Sales in the first two weeks in March were up a little from the same time in February and well down from the same time last year.  New listings are coming on the market at a brisk pace and inventories are almost at last year’s levels.  It feels like it has been busier than the number of sales would suggest and the number of pending sales supports that feeling at the highest level we’ve ever seen.

As usual, most of the activity is in the $200,000 – $400,000 price range where every third house on the market has a sale pending.  At that pace of sales, there is bound to be listing shortages heading into the spring market.

All the good news in Alberta, especially when it comes to job creation, will almost certainly keep attracting large numbers of people to come here from the rest of Canada.  Population growth fuels the housing market like nothing else.

Alberta’s Job Market Revs Up – Todd Hirsch, Chief Economist, ATB Financial – February’s job report puts to rest any lingering notions that Alberta’s labour market is shifting into lower gear. If anything, it may sound the alarm that the economy is galloping ahead too quickly. Last month, Alberta saw an increase of 18,800 new jobs (adjusted for seasonality)—the highest pace of monthly job creation in nearly three years, and well above the average gain of about 6,000 since the end of the 2009 recession.

The unemployment rate also dropped three-tenths of a percentage point to 4.3 per cent. The extraordinary performance in February brings the 12-month increase up 3.8 per cent to 82,300. Alberta now accounts for 87 per cent of all the jobs created in the entire country since February of last year.

Most of the new jobs in Alberta were in construction (+23,300), retail and wholesale trade (+7,300), and oil and gas (+6,800). These gains were partially offset by a drop in professional, scientific and technical occupations (-15,200), and health care and social assistance (-10,600). Three months ago, Alberta saw a one-month drop of nearly 10,000 jobs. That led to some concern about an economic slowdown. The longer term trend points to anything but.  With a falling unemployment rate and employment rising more quickly than the pool of available workers, the true worry could be that more Alberta employers will feel the pinch of labour shortages.

Trade deal good news for Alberta – Todd Hirsch, Chief Economist, ATB Financial – Canada’s new free trade deal with South Korea could be hugely beneficial to exporters, including those from Alberta. Prime Minister Stephen Harper signed the deal earlier this week.

With a population of more than 50 million, South Korea is nearly 50 per cent larger than Canada (population 35 million). Alberta has exported $2.9 billion in products to South Korea over the last five years—a miniscule amount when you consider total global exports over that period equalled $443.9 billion. But Koreans are becoming increasingly affluent and sophisticated, presenting Alberta exporters with lucrative opportunities.

The largest category of exports over the most recent five year period was natural resource products, notably coal and wood pulp (see graph). Machinery and mechanical appliances also made up a sizable portion (16.6 per cent). The big winners to come from the trade deal are Canadian farmers. Wheat and cereal grains make up more than 12 per cent of exports. Meat products account for another six per cent. Up until now, meat has faced high tariffs going into South Korea. With those trade barriers removed, Alberta farmers will be able to increase the volume of meat and other agricultural products they export overseas.

Sales in the first half of February are up from the same period last month, but down slightly from 2013.  The number of active listings is down from last year, but up slightly from January of this year.  At the pace sales are on this month, the market will continue to be firmly in favour of sellers and prices will continue to rise.  People considering a purchase this year would be well advised to start the process quickly to take advantage of the best prices they are likely to see this year as well as very favorable interest rates.

The central Alberta economy will continue to grow in 2014 as energy prices strengthen, construction on the NOVA plant addition ramps up, and optimism for US approval of the Keystone Pipeline increases.  If Red Deer gets approval this fall to host the 2019 winter games, it will trigger a host of new investments that will also ramp up the central Alberta economy.  That economic growth will result in population growth and stronger demand for rental accommodations and housing and potentially higher prices unless we see an incredible surge in new home construction.

