The Edmonton Real Estate Blog

Please visit our new location for new posts.

Tuesday, May 30, 2006

Buying a Home Without Knowing the Cost

The Calgary real estate market is now so hot, that buyers are putting deposits on new homes, without knowing the final price. You heard me, putting down a deposit and signing a contract to buy a house, that isn't built yet, for an unknown price. Wow! Rumour has it this trend could move its way north to Edmonton soon too... here's the article from today's National Post:

Buyers putting deposits on lots without final price of houses
Desperation in Alberta
Garry Marr, Financial Post
Published: Tuesday, May 30, 2006

Consumers in Alberta are now putting down deposits on housing lots without knowing what the final price for the finished home will be, in the latest example of the desperation for housing in the province.

The bizarre situation in which consumers are contractually bound to pay a final price yet to be determined has been going on for the past few months, said Allan Klassen, president of the Alberta chapter of the Canadian Home Builders' Association.

"That's how people are securing housing now," said Mr. Klassen, adding the situation is being driven by demand for housing as opposed to greed from builders. He added it's the only way builders can agree to sell a home because their costs are rising so quickly.

The influx of out-of-province workers into Calgary, flush with cash from jobs connected to the energy sector, has created a surge in demand for homes. The Calgary real estate board said last month existing home prices were up more than 37% from a year ago.

New-home prices are rising quickly in the province, up about 30% in Calgary in the past year. Canada Mortgage and Housing Corp. said this month Alberta is one of the few provinces in the country where new construction activity will rise this year from 2005.

The flipside to all the demand has been rising expenses. Builders taking an order today at a set price could end up spending more money building a home than the price paid, Mr. Klassen said.

"One of the reasons we capped sales is because we couldn't guarantee our costs," said Mr. Klassen, referring to the fact his company, Albi Homes, stopped selling houses it couldn't guarantee would be built in the next year.

To combat price worries, builders are now willing to let consumers guarantee themselves a space in a development if they are willing to put a deposit on a lot. Mr. Klassen said that deposit can sometimes be about 20% of the value of the lot.

For that deposit, consumers are usually signing a contract that binds them to buy the house once it is completed. The final price is dependent on what type of costs the builder incurs. The prices rise as costs rise.

The deposit contracts vary from builder to builder but Mr. Klassen said most builders are willing to let consumers have their deposit back if they are unhappy with the final price because the current market conditions are strong.

It's a dangerous game for consumers, according to Brian Hollohan, manager of market analysis for CMHC in Calgary. "It's not something I would do," he said. "But there are a lot of unusual transactions taking place and people are taking unusual measures to secure a home."

Ron Odynski, a partner with law firm Ogilvie LLP, said it is possible to draw up a contract that binds a consumer to pay for a finished home based on fluctuating costs. He said you would have to take a close look at the terms of the contract, adding, "It's the type of contract you would want a lawyer to look at."

Consumers looking for more price certainty in the existing-homes market are out of luck. Kevin Clark, president of the Calgary Real Estate Board, said the average price of a home in the city was rising as much as $500 per day.

"The resale market is quite insane," said Mr. Clark, whose board is expected to release another set of stellar numbers on Friday that will almost certainly surpass the record high for home prices in the city set last month.

The level of unsold inventory in Calgary is just 16 days, meaning at the present pace of sales all the homes on the market would be sold in 16 days. Normal unsold inventory levels are 120 days.

Mr. Clark said it's no wonder people are willing to put deposits on new homes without knowing the final price. "If they don't there is another person right behind who will," he said.

Search all Edmonton MLS listings.

Is the Edmonton real estate market overheating?

There is always someone who has to cry "the sky is falling" and today it is a senior investment bank economist. The article below has some excellent points, and in comparing the current boom to those of the late 70's and late 80's does find some rather scary comparisons. What is missing though are the other factors in the economy like the strong job market and low interest rates we are currently experiencing. Lucky for us Edmonton was over-looked (as usual) in this article so I guess everything here is just hunky-dory.

