Sales in Red Deer in September were off only slightly from August. The number of active listings dropped keeping the ratio of sales to listings firmly in seller’s market territory.  Sales at the low to midpoint of the price spectrum remained strong, while the higher price ranges lost some of the momentum picked over the spring and summer.

When pondering the future of central Alberta, the story remains pretty much the same – strong in-migration from other provinces driven by a strong job market, high wages and low taxes.  In April, May and June of this year, Alberta gained a net 13,204 new people from other parts of the country (the difference between the number of in-migrants less the number of out-migrants). That is the equivalent of Alberta adding another city the size of Camrose to its population in a matter of 3 months.

Part of the reason for our strong economy is that our oil is making its way to market by train.  New markets mean higher prices for producers and more royalties for the government who will be spreading the money around before another provincial election in 2016.

Strong sales continue in the first two weeks of September combined with adequate inventory in almost every price range except $450,000 to $500,000 where the pickings are a little slimmer.

We are often asked what the market is going to do in the future.  While no one can predict the future, the following articles from ATB are strong indicators that the future looks very promising in central Alberta.

Alberta’s Population Projected to Climb – Todd Hirsch, Chief Economist, ATB Financial – The number of people living in Alberta will grow no matter what, according to the latest population projections by Statistics Canada.  The present population of Alberta is 4.1 million. Under six various growth scenarios, the province’s population will range from a low of 5.6 million to a high of 6.8 million by the year 2038. The high growth scenario would essentially see the addition of another Calgary, Edmonton and Red Deer combined over the next 24 years.

“In all scenarios, population growth in Alberta would be the highest among Canadian provinces over the next 25 years,” said the statistical agency in a press release this morning. It also notes that these projections are not forecasts. Forecasts suggest what will most likely occur in the future; projections represent an attempt to establish plausible long-term scenarios.

Under the same growth scenarios, Canada’s total population will grow from its current 35.2 million to anywhere between 39.4 million and 47.8 million in the same time frame. A longer-term population projection for the country could see it reach 63.5 million by the year 2063.  Economic trends are not considered in the exercise of population projections. Rather, Statistics Canada bases its assumptions on trends in fertility, life expectancy and migration. The latter of these—migration—is deeply tied to the economic performance of the province. As we’ve seen in recent quarters, Alberta’s strong job market continues to draw thousands of interprovincial and international migrants.

Oil and Gas producers Busier in Second Quarter – Todd Hirsch, Chief Economist, ATB Financial – More oil and gas rigs, drilling equipment and heavy transportation vehicles were being used in the spring of 2014 compared to earlier quarters. According to this morning’s Statistics Canada figures, the industrial capacity utilization rate in Canada’s oil and gas extraction industries rose to 88.0 per cent. That’s the highest rate in 11 years.

The industrial capacity utilization rate is a measure of existing slack in the economy. It is the ratio of an industry’s actual output to its estimated potential output, given the fixed amount of buildings, factories, machinery and equipment currently available. The closer the ratio is to 100 per cent, the less slack there is in the system.

Nationally, industrial capacity also tightened to a utilization rate of 82.7 per cent, the highest since the second quarter of 2007. Statistics Canada reports that manufacturing industries were the main source of the increase. Much of Canada’s oil and gas extraction sector is based in Alberta, so capacity utilization in this sector is a good reflection of the pace of economic activity in this province.

Yet there is a distinct downside to the heightened activity: cost pressures for producers. As utilization rises, prices for available machinery, equipment and labour also rise. That puts upward pressure on the break-even point for many projects, particularly in the capital-intensive oilsands.

Red Deer sales in August slipped slightly from July’s and continued the downward trend started after a very busy May.  That is the same trend experienced in most past years, but may be a little more pronounced this year.  Another trend worth noting is that after several months of increasing inventories, the active listing count is down by about 10% over last month.  The Red Deer market is still well into Seller’s market territory, but moving toward balance which should keep prices in check.