The Source of so Many Newcomers, Todd Hirsch, Chief Economist, ATB Financial

The stampede of job seekers to Alberta from other provinces reached a record high in 2013. We often assume Newfoundland and Labrador and Saskatchewan are where we get most of our new arrivals, but for most of the last twenty years, Ontario has been the largest source of migrants moving to Alberta.

In 2012-13, 36,680 people came from Ontario—about a third of total migration from all provinces combined. Since 1992, the central province has accounted for, on average, 24 per cent of interprovincial migration to Alberta. The figures count in-migration only. Each year some Albertans move to other provinces (which would leave the net-migration figure somewhat lower). The fact that Ontario is the greatest source of migration should come as little surprise. It has a population of nearly 13.6 million—more than four times that of Alberta and significantly greater than Quebec’s second place 8.2 million. With so many people, it stands to reason that Ontario is the origin of so many interprovincial migrants.

But Ontario’s struggling economy also plays a role, especially with its real GDP growth rate of 1.3 per cent in both 2012 and 2013, and an unemployment rate of 7.5 per cent. Alberta’s economic growth is clipping along at a rate more than double that of Ontario, and our unemployment rate is nearly half.

Alberta Businesses Upbeat on Economy, Todd Hirsch, Chief Economist, ATB Financial

Small- and medium-sized business owners in Alberta are painting a positive picture of the province’s economy going into 2014. According to the February 2014 ATB Business Beat, optimism about own business operations reached a high of 72.3 in the fourth quarter of 2013. Business Beat is a quarterly survey of small- and medium-sized enterprises (SMEs). It also suggests SMEs are still optimistic about the future of Alberta’s general economy, as the index remains unchanged at a strong 66.8.

January sales are off to a good start, down from the same period in December but better than the first two weeks in January 2013.  The number of pending sales suggests that January will end with fewer sales than last year.  Weather and lower inventory levels are two possible reasons for a slower month.  In the meantime, the number of active listings is below 300, less than needed to maintain market balance, but not unusual considering the time of year.  Listing counts typically start to rise in February and March in anticipation of the spring market.

There are lots of reasons to be optimistic for the economy and the real estate market in 2014.  Oil and gas prices are still high enough to keep our energy industry busy, especially since our dollar has dropped compared to the US dollar.  We sell our oil for US dollars, so both the government and the energy industry benefit from a lower Canadian dollar.  Canadian exporters also benefit.  The losers are those still considering real estate purchases south of the border.  Not only will those purchases cost more because of the lower dollar, prices are up in the sunny markets.  That may result in less cash moving south and more being invested here.  Another positive.

Building Permits Remain Strong – Todd Hirsch, Chief Economist, ATB Financial

Construction activity is one of the pillars of Alberta’s economy. It provides amply employment and boosts gross domestic product. Judging by new data on building permits, that activity—and the spending that comes along will it—will continue through 2014.

Building permits issued by municipalities and counties are an excellent indicator of future activity (a “leading indicator” in the language of economists) because they must be secured by the builder prior to any construction starting. They represent what builders plan to spend in the coming months. According to Statistics Canada, $1.47 billion in building permits were issued in Alberta in November (seasonally adjusted). That’s down from the $1.5 billion issued in October, but permits are 17.0 per cent higher over the most recent 12 months compared to the previous.

Residential building permits dipped to $875 million in November—the second consecutive monthly decline—but they are still well above levels over the last several quarters. This was partially offset by an increase in non-residential permits to $590 million.

Alberta to Open India Trade Office – Todd Hirsch, Chief Economist, ATB Financial

Alberta is expanding its international horizons with the opening of a trade office in India. Premier Alison Redford will open the New Delhi office during a trade mission this week. While not the same economic powerhouse as China, India is the world’s second largest country by population and a potentially huge market for Canadian exporters.

Over the last ten years, Alberta’s exports to India have averaged close to $100 million annually. Data are available only for the months of January to October of last year, but based on these ten months (down 12.2 per cent from 2012) total trade for the entire year should be close to $103 billion. Relative to the $83 billion (with a B) that the province exported to the United States in 2012—and the $96 billion to the entire global market—trade with India is tiny. It represents about a tenth of one per cent of Alberta’s total exports.