Western Canadian housing market overheating: BMO-NB economist

Canadian Press
Published: Tuesday, May 30, 2006

TORONTO (CP) - Just when the U.S. home-price boom is abating, Canada's housing market is accelerating to a potentially dangerous level, a senior investment bank economist warned Tuesday.

"Bubble-like activity" is concentrated in the West, Douglas Porter of BMO Nesbitt Burns (TSX:BMO) wrote in a report, but "that doesn't make it any less real."

He said the American real-estate surge is drawing to a close after sales peaked last summer, "but just as U.S. housing is finally cooling down, there are signs that the Canadian housing market is actually heating up, potentially dangerously so."

Canadian price increases have surged ahead of U.S. trends, Porter writes, because Canadian interest rates are lower and because the boom took longer to get rolling in Canada, while Canadian employment growth has more than doubled the U.S. pace.

"To those in Central Canada, it may seem passing strange to talk about a housing boom, since conditions in Ontario and Quebec are far from frothy," Porter noted.

"But just because bubble-like activity is concentrated in only some regions - pretty much anything west of Lake Superior - doesn't make it any less real. The much-ballyhooed U.S. bubble was largely relegated to the coasts and sun-spots."

Almost every major city in Western Canada has posted double-digit percentage increases in home prices so far this year, "led by a jaw-dropping 28.9 per cent spike in Calgary," Porter said.

"Vancouver is not far behind at 21.7 per cent, and average prices there have pushed above the $500,000 barrier."

Conditions have "become even more torrid in recent months," and residential construction's share of the total economy is approaching the level at the past two major cycle peaks, in the early 1970s and the late 1980s.

"While the first episode was largely justified by underlying labour force trends, the latter was not, and it ended in tears," he concluded.

"The longer the current boom lasts and the higher it climbs, the greater the risks of an ugly end to this housing cycle."

Monday, May 29, 2006

How High Can the Edmonton Real Estate Market Go?

Well, when I read this article I wish she'd mentioned our blog in her list of links! Oh well... So everyone is hearing about the market being hot. This article by Kelly Keehn from the Edmonton Sun brings up some good points about the price of real estate and what the rest of the economy is doing...

Unless you've been cryogenically frozen for the past decade, you know the Alberta real estate market is hot! The questions remain, how high can this market climb, and are there still profits to be had?

Hot for how long?

Without the absolute clarity of a crystal ball, the simple answer is, it's anyone's guess. However, even the most "cracked" fortune teller can follow some simple fundamentals in predicting future growth or an '80s bust.

Les Michaelson of the Edmonton Revenue Property Investors Association points to a steady supply of jobs and a seemingly endless supply and demand for oil in Alberta.

Both are paramount for sustainable growth in provincial real estate. He points out that others have seen the beginnings of a real-estate bubble-burst, in Nevada and Florida for example.

Low inventory of homes for sale in Edmonton, particularly in April, fuelled a seller's market, said Michaelson, who believes the market is a little over-inflated. Buyers who hold on until the summer or fall might find a better deal.

On new home construction, increasing costs for labour and supplies like lumber raise questions about how many developments will finish on schedule, he said. So resale on existing homes is a simpler purchase. More buyers move to that market, thereby driving up values.

The Edmonton Real Estate Board reports that so far this year sales have risen 12.4% and prices are 18% ahead of the same time last year.

"Prices are increasing steadily but housing is not overpriced," said Madeline Sarafinchan, board president. "Mortgage rates remain low and consumer confidence is high."

Even in a seller's market, Don Campbell, author of Real Estate Investing in Canada, outlines some simple techniques you can employ to ensure that the ball falls in your financial court. Campbell suggests that you write a simple cover letter to the seller.

If you're a family of four and love the treed yard and can see your grandchildren coming over for Sunday dinner in a decade, let the seller know that.