Year to date sales in 2014 are up more than 10% over the same period last year and are indicative of the very strong economy we’ve been experiencing, not only in Alberta but in Canada as well.

The economics of both Alberta and Canada are performing above expectations.  The Canadian economy grew by 3.1 percent in April, May and June according to Statistics Canada – the strongest the economy has seen since 2011.  In Alberta, wages continue to go up, much faster than the rest of Canada which would explain the ongoing large numbers of people moving here from other provinces.  Alberta weekly wages top the rest of Canada by more than 18%.

Red Deer Market Update – sales in Red Deer in the first half of August were off slightly from the same period in July and the number of active listings also dropped.  The number of pending sales (those with accepted offers with conditions) has dropped by almost half which is an indication that the market has slowed a little.  That will likely be confirmed with lower end of the month numbers.

Activity is still strong in the $300,000 – $350,000 price range where thankfully there still seems to be ample inventory to satisfy most buyer’s needs.  Higher end activity is also very strong this month compared to previous months.

The overall central Alberta market is still quite strong with year to date sales up from last year.  New construction appears to be keeping pace with population growth in most places and is keeping price growth stable.  Our research shows that prices have now recovered from the economic downturn in 2008 except at the high end of the price spectrum.  A couple of the reasons for our continuing strong housing market are outlined below:

Alberta’s unemployment rate globally impressive – Nick Ford, Economist, ATB Financial – Alberta is the envy of Canada, at least when it comes to finances. Our economy leads the nation, particularly in job creation and a low unemployment rate. Alberta’s unemployment rate currently sits at 4.9 per cent, holding second place behind Saskatchewan’s 3.9 per cent.

Alberta’s employment environment fairs well not only on the domestic front, but also on the global stage. Using data from StatisticsCanada, it sits in sixth place when compared to the 34 countries in the Organization for Economic Co-operation and Development (OECD). Canada places seventeenth (7.1 per cent unemployment) while the United States just misses the top ten by landing eleventh with a current unemployment rate of 6.1 per cent (according to the US Bureau of Labour Statistics).

However, since the latest available OECD data is from October 2013, the unemployment rate for October 2013 can be used to level the playing field. When this is done, Alberta jumps up one spot to fifth place (4.5 per cent unemployment). Canada also slides up one spot to sixteenth (7.0 per cent unemployment). The U.S., with a higher unemployment rate (7.2%), slides back eight spots to number 19.

Here at home, Alberta’s job market remains the strongest in Canada. Continued growth in the province’s economy in 2014 will maintain a balanced job market and a low, healthy unemployment rate. ATB Financial predicts the unemployment rate will average at 4.5 per cent this year.

Manufacturing on a tear in June – Todd Hirsch, Chief Economist, ATB Financial  – The value of manufacturing shipments in Alberta reached a new record high in June at just under $7 billion, adjusted for seasonality. According to the latest numbers from Statistics Canada, manufacturing racked up $6.925 billion in sales in June, a big jump (+4.7 per cent) from the previous month.

Red Deer sales in July were again off slightly from June’s, but still well ahead of last July’s. While sales are up from last year, so are the number of active listings which keeps the market from going too far off balance. A market that is slanted heavily in favour of either buyer or seller is not healthy. The Red Deer market is still balanced slightly in favour of sellers, but less so than it was this spring.

The most active market by far is the $250,000 ‐ $350,000 price range. Sellers have the advantage in every price range except $500,000 plus where supply is far higher than demand. We believe that prices in Red Deer at the low end of the spectrum have surpassed the highs of 2007, but the high end of the scale has not quite.

More and more people are moving to Alberta to take advantage of the jobs that are available here. The median family income in Alberta is much higher than other provinces and Alberta residents get to take home more of it because we have no provincial sales tax, no real estate transfer tax and lower income tax rates. Add in ample, well- paying jobs and you have a very strong economy that just keeps getting better.