However, with a population of 1.27 billion (also with a B), India is a potentially huge market for Alberta. Traditionally the largest exports to India have been agricultural products—notably dried peas, which account for nearly half of Alberta’s total exports to that country. Other significant exports include polymers of ethylene and, surprisingly, radio navigational aid apparatus.

The one thing not on the list of exports to India is crude oil but that may change in the coming years. Potential pipeline projects to move Alberta bitumen to tide water at either Kitimat, British Columbia, or Saint John, New Brunswick, would open up that possibility.

Sales in the first half of November in Red Deer were down slightly from the same period in October as well as the same period in 2012.  The number of active listings is down very slightly and is holding at a level that keeps the market in balance – where neither the seller or the buyer has the advantage.

Sales activity is strongest in the $300,000 – $400,000 price range which is also where there are the most active listings.  A good, balanced market as well if the current trends continue.  The market where the buyer still has the advantage is in the $400,000 plus price range where the sales to listing ratio is lower.

The long term forecast for Alberta remains strong as we continue to lead the country in growth.  That growth should support a good real estate market going into 2014.  Strong building starts in both the residential and commercial sector are huge contributors to a strong economy.

Building permits inch higher – Todd Hirsch, Chief Economist, ATB Financial

Construction activity is an important driver of Alberta’s economy, and over the last few years it has remained remarkably steady. New information released by Statistics Canada suggests this trend will continue in 2014.

Alberta’s total building permits are an excellent indicator of future construction activity. In September, they rose 5.2 per cent over the previous month, to $1.43 billion. However, residential and non-residential permits moved in opposite directions.

Residential builders took out $954 million in permits in September, a steep jump from August and the second-highest single month on record. (The all-time record of $978 million was set in June of 2007.) The rising value of residential permits suggests that home builders are reacting to strong demand for new homes. This is consistent with other residential real estate indicators, such as home sales and rising prices, for both new and existing homes. It also makes sense given the steady inflow of interprovincial migrants to Alberta this year.

The increase in residential permits was almost completely offset by a drop in non-residential permits. They tumbled 18 per cent month-over-month to $475 million. That’s a nine-month low. The size and scope of some non-residential construction projects, including office towers, shopping malls and industrial complexes, makes them much more volatile month to month.

Combined total building permits in Alberta continue to rise. Over the last twelve months, permits are 19.7 per cent higher than the previous twelve months. This bodes well for construction spending and employment in the near-term.

Red Deer Market Update – Sales to the middle of September are ahead of the same time last month and should finish the month strong with 54 sales currently pending.  Assuming we maintain the current pace, the overall Red Deer market will end the month still well into seller’s market territory.  The one part of the market that was slower has had a great start this month and it looks like the market may be expanding into $500,000 plus price range.

Of course activity in the lower price ranges continues to be strong with the most sales in the $300,000 – $350,000 price range.  Fortunately the number of active listings seems to be adequate to meet the demand.  The reason that the market is strong can be explained by the article below.  More than 80,000 new jobs in Alberta in the past year!  People are moving here to take advantage of those jobs and demand for housing is one of the first indicators.  While many moving here aren’t ready to buy, they drive up the cost of rent and drive the renters who can buy into the starter market.  The sellers are then in a position to move up…. and the cycle continues.

Alberta adds fewer jobs in September – Todd Hirsch • Chief Economist, ATB

Alberta remains the engine of Canada’s job creation machine, but in September it shifted into a slightly lower gear.
Last month, the province added 4,000 new jobs, below the average monthly increase of 5,000 positions during the past two years, according to Statistics Canada. Despite the dip, there was a much larger increase in full-time work (+7,500) between August and September, which was offset by a decrease in part-time work (-3,500). All figures are seasonally adjusted.

