Buyers gain the edge in local resale housing

By Bill Mah, Edmonton Journal

Expect a buyer’s market for Edmonton-area resale homes in the remainder of 2010 with more balanced conditions next year, says a new report released Tuesday by Canada Mortgage and Housing Corp.

The average resale home price in the Edmonton census metropolitan area will still increase by 3.9 per cent this year compared with last year, but total MLS sales will fall by 11.2 per cent, said the report.

CMHC forecasts Edmonton area MLS sales to slide to 17,000 in 2010, with the average sale price at $333,000, up from $320,378 last year, says CMHC’s second quarter Housing Market Outlook.

Heavy demand in the first half of 2010 boosted the Edmonton area’s average MLS resale price, but prices are now moderating in the second half, CMHC regional economist Lai Sing Louie said.

Edmonton, like Alberta’s other major centres except Wood Buffalo, are now buyer’s markets as recent price growth attracted more listings while demand slowed, Louie said.

“It was in balanced market conditions at the beginning of the year and it’s in buyer’s market conditions right now,” Louie said.

“People who are buying now are getting something off the list price. It’s taking longer to sell and we’re seeing some repricing in the real estate market.

“As the listings start to ease up to some extent, we expect to see demand come up a bit in 2011 and the market move back into balanced market conditions and that will allow for some price growth.”

The average MLS price for the Edmonton census metropolitan area next year is forecast to be $342,500.

Total MLS sales for Edmonton are predicted at 17,000 this year — down from 19,139 last year.

“We were quite ahead of last year’s pace at the beginning of the year but as we moved into the second quarter things started to slow down.

“We don’t see anything right now that would pick it up to the pace of last year.”

Louie said sales are expected to pick up by three per cent to 17,500 in 2011 as the job market improves.

Across Alberta, resale home sales and prices will also soften for the second half of 2010, and housing starts will moderate, according to the report.

By year-end, Alberta’s resale transactions are forecast at 53,200, a decrease of about 11 per cent from last year, the federal agency said.

First half sales in 2010 were accelerated by buyers rushing to take advantage of market conditions such as record-low interest rates and to beat tighter investment property rules coming into place.

The pace of sales was also slowed by fewer people moving to Alberta and an increase in monthly carrying costs.

Recent price growth has attracted more home listings, but with slowing demand, CMHC predicts prices to moderate in the coming months.

By the end of 2010, CMHC projects Alberta resale prices to grow by less than four per cent to $353,400. Next year, higher listings relative to sales will keep price growth below three per cent to $362,700, the federal agency said.

In the new home market, Edmonton-area housing starts will rise to 9,500 this year, from 6,317 last year.

Next year, CMHC forecasts 10,300 starts in the Edmonton census metropolitan area.

“It’s coming back, but it’s significantly below the years prior to 2007,” Louie said.

Edmonton’s average, absorbed new home prices — homes sold and completed — are expected to drop about 10.7 per cent to $485,000 from last year’s $543,171.

Total housing starts in 2010 will rise in all three Prairie provinces, with Alberta experiencing the largest increase to 28,450 — up more than 35 per cent from last year, CMHC said.

But much of that increase will also be from the first half of the year as new single-detached home inventory grows and competition from the resale market increases.

“The pace of housing starts in the second half of 2010 will slow as more units under construction will be completed and move into inventory,” Louie said.

Total Alberta housing starts will be 30,700 in 2011, CMHC said.

In 2011, the report forecasts single-detached starts to rise but with a much slower growth rate of under six per cent. Multi-family starts in Alberta will be up significantly in 2010 and post a more modest gain in 2011, CMHC said.

Despite the increases, multi-family unit production will remain low compared with levels seen between 2002 and 2008.

The inventory of completed and unabsorbed units, especially apartments, is historically high but may have peaked, CMHC said.

Nationally, CMHC also expects home sales and prices to fall in the second half of 2010 and housing starts to moderate.
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