Red Deer Market Update – Red Deer experienced strong sales in the first half of July while at the same time the number of active listings is up enough to keep the market in balance.  We have been tracking the market for about 30 years and it almost always follows the same path – listings and sales up in the spring, tapering off in the summer with a slight uptake in the fall and then down to the lowest level in December and January.

The market is also quite predictable in other ways.  The lower to middle ranges of the price spectrum are typically the most active because that is where the largest portion of the population is comfortable.  At the high end, new construction is a strong competitor to the resale market.  People who have larger budgets are more likely to want new and shiny and less concerned about finances.

The health of the local real estate market requires population growth and jobs.  Central Alberta has had an abundance of both this year, thanks mostly to the energy industry, but it appears that other industries are also making a strong contribution based on the ATB article below.

Sales of non-energy exports reach post-recession high – Todd Hirsch, Chief Economist, ATB Financial

The value of Alberta’s international exports rose to $10.52 billion in May, thanks partly to higher sales of agricultural, forestry and other non-energy products. The slight increase over April represents one of the highest amounts in the last five years, according to Statistics Canada.

Approximately three-quarters of the province’s sales abroad are oil and natural gas, as well as refined petroleum products. The value of sales is rising due to higher prices in recent weeks. The prices of West Texas Intermediate crude and the benchmark Western Canadian Select Blend of oil are both higher compared to a year ago. Tensions in Russia and Ukraine, as well as increased instability in Iraq, have pushed global oil prices steadily higher.

Perhaps even bigger news is that Alberta’s non-energy exports reached a near five-year high in May with a total of $2.77 billion—the highest level in the post-recession period. Non-energy exports, which are made up mostly of agricultural products, specialized machinery and equipment, and forestry products, have struggled to gain traction over the last few years. A faster-growing U.S. economy and a softer Canadian dollar have worked in tandem to increase sales south of the border.

Alberta’s total international exports over the last twelve months are 15.9 per cent greater compared to the previous twelve months. Nationally, total exports increased to $44.2 billion. This is the second highest value on record, led by motor vehicles and parts.

Sales in Red Deer in June dropped off slightly from the incredible pace set in May, but it was still a very strong month. Year to date sales are up almost nine percent which is a strong increase over a very good year last year. The number of active listings has kept pace and actually brought the sales to listing ratio down a little, although it still signals a very strong seller’s market.

June brought some relief for buyers in the $250,000 ‐ $350,000 price range. Sales actually fell off while the number of active listings increased. The $350,000 ‐ $450,000 was a little less friendly to buyers with the ratio of sales to listings favouring sellers.

The strong market we have experienced this year is the result of a strong economy that creates lots of jobs and encourages migration from the rest of Canada and the world. Population growth creates demand for new construction which is in itself an economic driver. In 2013 Alberta’s population grew by 3.25%, the fastest in Canada by double. In the first quarter of 2014, we managed a net gain of more than 9,500 people ‐ on pace for a 40,000 net gain for the year.

Sales in the first two weeks of June couldn’t keep up with the blistering pace set in the first two weeks of May, but that is typical since the market typically slows a little going into June. The good news for buyers is that the number of active listings is back where it should be to keep a fairly balanced market.

Population growth is the driver responsible for a tight housing market and that is not likely to change based on what’s happening in the rest of the world. Unrest in the middle east and the ongoing problems between Russia and the Ukraine is driving oil prices higher which will encourage more activity in the Alberta energy sector and help keep all this activity going.

Alberta Population Growth Fastest in Canada – byTodd Hirsch, Chief Economist, ATB Financial

Alberta’s population continues to grow at a rate far faster than the national average. According to new estimates released this morning by Statistics Canada, the province’s population on the first day of April this year was 4,111,509. Canada’s total population was 35,427,524.

Over the last year, Alberta’s population increased by 3.25 per cent—nearly triple the national average (+1.1 per cent) and almost double that of the second-fastest growing province, Saskatchewan. British Columbia and Manitoba come in third and fourth, respectively, making the western provinces the four fastest growing populations in the country.