It seems like an insignificant thing to do, but if the seller has kids of their own and suspects that the other buyers will tear down the home to build something different, you just might secure the sale, and even at a lesser bid.

Any room for profit making?

Randy Keehn, owner of the Renovation Store and a real estate flipper, is confident: "There are still deals to be had." Keehn cautions that you'd better have your chequebook ready to take advantage of these opportunities because asking for a condition for financing can lose you the deal.

Resources for the real estate mogul

Not sure whether you should sell your shack or cash in immediately? Check out these real estate resources that can support the "Trump" within:

Edmonton Revenue Property Investors Association:

Edmonton Real Estate Board:

Motiva Group:

Edmonton Apartment Association:

Real Estate Investment Network:

Red hot or not? As with any investment, careful evaluation of real estate and how it fits in to your financial plan requires some research and professional advice. And that magic eight ball couldn't hurt either.

Friday, May 26, 2006

Alberta Real Estate: The Land of Milk and Honey

Business Edge published the following article yesterday, explaining just how well real estate is doing in the entire province, be it resale, new construction or commercial. They predict this will continue for at least another couple of years.

Real estate scene land of milk and honey
Experts predict markets still haven't peaked
By Laura Severs - Business Edge
Published: 05/25/2006 - Vol. 6, No. 11

It's still a lot of boom but very little bust for Alberta's residential real estate sector.

Despite markets that have been overheating for the past few years, industry professionals predict the peak has yet to be reached.

"I've been in the business for 34 years and I've never seen a market like this," Doug Kelly, senior vice-president with Calgary-based Carma Developers LP, said at a recent real estate forum held in Edmonton.

"Where are we in the residential cycle? We haven't reached the top yet and it probably won't happen for another couple of years."

Land prices five years ago were $20,000 to $30,000 an acre, Kelly notes. "Now it's being bid up to over $100,000 an acre. I'd guess you'd say it's out of control. Where it's going to end, I'm not sure."

Canada Mortgage and Housing Corp. (CMHC) senior market analyst Richard Goatcher said Edmonton's residential market is so strong that demand for single-detached homes is up 35 per cent for the first four months of this year, compared to last year when it set a record with more than 7,000 units. On the resale side, he noted, "the big story is that there is very little inventory and it's selling very fast."

But it's not just housing that's hot in Edmonton. Retail is staging its own rally in Alberta's capital.

There are 18 possible projects on the drawing table that could add 400 acres, or five million square feet, of leasable space - the majority of which are grocery-anchored, neighbourhood based strip malls.

"We sit at No. 1 in terms of retail space per capita right now, at 29.7 feet per person, and if you add another five million square feet, that's another five square feet per person," said Brad Merchant, president of the Northern Alberta Shopping Centre Association.

Edmonton reclaimed the top spot from Calgary and London, Ont., the latter being a market that grew with strong power- centre development.

"It's population growth, it's high discretionary income, it's buoyant retail sales, are all attracting more retail interest," said Merchant, adding retailers are also interested in Calgary.

Demand for space is coming from those already in the market and new entrants trying to capitalize on the growth they're seeing. While lack of skilled construction workers was a frequent theme throughout the one-day forum, there was also concern about retailers being able to find enough staff for their new stores.

Randy Ferguson, senior vice-president of Westcorp. Inc., an Edmonton-based real estate management and development company, noted one way to address the labour shortage is to set your company apart by making it more attractive to employees.

But while attention is already being paid to the labour shortage by all levels of government, forum participants warned that it will likely be the unexpected that will pull the rug out from under the real estate market.

Larry Pollock, president and CEO of the Edmonton-based Canadian Western Bank, noted that the growing middle classes in China and India could exert tremendous pressure on consumption-based economies.

On the other hand, he added, American consumers are just about tapped out and the growing U.S. deficit can only make things worse for that economy.