While there was only a modest increase in the number of people working, the size of Alberta’s labour force actually slipped slightly last month by 7,600. With fewer people actively in the job market, the unemployment rate fell to 4.3 per cent from 4.8 per cent. Alberta is now tied with Saskatchewan for lowest unemployment rate in the country.

Nationally, a modest 11,000 jobs were created, which fell below the consensus forecast of economists who expected a gain of 16,000. The unemployment rate, however, dropped to 6.9 per cent—the first time it has been below 7 per cent in almost five years. But this was also prompted by a contraction in the size of the labour force.

The long-term trend shows Alberta’s job market is still doing quite well. Since September of last year there has been a net gain of 80,300 jobs (+3.7 per cent), representing nearly 4 in 10 of the new jobs created nationally. Sectors with the strongest employment gains in the province include professional, scientific and technical services (+27,500), health care and social assistance (+20,500), and wholesale and retail trade (+17,900).

Sales in the first half of September are off to s slower start than August and also slightly lower than the first two weeks in September of 2012.  The pending sales count at 52 is a good indication that the month will finish strong.  In the same time, the number of active listings is down again, creating an imbalance in supply and demand.  That will mean a continuation of the seller’s market we have been experiencing most of this year.

Sales activity is once again strongest in the $200,000 – $400,000 price range while the higher price range is slow with lots of active listings.  Buyers moving up to the $500,000 plus range can quite likely sell high and buy relatively low.

There are a lot of reasons why our market will continue the current trend – viable oil and natural gas prices, strong migration to Alberta, and low interest rates will keep the market active.  When people move into a market they typically need rental accommodation first.  Vacancy rates go down, rents go up and existing tenants are pushed into home ownership, which allows starter home owners to move up… and the cycle continues. 

A lot of swinging hammers – Todd Hirsch • Chief Economist, Alberta Treasury Branch

While building sites can often be noisy and messy to look at, there’s no denying the positive contribution that construction activity has on Alberta’s economy. Judging by the most recent statistics on building permits, it appears that our province can anticipate strong construction activity in the coming months.

This morning, Statistics Canada released its monthly report of building permits issued by municipalities across the country. In Alberta, the value of permits issued in July of this year reached $1.63 billion—an increase of 19.1 per cent over the previous month. Taking a longer-term view, building permits over the last 12 months are up 19.6 per cent compared to the previous 12-month period.

July’s soaring building permits were driven mostly by non-residential projects, which jumped to $816 million. On a month-to-month basis, non-residential projects tend to display more volatility than residential permits simply because of the size and scale of certain projects. Commercial construction projects—such as office buildings and shopping centres—made up nearly all of the non-residential permits in July, increasing from $350 million in June to $626 million in July.

But residential building is charging steadily higher in Alberta as well. Despite warning bells in other parts of Canada about over-valued real estate, Alberta’s home builders are in a more balanced position. House prices are rising, but not out of line with higher demand driven by in-migration and rising wages. That’s encouraging home builders to offer more choices onto the market for potential home buyers.

Month to date sales in Red Deer kept pace with July’s and were almost double the number sales for the same period in 2012.  The change from last year is in the number of active listings – down more than 10% from last year.  Fewer listings combined with strong sales is keeping Red Deer in Seller’s market territory, a bit unusual for the summer market.

Strong activity in new construction is a big factor in keeping the market closer to balance as people continue to move to Alberta in large numbers as indicated in the ATB article below.  It’s good to see that the jobs are not all energy related.  Growth in other sectors is critical to balance in our provincial economy.

Interest rates are on the rise, but still very low compared to the last 30 years.  Mortgage rate increases will have some negative impact on house prices. It will be interesting to watch how high they go and what impact they will have over the rest of the year.  It’s possible we could see stronger activity because buyers with locked in rates on mortgage pre-approvals are hurrying to buy before their lower rates expire.

