutions and other businesses and can be a strong force that works in conjunction with retailers. Like many sectors in our province, wholesale has had to battle strong economic headwinds.
But, today’s wholesale report does bring some decent economic news. While, virtually all types of wholesalers have seen activity dwindle from last year, sales are beginning to increase again. The value of goods sold from Alberta’s largest wholesale supplier, machinery, equipment and supplies merchants grew 18.0 per cent in June from May. In addition, the value of goods sold by building material and supplies (11.1 per cent) and food and beverage wholesalers (4.0 per cent) were up from May too.
Like June’s monthly Retail Trade Survey, June’s monthly Wholesale Trade Survey added three questions to assess the impact of the Fort McMurray wildfire. In June, about 1,250 companies responded to the additional survey questions. Of these companies, 147 wholesalers indicated that they had been affected by the wildfire, down from 212 wholesalers in May. While the effects of the wildfire were felt across many wholesale subsectors, responses indicated that the machinery, equipment and supplies subsector had the largest share of companies reporting an impact in June, the same as in May. Responses to the supplementary questions also revealed that wholesale establishments in most provinces had been affected, led by those in Alberta, Ontario and British Columbia. Although the responses showed that many had been affected, the overall impact of the wildfire and evacuation on wholesale sales was relatively small.

Prices to just over Year to date sales in Red Deer haven’t kept pace with last year.  The year started out slow but rising oil US$50 per barrel for West Texas Crude in the spring gave consumer confidence and we experienced a busy three months in April, May and June.  When the price of oil recently dropped below US$50 on its way to the current level around $42, consumer confidence went with it.  The slower market has also caused inventories to go up slightly, although not as high as might be expected.

The good news for central alberta is, the light at the end of the tunnel is still on.  An August 3^rd article in the Financial Post quotes Martin King, vice-president of institutional research at First Energy Capital Corp in Calgary. The gist of the article is that large reductions in capital expenditures in the world energy industry will have a direct impact on the long term supply of oil going forward.  Since the price of oil is driven by the relationship between supply and demand, lower capital investment means lower production that will lessen supply and bring prices back to a more equitable level.

Their prediction is US$60 average in 2017 and US76.50 through 2019. US$60 currently translates to about $78 Canadian which is likely enough to keep our energy industry working. Alberta will survive this latest downturn just like all the others before it.

Red Deer – a little slower start to the summer market in Red Deer with sales in the first two weeks of July down from last month as well as last year at the same time. It’s a bit of reversal from the last couple of months when we were seeing positive signs – higher sales and slow inventory growth. Sales do typically slow somewhat as we move into July and the decrease isn’t far off typical.

It seems that history does repeat itself. The number of active listings is creeping up to levels we last saw in 2010 – 2011 while sales for the first half of the year are on par with those in 2009 and 2010. Coincidentally the price of oil was below $50 at the beginning of 2009, and the difference between then and now is that the price did recover back to $US 80+ within just a few months.

The one thing we do know is that the world is still using lots of oil and will do so for many years to come. That means there will be a market for Alberta oil. Left alone, the market will always find balance between the place where consumers are willing to buy it and producers are able to bring it to the market. This time, we don’t expect prices to recover as quickly, but we do expect to see producers become more efficient in order to generate profits even at lower prices.

 Alberta Treasury Branch – Alberta Economic Outlook – Q3 2016

Without question the third quarter of 2016 is going to be difficult for many Albertans and businesses in the province. More layoffs in the energy sector and the setbacks presented by the Ft. McMurray disaster will add strain to an already struggling labour market. Adding to this is the heightened level of volatility in global markets and the questions surrounding the Brexit vote, all of which will continue to grind on optimism.

Yet while the unemployment rate may drift higher over the summer and early fall, there are signs that better days aren’t too far off. Oil prices have stabilized and should rally modestly to the range of $US 55-60 by the end of the year, which will bring stability to Alberta’s petroleum sector and the labour market. And barring any additional turmoil stemming from Europe (such as another major economy threatening to leave the E.U.) financial markets should calm down by the fall. In the meantime, Alberta’s retail, manufacturing, housing and construction sectors will continue to be challenged.