Others at the forum talked of how a major terrorism-related event or a pandemic could change Alberta's still-bullish real estate outlook. But most agreed that the province's vast oil reserves would act as a buffer to any major derailment of the real estate sector.

Meanwhile, CMHC officials said nationally, new housing construction is expected to cool off this year after a stronger-than-expected start.

Higher mortgage interest rates and soaring prices are proving to be a drag on the industry, CMHC noted.

Housing starts will likely reach 222,200 units this year, down from 225,481 units in 2005, but will continue above the 200,000 mark into 2007 for the sixth consecutive year, the agency said in its latest quarterly outlook.

"Housing starts this year will be stronger than previously forecast, mainly due to persistent strong demand in Alberta and British Columbia, but will not match last year's pace," CMHC chief economist Bob Dugan said in a release.

"Higher mortgage carrying costs, due to modest increases in mortgage rates, and rising house prices will temper housing demand this year and next."

Residential construction will continue to ease in 2007 to 204,100 units, the CMHC said.

Resale homes will register their second-best year at 478,400 units in 2006, down 0.9 per cent from 2005, according to data from the Multiple Listing Service.

Growth in the average MLS price is expected to accelerate from 10.2 per cent in 2005 to 11.2 per cent in 2006, "due entirely to a pickup in Alberta and B.C. Growth in houses prices is expected to slow in the rest of the country," the agency said.

"Over the medium term, housing starts will continue to slow gradually, reaching 184,400 units by 2010," Dugan noted. "The decrease in starts in the medium term will be more pronounced for single homes than for multiple-family dwellings, because multiple dwellings are less expensive than single homes. The aging population and increases in immigration will also contribute to the relative strength of multiple starts."

Wednesday, May 24, 2006

Mortgage Rate Increase on its Way

If you are considering buying a home in the coming months, do yourself a favour and call a mortgage broker first thing in the morning tomorrow and reserve a rate. It won't cost you anything, in fact, it will save you thousands if you do decide to buy a home. They should give you a rate guarantee for 90-120 days, giving you time to get some real estate at today's price (well, at today's mortgage rate anyway....). The bank of Canada increased interest rates today and that means a mortgage rate hike should come tomorrow....

Bank of Canada boosts interest rates
Last Updated Wed, 24 May 2006 19:50:33 EDT
CBC News

The Bank of Canada raised a key interest rate once again by one-quarter of a percentage point to 4.25 per cent, but signalled that its recent string of rate hikes may be at an end.

* INDEPTH: Interest Rates - the rising cost of money

The increase to the overnight rate — what major banks charge each other for overnight loans — is the seventh increase since last fall, when the Bank of Canada started edging rates up gently to slow down a red-hot economy and keep inflation in check.

In a commentary accompanying Wednesday's rate decision, the Bank of Canada dropped any suggestion that modest further rate hikes may be necessary to keep the economy rolling and inflation in check — a phrase that had been common in previous announcements.

Instead, the bank said the overnight rate is now at a level that is expected to keep the Canadian economy healthy and to return inflation to the bank's two per cent target.

The country's major banks responded by boosting their prime rate, which is what they charge top customers.

In the wake of Wednesday's increase, consumers should expect to see higher interest rates for such things as lines of credit and variable rate mortgages.

The latest increase in interest rates comes as Canada enjoys solid economic growth, low unemployment and relatively benign price inflation.

The core inflation rate — which excludes eight volatile components identified by the Bank of Canada — surprisingly slipped to 1.6 per cent in April from 1.7 per cent in March. Many economists had expected the core rate to rise to 1.8 per cent.

Canada's jobless rate increased slightly to 6.4 per cent in April as job growth slowed, Statistics Canada said earlier this month. The rate rose a tenth of a percentage point from March, but still remained near 30-year lows. Additionally, the economy grew by 3.3 per cent between February 2006 and the same month last year.

Economists see rates hikes at an end

"In our opinion, there is a good chance that we have seen the last tightening in the current cycle," said TD Bank deputy chief economist Craig Alexander.