Weather Cool, But Job Market Hot – Todd Hirsch, Senior Economist, ATB Financial 

Alberta may be experiencing a cold, damp summer—but its’ job market is anything but.  In July, Alberta gained 16,600 new jobs, bringing the seasonally adjusted total employment to 2.217 million workers. The June flood may have played a part: while the provincial unemployment rate fell to 4.5 per cent, it actually ticked higher in Calgary to 5.3 per cent.

Canada’s job picture was not as rosy this morning. A loss of 39,000 jobs surprised economists who had, in a consensus forecast, predicted a modest gain of 6,000 jobs. The national unemployment rate ticked up a tenth of a percentage point to 7.2 per cent—now only slightly below the 7.4 per cent rate in the United States.

Alberta and Saskatchewan remain the hot job markets of the Canadian economy with employment growing by 3.0 and 3.9 per cent, respectively, over the last twelve months. Nationally employment has grown by a much more sluggish 1.3 per cent.

The sectors creating the most jobs in Alberta are not, however, the traditionally strongest sectors. Indeed, the oil and gas sector has shed 9,500 jobs (year-over year), as has the construction sector (-4,900). The strongest gains have come on the service side of the economy—professional, scientific and technical services (+28,200), retail and wholesale trade (+17,600) and information, culture and recreation (+13,700) showed the largest annual gains.

The surging employment has also been marked by good quality jobs. Nearly 89 per cent of the new positions created over the last twelve months are fulltime. That has helped boost consumer confidence, retail sales and the housing market throughout the province.

Red Deer sales in the first half of July are off slightly from the same period in June, but up from the same period in July 2012.  The number of active listings has jumped in the past two weeks bringing the sales to listing ratio closer to a balanced market but still in seller’s market territory.  The large increase in the number of listings was mainly in the $250,000 – $350,000 price range which coincidentally is where the most activity is.  That bodes well for those home buyers.

Like other central Alberta municipalities, there is substantial speculative new home construction in Red Deer with a good range of pricing.  The activity in new construction is helping to keep supply and demand in balance as it adds new inventory to the housing market at a time when substantial numbers of people are moving to central Alberta.  It appears there is adequate development land available to provide lots for the growth we are experiencing.

As long as the builders can keep pace with demand, the market is likely to stay balanced and prices will remain at current levels.  The economic forecast for central Alberta is good as a result of strong activity in the energy sector, the billion dollar expansion at Joffre and will also be helped by a great farm crop year, but not so strong that we should expect price inflation like we experienced in 2006 and 2007. 

Home builders busy – Todd Hirsch, Chief Economist, ATB Financial 

The inflow of inter-provincial migration into Alberta is having a positive effect on much of the economy. One of the most noticeable has been on the increased demand for new housing—and builders are busy keeping up.

In June, developers got started on 38,709 new homes in our province. This figure is annualized, which suggests the total number of houses that would be built in a year if this pace of building keeps up for 12 months. It is also adjusted to account for seasonal variation in home building.

The June figure is a bit of a dip from May, but it is still about 14.6 per cent higher than June of last year. It’s also about 40.9 per cent higher than the five-year average annualized rate of 27,400 new homes.

Housing starts are an extremely important economic indicator. Not only does it point to the growing level of consumer confidence in the province, it also bodes well for construction jobs in the coming months.

There is also a good deal of peripheral retail activity around a new home such as new appliances, flooring and furniture. One worry is that too much building could result in an oversupply of unsold homes on the market, especially if developers are building a good number of homes on speculation (or “spec” houses). That was a problem in 2008 when residential prices dropped. However, demand for homes in 2013 appears to be keeping pace with the new supply—at least for now.

The central Alberta real estate market continues to chug along.  Sales in the first half of June are down from May’s and off slightly from last June.  Historically June has been a slower month coming off our strong spring markets and we believe it’s because families are typically very busy in June with school year ending activities and just have less time to spend on looking at homes.  Typically, June has also been the end of spring break-up in the energy industry, marking the time those workers are back to work with less time to think about looking at homes.