Three of the Atlantic provinces lost population, and Ontario and Quebec continue to grow at less than 1.0 per cent annually. The east-west split in population trends—and particularly the strong growth in Alberta—is being driven entirely by economics. Western Canada has a much better labour market which is luring interprovincial migrants who want work. With the lowest unemployment rates in the country, Saskatchewan (3.7 per cent) and Alberta (4.6 per cent) are the places to be if you’re looking for work.

In the first quarter of 2014 alone, Alberta gained over 24,000 people from other provinces (while about 15,000 moved out of Alberta). The net gain was 9,581, which puts the province on track for a total net gain of close to 40,000 interprovincial migrants this year.

Singing the Homebuyer Blues – by Nick Ford, Economist, ATB Financial

People looking to purchase an existing home in Calgary or Edmonton (or central Alberta) might be feeling irritated and discouraged. There isn’t a lot on the market these days and what is available is going up in price….

Demand for existing homes in Alberta is the result of growing employment numbers and the influx of people moving here to take those jobs. Unfortunately, fewer listings and increasing prices are realities homebuyers will have to endure. There is an upside: as prices rise, more people will be inclined to list, which will boost supply.

Red Deer sales in the first half of the month are at record setting levels.  If that pace continues to the end of the month, it will be the biggest month in since we started keeping track in 1988.  Thankfully the number of active listings managed increased somewhat although not enough to keep the market close to balanced.  The pending sales count is still very high suggesting that the month will finish strong.

Spring is always the busiest time in the central Alberta real estate market for at least a couple of reasons.  First, a sale or purchase now, often allows folks to move at the end of the school year.  Spring is also break-up time in the energy sector when those people often have some extra time off to look for a new home.

While there have been some layoffs in the energy industry, other sectors in the Alberta economy are making a large contribution to our growth:

Rising prices boost manufacturing numbers – Todd Hirsch, Chief Economist, ATB Financial

Manufacturers across the province have been busier than they’ve been in months, according to the latest information from Statistics Canada. March shipments of manufactured goods rose to $6.6 billion (seasonally adjusted)—a 1.7 per cent increase over the previous month.

Over the last few years, the value of manufactured goods has been rather flat. It’s only been in the last few months that shipments have been trending higher, albeit modestly. Over the last twelve months, total shipments have risen by 5.5 per cent compared to the previous twelve month period.

The rising trend—and particularly the increase witnessed in March—may not be an accurate reflection of what’s going on in factories and refineries across the province. Much of the increase may be due to rising prices, not strong sales or higher volume of production.

The increase in March was in food manufacturing alone. In Alberta, that’s made up mostly of beef and pork processing. The higher value of shipments is due entirely to the recent price jumps for beef and pork. Petroleum refining has also been rising because of higher prices for gasoline and other refined energy products.

Other major manufacturing sectors for Alberta such as wood products, steel pipe, machinery and chemicals have increased by much smaller amounts or have actually slipped a bit. Overall employment in manufacturing is up year-over-year by only 2.5 per cent—below the all-sector growth rate of 4.0 per cent.

Red Deer sales in March were up almost 30% over February while the number of active listings jumped 23%. Because the increase in active listings didn’t keep pace with the increase in sales, the advantage for Sellers is stronger. The tightest markets are $200,000 ‐ $250,000 and $300,000 ‐ $350,000 price ranges. Last month more than 80% of the homes listed in those price ranges sold.

Spring has been reluctant to arrive, but the spring real estate market is definitely here. All the economic indicators ‐ energy prices, population growth, manufacturing growth and oil sands development continue to point to a strong Alberta economy.

When the good weather does arrive, we are likely to see the real estate market ramp up even more.

Alberta’s population reached 4 million last year, an average growth rate of 3.4%, almost three times that of the rest of Canada. That growth creates the need for schools, hospitals, roads and infrastructure. The development of that infrastructure creates jobs and more economic activity. And the cycle continues.