"There are clear signs that housing markets in the U.S. are cooling, which will erode the housing-wealth effects that have been a powerful catalyst to American consumer spending in recent years," he said.

BMO Nesbitt Burns senior economist Michael Gregory said the Bank of Canada appears to have “officially” paused but still probably retains a bias to tighten.

"The data, inevitably, will determine the length of pause and the post-pause policy direction," he said.

The Canadian dollar closed up 0.14 of cent on Wednesday at 89.31 cents US.

Search all Edmonton and area MLS listings before they hit

Tuesday, May 23, 2006

KPMG ranks Edmonton number one major city in western North America

As you know, housing costs are quickly increasing in Edmonton, due in part to the number of people moving to the area. This study from KPMG shows Edmonton as the least expensive place in Western Canada to run a business. This could mean more business will open up offices here, increasing the number of jobs and therefore the number of people relocating here and in a round about way could further increase the demand for is the article:

Edmonton has the lowest business costs of any major city (500,000-plus population) in Western Canada … and western North America, according to an independent report released by KPMG.

Edmonton is second only to Saskatoon, Saskatchewan in comparison with 31 cities of all sizes evaluated in western North America. And Edmonton is second only to Quebec City, Quebec in comparison with 20 global cities with populations between 500,000 and one million.

Business costs are expressed as an index, with the United States being assigned the baseline index of 100. An index less than 100 indicates lower costs than the U.S. Edmonton’s business cost index is 93.3 … just 3.2 points from the top-ranked Canadian city (Sherbrooke, Quebec).

All 17 business operations measured in Edmonton have low index ratings, ranging from clinical trials (85.9) to telecommunications (96.8). Eight of these business types in Edmonton —advanced software, telecom equipment, specialty chemicals, food processing, pharmaceuticals, medical devices, electronics assembly and shared services centres — are ranked among the top-10 globally for cost-effectiveness.

The 2006 Competitive Alternatives study measured 27 cost components — including labour, taxes, real estate and utilities — as applied to business operations in nine countries: Canada, France, Germany, Italy, Japan, the Netherlands, Singapore, the United Kingdom and the United States. Business cost comparisons were provided for 95 cities in these countries based on start-up and operational costs for 17 types of businesses over a 10-year planning horizon.

Wednesday, May 17, 2006

Putting Housing Prices in Perspective

This report was just released by Century 21, and dicusses the increase in housing prices in a number of Canadian markets in the past five years. What is really interesting about the survey, is they compare the increase in housing prices, to other things like the cost of milk, or gas. It definitely puts things in perspective.

VANCOUVER, May 17 /CNW/ - Increases in Canadian house prices over the past five years - dramatic in Alberta and British Columbia and strong in the rest of the country - are the result of a robust economy that has also seen a dramatic rise in key Canadian economic indicators and popular lifestyle and
consumer items, according to an analysis by CENTURY 21 Canada released today.

Price increases over five years for typical homes across the country in a selection of markets surveyed by CENTURY 21 range from as high as 129 per cent in Vernon, in British Columbia's Okanagan Valley, to as low as 12 per cent in Thunder Bay, Ontario.

Other hot housing markets surveyed include Calgary north-east, up 121 per cent; Fort McMurray, up 105 per cent; Kelowna, up 89 per cent; North Vancouver, up 87 per cent; Quebec City, up 67 per cent; the Winnipeg suburb of St. Vital South, up 64 per cent; Peterborough, up 54 per cent; and Dartmouth, up 46 per cent.

Don Lawby, President of CENTURY 21 Canada, says Canada's housing prices are the result of strong economic performance in every region of the country. "The economy continues to provide the job stability and consumer confidence combined with moderate mortgage interest rates to bring continued, stable house price growth on the Prairies, in Central Canada and in Atlantic Canada," said Lawby. "In British Columbia and Alberta, the same economic factors plus booming energy and construction sectors have produced dramatic house price increases."