Of course, there are many very complicated factors that affect the local and world economies and therefore the local real estate market.  That makes it very difficult to predict what comes next, but historically the market slows some going into the summer months and will pick up again in the fall.  Right now it appears that the market is close to balance with adequate inventories in most price ranges and reasonably strong demand as people continue to move to Alberta.

The biggest reason we continue to have adequate inventories is very strong activity in home construction as indicated in the article below.  Quite simply, at this point anyway, the builders are keeping up with demand and we are looking for a “normal” summer and fall market.

Housing starts hit five-year high – Todd Hirsch, Chief Economist, ATB Financial

While softer energy prices may be moderating overall economic growth this year, it appears that homebuilders didn’t receive the memo. Judging by the most recent statistics, its boom time in Alberta!

According to the latest figures from Canada Mortgage and Housing Corporation, builders started construction on 41,438 new homes in our province in May. That’s the highest this year and the first time since early 2008 that the figure has risen above the 40,000 mark. What’s more, the trend over the last several months clearly suggests that the housing market is heating up. Between May 2012 and May of this year, housing starts are 14.1 per cent higher than they were in the previous 12-month period.

What’s causing this boom in home construction isn’t any big mystery: population growth. Even if overall economic growth has slowed somewhat, the inflow of people into our province hasn’t. The latest Labour Force Survey (released last Friday) points to a surge in the labour force, which has grown by 59,400 (+2.6 per cent) over the last 12-months. Interprovincial and international migration to Alberta is driving some of the demand for new homes. High wages, low unemployment and a younger population are also contributing factors.

The strong housing starts number this morning is supported by another figure from Friday’s employment report—the number of construction jobs is also rising. Even if jobs in the energy patch and manufacturing have eased back a bit, employment in construction continues to provide some great work opportunities.

Another strong sales month in Red Deer – up 20% from last month and slightly ahead of May 2012.  The number of active listings did rise in May which is keeping the relationship between supply and demand from getting severely out of balance.  The rest of the central Alberta market continued on an active pace in May with sales up again over last month, but that market also saw an increase in the number of active listings and the Sylvan Lake, Lacombe and Ponoka markets are still balanced slightly in favour of buyers.  We are seeing more buyers expanding their searches into the outlying markets looking for more choice and better prices.

The ATB article below explains why our markets are good, but not going out of control.  The Canadian economy is moving a little slow, but oil prices are still quite strong which keeps Alberta at the head of the Canadian economic pack.  The pace of growth in Alberta is so far being matched by the construction industry adding living accommodations in pace with demand.

Canada’s economic thaw – Todd Hirsch, Chief Economist, ATB Financial 

With spring slowly morphing into summer in Canada, it appears the temperature is not the only thing on the rise.  Canada’s economy is slowly crawling out of last year’s winter chill.

In March, the Canadian economy expanded by 0.2 per cent over the previous month. While that is shy of the rate of growth in January and February, it is the third consecutive month in which the gross domestic product has advanced.

For the entire first quarter of 2013, Canada’s economy expanded by 0.6 per cent quarter-over-quarter, the fastest pace in over two years. The major contributor to growth was the mining and oil and gas sector, which advanced 4.1 per cent in the quarter. This was due largely to higher prices for Canadian crude oil, which pushed up the value of exports.

At an annualized rate—that is, the rate of growth the economy would experience if this same pace was sustained for 12 months—Canada’s economy grew by 2.5 per cent in the first quarter. That is ahead of the comparable growth rate in the U.S., which clocked in at a revised 2.4 per cent.

The GDP’s growth in March and in the first quarter is a good sign for the Canadian economy. Nonetheless, the pace of growth is still somewhat below what the Bank of Canada would regard as “potential growth”— meaning some excess capacity remains in the economy. Today’s GDP report is unlikely to change the Bank of Canada’s position it took earlier this week when interest rates were kept unchanged.