ATB’s economics and research tem are forecasting a contraction of 1.9 per cent this year – the second consecutive year of recession. This will be followed by a modest recovery of 2.0 per cent growth in 2017.

Blackfalds – a decent start to the summer market in Blackfalds with sales in the first two weeks of July on par with last month, and also even when compared to last year at the same time. It’s a continuation of the last couple of months when we’ve been seeing positive signs – higher sales and slower inventory growth. Sales do typically slow somewhat as we move into July but hopefully this good start is a sign of things to come.

The Blackfalds market has defied logic this year with year to date sales up slightly compared to last year, unlike any other central Alberta markets. The number of active listings is down from last month, but up a little when compared to last year at this time. In spite of very active new home construction over the last few years, the active listing count remains relatively stable when conventional wisdom would have expected it to skyrocket when the economy slowed.

Red Deer sales in June fell off a little when compared to a very strong May. The number of active listings dropped slightly as well, helping keep supply and demand in balance. Two months of a balanced market hopefully is the start of a new trend to go along with higher oil prices.

The median sale price for central Alberta recovered a little in the 2nd quarter and is now back to where it was at the peak in 2007. That means that in the 2nd quarter of 2016, when considering all the sales in Red Deer, Sylvan Lake, Lacombe, Ponoka, Blackfalds, Penhold and Innisfail, the sales price with an equal number of sales higher and an equal number lower moved up a little to $312,900 from $308,000 in the 1st quarter of 2016.

Median price is used to define trends only. An upward movement in the median price doesn’t necessarily mean that the price of an individual home went up. It more likely means that there were more sales in the higher price ranges. We have seen strong activity at the high of the price spectrum in some markets this year. It’s not possible to broadly define an exact percentage increase or decrease in prices for the overall market because every price range and every market is a little different based on the supply of active listings relative to the demand. Ask your local RE/MAX Associate for specific market advice about your property.

Sales in the first two weeks of June were a little slower than last month as well as the same period last year, but there are two encouraging signs that the market is on the right track.  First, the number of active listings has dropped since last month.  Second, the number of pending sales is still strong, even though recent changes to regulatory policy allows sellers not to report pending sales.  That means that there are likely many more pending sales than actually show in our records.

We consider the overall central Alberta market to be stable considering the economic situation in Alberta.  That stable market can probably be at least partly attributed to the fact that people are staying here rather than leaving, as indicated in the ATB article below.  Apparently the job situation in other parts of Canada isn’t good enough to lure them away and they feel there is a future here.

Crude oil prices have fallen below the magical $50 US mark, which may be having some effect on consumer confidence.  We expect them to fluctuate up and down but most economists are predicting a gradual rise over the next few months and improvement in the Alberta economy starting this summer and fall.

Out-migration from Alberta Holding Steady, Todd Hirsch, ATB Economics – During a typical recession in Alberta, it’s common for people to move to other provinces for work. That trend makes what’s happening in the current downturn a bit surprising: so far the number of people leaving Alberta is relatively low.

The graph below shows the last 50 years of out-migration to other provinces, as a percentage of the population. The thin green line shows quarterly outflows that are subject to significant seasonality—people tend to leave mostly in the third and fourth quarters of the year. The heavy green line shows outflow averaged over four quarters, giving a better perspective of the general population movement.

The outflow was quite high during some of the 1960s and 1970s—more than one percent of the province packed up and left. The outflow gradually ebbed lower over the decades, with only a slight bump higher during the nasty recession of the 1980s.

The percentage of Albertans leaving has been remarkably stable since the mid-1990s at around 0.4 per cent per quarter. There was a slight jump in the 2008 recession to around 0.5 per cent. Despite the severity of the current 2015-16 downturn, out-migration from Alberta has risen only slightly above 0.4 per cent—mostly due to the fact that the job market in other parts of the country is not significantly better than it is in Alberta.