"Our five-year National House Price Survey includes non-housing benchmarks because we want to put the housing market into perspective with other economic indicators and some popular consumer items that Canadians will be choosing this summer," said Lawby.

Indeed, house prices haven't risen in isolation. During the period from 2001 to 2006, other key consumer and economic benchmarks have also turned in impressive performances(1):
- The price of a litre of regular gasoline increased in Edmonton to $1.02 from 68.8 cents, up 48 per cent, and in St. John's, to $1.16 from 88.4 cents, up 31 per cent.
- A litre of homogenized milk increased to $1.86 from $1.55, up 20 per cent.
- The manufacturers' suggested retail price for a base model (DX sedan) of the best-selling car in Canada, the Honda Civic, increased to $19,405 from $17,650, up 10 per cent.
- Average undergraduate university tuitions increased 22 percent overall and ranged from an increase in British Columbia to $4,874 from $2,592 per year, up 88 per cent, to a decline in Newfoundland and Labrador to $2,606 from $3,373, down 29 per cent.
- The most affordable ticket at the 89th Grey Cup Game in 2001 in Montreal when the Calgary Stampeders defeated the Winnipeg Blue Bombers 27-19 was $58, compared with the posted price of $75 for the most affordable ticket at the 2006 Grey Cup to be played in Winnipeg
November 19th, up 29 per cent.
- The fee to hike the world-famous West Coast Trail on Vancouver Island has increased to $110 per person in 2006 from $70 per person in 2001, up 57 per cent.
- A grounds pass to the final day of the 2001 Canadian Open Golf Championship at the Royal Montreal Golf Club was $65, compared with $70 for the final day of the 2006 event to be played at the Hamilton Golf & Country Club September 4-10, an increase of 8 per cent.
- The TSX Composite Index increased to 11,933 from 8,146, up 46 per cent.
- The Canadian dollar versus the American dollar increased to 90.2 cents from 64.5 cents, up 41 per cent.
- The Consumer Price Index (CPI) increased to 129.3 from 116.4, up 11 per cent.

At the same time, a few items actually declined:
- The price of an Olympus C-3000 digital camera with 3.34 mega pixels declined to $400 in 2006 from $400 in 2001, down 125 per cent.
- The Canadian unemployment rate declined to 6.7 per cent from 7.0 per cent, down .3 per cent.
- Mortgage rates have also posted a moderate decline over the past five years. The posted interest rate for a conventional five-year mortgage was 7.75 per cent in May 2001, 5.7 per cent in June 2005 and 6.75 per cent May 15, 2006, contributing to the activity in the
housing market and the resulting price increases.

The CENTURY 21 Canada National House Price Survey reflects the price of a typical home in communities across Canada. A "typical home" is the type of home that occurs most frequently in any given neighbourhood or community.

These homes are not identical, but meet a fairly narrow range of criteria including size and design. The survey included 38 markets across the country.

Hottest housing markets surveyed in British Columbia are Vernon, where the price of a typical home described as a 1,200-square-foot bungalow with three bedrooms and two bathrooms on a 55x100-foot lot increased to $355,000 in the spring of 2006 from $155,000 in the spring of 2001, an increase of 129 per cent; Kelowna, where the price of a typical home, described as a
2,006-square-foot split level with four bedrooms and three bathrooms on a 65x120-foot lot increased to $350,000 from $185,000, an increase of 89 per cent; and North Vancouver, where the price of a typical home, described as a 1,800-square-foot bungalow with three bedrooms and two bathrooms on a 50x150-foot lot has increased to $650,000 from $348,000, an increase of 87 per cent.

