2005 a 'remarkable year' for Edmonton's real estate market

The following are exerpts from an article today in the Edmonton Sun By NEIL WAUGH.

Edmonton Real Estate Board president Jim Kulak calls it a "remarkable year." To Canadian Mortgage and Housing Corporation senior Edmonton analyst Richard Goatcher, it's "torrid."

Anyway you slice it, it's been one heck of an 11 months for housing in Edmonton. And there's still a month to go before the old guy with the scythe shows up, and Jim and Rick finally get to draw the bottom line.

Yesterday, Goatcher released his November numbers.
There were a few negative notes. Total starts dropped off some - down 17.5% from the same month a year ago - mainly because the apartment market has cooled off, and row housing also recorded a 39% decline over November 2004.

But even with that doom and gloom, Goatcher happily reported that total starts will beat the 12,000 threshold for "three of the past four years."

It's amazing what $80 billion in proposed oilsands and other construction will do to an economy.

It's the single-detached homes market where the real action lies. Starts were up 20.3% to 653 units from same time a year ago. By the end of November single-family builders have dug 6,934 basements in the Edmonton metro area, up a solid 15.4% over a year ago.

RECORD PRODUCTION
"Production to date represents the highest annual total ever," the analyst whooped. "And we still have one month remaining in 2005."

In November, the showhome warriors set a monthly total sales record (1,647 units up 18.8% - $345 million up 6.23%). A record average residential selling price of $226,110 - up 10.6% - was also set.

But clearly the most impressive record was the EREB's total sales to date. "We cruised past $4 billion on November 28," beamed Kulak.

This is even more remarkable when Jim points out that the board was struggling to beat $3 billion only a year ago.

Five years ago the total Multiple Listing Service turnover was just $2 billion. Could it hit $5 billion before the year ends? Probably not. But that's surely something to shoot for in 2006.

Kulak says it's the "strength of the local economy" that's driving both sales and prices to new records.

Veteran Edmonton realtors know exactly what happens when a market gets inflated. It can pop like a birthday balloon, the way it did in July, 1982 when Pierre Trudeau's national energy program really hit home.

Already, the bank has detected "froth" activity in the Toronto and Vancouver condo markets.
A bubble technically occurs when greedy speculation takes over from real estate fundamentals. So, in some ways, a bubble can be a good thing. Unfortunately, innocent bystanders can also get hurt.

LOW RISK
"The risk of a housing bubble in Edmonton continues to be extremely low," the report concluded, citing reasons like solid income growth, a third quarter dip in interest rates and an affordability rate listed as "unthreatening."

But that might have already changed after Bank of Canada governor Dave Dodge consulted his tea leaves on Tuesday. Dodge jacked up the central bank rate by a quarter of a point.

The big banks took the hint and put up short term mortgage rates. Although the five-year-and-up ones luckily stayed put.

To keep inflation on target "some further reduction in monetary stimulus will be required to maintain a balance," Dodge sniffed. Which is a central banker's way of saying, he ain't done yet.