Hottest housing markets surveyed in Alberta are Calgary north-east, where the price of a typical home described as a 1,090-square-foot bungalow with three bedrooms and two bathrooms on a 50x110-foot lot increased to $363,000 in the spring of 2006 from $164,000 in the spring of 2001, an increase of 121 per cent; and Fort McMurray, where the price of a typical home described as a 1,200-square-foot bungalow with three bedrooms and 11/2 bathrooms on a 65x100- foot lot increased to $410,000 from $200,000, an increase of
105 per cent.

Hottest housing market surveyed on the Prairies is the Winnipeg suburb of St. Vital South, where the price of a typical home described as a 1,500-square-foot two-storey home with three bedrooms and 21/2 bathrooms on a 50x110-foot lot increased to $200,000 in the spring of 2006 from $122,000 in the spring of 2001, an increase of 64 per cent.

Hottest housing markets surveyed in Ontario are Peterborough, where the price of a typical home described as a 1,050-square-foot bungalow with three bedrooms and 11/2 bathrooms on a 50x150-foot lot increased to $202,000 in the spring of 2006 from $131,000 in the spring of 2001, an increase of 54 per cent; and Kitchener-Waterloo, where the price of a typical home described as a 1,200-square-foot two-storey home with three bedrooms and two bathrooms on a 45x120-foot lot increased to $245,500 from $163,000, an increase of 51 per cent.

Hottest housing market surveyed in Quebec is Quebec City, where the price of a typical home described as a 1,000- square-foot bungalow with three bedrooms and one bathroom on a 50x100-foot lot increased to $150,000 in the spring of 2006 from $90,000 in the spring of 2001, an increase of 67 per cent.

In Atlantic Canada, the hottest housing market surveyed is Dartmouth, Nova Scotia, where the price of a typical home described as a 1,500-square-foot bungalow with four bedrooms and two bathrooms on a 55x110-foot lot increased to $155,000 in the spring of 2006 from $106,000 in
the spring of 2001, an increase of 46 per cent.

Tuesday, May 16, 2006

Edmonton and Calgary Lead Canada's Real Estate Markets...Again

No sooner do I post that CREA released stats about the resale housing market with nothing specific about Edmonton and Calgary, do I find this article. Although sales are down nationally this April compared to last, Edmonton and Calgary are WAAAAAAAY up... Add to that the two cities lead the country in a drop in new listings. More sales, fewer listings = higher prices (a little elementary economics for you). From the Calgary Sun:

Calgary and Edmonton have achieved record resale housing activity so far in 2006.


Calgary and Edmonton have achieved record resale housing activity so far in 2006, pushing national home sales to new heights, according to the Canadian Real Estate Association.

Across Canada, transactions for the year-to-date in April were 5.1% ahead of the number of sales posted during the first four months of 2005, putting the residential resale sector on track for a sixth consecutive annual record in 2006.

In Calgary, there were 12,354 sales from January to April, marking a 23% increase from a year ago.

Edmonton, meanwhile, recorded 6,822 sales in that time, up 21% from the first four months of 2005.

The two cities had the greatest increase in activity of any other Canadian market.

And as residential sales shoot through the roof, Edmonton and Calgary also lead the country when it comes to a drop in new listings.

Calgary experienced an 11% decline in new listings in the first four months of the year, compared to 2005, and Edmonton saw a 15.5% plunge.

“The market remains tight and this is reflected in rising prices,” said CREA chief economist Gregory Klump.

“There aren’t enough new listings coming onto the market to meet consumer demand in many urban areas, so prices will continue to rise over the rest of the year and next.”

Average residential resale prices in Calgary hit $341,838 in April, a shocking 37% increase from the same month last year.

And the average home resale price in Edmonton climbed 18% to $226,846 from April 2005 to last month.

Prices Rise, Sales Fall in April

CREA (Canadian Real Estate Association) just realeased the following press release. Existing home sales fell in April in Canada. There is no information specific to Alberta in the press release, although previous releases from the Edmonton Real Estate Board showed increases in both volume and price. As interest rates and prices continue to rise there is bound to be a slowing in the number of sales. This could be a welcome breather for the buyers in Edmonton who've been facing multiple offers and sale prices over list price everywhere they turn. From where we're sitting, we don't see any slowing in the Edmonton market, yet.

Canada's April Existing-Home Sales Fall 3.2%; Prices Rise

May 16 (Bloomberg) -- Canadian existing-home sales fell 3.2 percent last month, led by Toronto and Vancouver, as prices and borrowing costs rose.

Sales in 25 major markets fell to a seasonally adjusted 27,746 homes in April, the Ottawa-based Canadian Real Estate Association said in a statement today. Sales fell 5.4 percent to 8,631 units in Toronto, the country's largest city, and 18 percent to 3,434 homes in Vancouver, the third-largest.

The average resale price rose 12 percent in April from a year earlier to a record C$297,609 ($268,000), the association said. Prices advanced 10 percent or more each month this year. Borrowing costs also are increasing, with the rate on a five- year conventional mortgage rising to an average 6.6 percent in April from 6.3 percent at the end of 2005.

``Resale housing demand is still very strong and the market remains tight, and this is reflected in rising prices,'' Gregory Klump, the real estate association's chief economist, said in the statement.

Year-to-date sales increased 6.5 percent to an unprecedented 114,321 and sales for all of 2006 will probably reach a sixth straight record, the association said.

Existing home sales, new home construction and new home prices all reached record highs in the first quarter, spurred in part by a 31-year-low jobless rate.

Fewer people put their homes on the market in April, with new listings falling 0.9 percent to 45,654 units.

Thursday, May 11, 2006

Alberta Housing Prices to Surpass Ontario in 2007

Average residential resale prices in Alberta will surpass Ontario next year, according to the Canada Mortgage and Housing Corporation. Here are the details from the Edmonton Sun:

The CMHC's housing market outlook, released today, calls for average prices in the province to rise 23.7% this year to $270,000, before climbing another 8.1% to $292,000 in 2007.

That compares with the average resale price in Ontario reaching $279,000 this year, followed by a 2.9% jump next year to $287,000.

In Edmonton, home prices have been on a tear for years, riding the oil-fuelled blitz.

The average price for a residence (house, condo or duplex) in Edmonton hit a new all-time high of $226,846 in April (up 3% from the previous month).

The average resale price of an Edmonton house in April was $265,557, according to the Edmonton Real Estate Board. That's up from about $256,000 in March, and up from about $218,000 in April last year.

Edmonton prices are already 18% ahead of last year, the board said.

April condo prices were up 3.6% to $162,565, while average prices on duplexes and rowhouses were $221,941,up from $193,000 last month.

More than 40% of single family homes on the Multiple-Listing Service sold at more than the list price during April.

A home sold in April was listed for an average of 23 days. A year ago, the average was 46 days.

Calgary, meanwhile, is experiencing "the highest rate of resale price growth on record," said Richard Corriveau, a regional CHMC economist, in his spring forecast for the city.

The average price for all residential units in Calgary hit $308,576 during the first quarter of this year, marking a 26% increase from a year ago. By 2007, that average price is expected to hit $341,000.

Corriveau said higher levels of migration to Alberta and low mortgage rates are fuelling demand as "the prospect of higher prices and mortgage rates in the future has created a sense of urgency for first-time buyers, prompting many of them to make a purchase."

Edmonton Condo Prices Increasing Fast

This report by Remax shows demand for condos is increasing faster in Edmonton and Calgary than anywhere else in Canada while prices are considerably lower than Toronto or Vancouver...

Condominium sales post double-digit gains in Q1 2006 in most major Canadian centres, says RE/MAX

"For some first-time buyers, condominiums represent the only means of

MISSISSAUGA, ON, May 11 /CNW/ - Unprecedented demand for condominium
apartments and town homes has sparked double-digit gains in unit sales in most
major Canadian centres during the first quarter of 2006, according to a report
released today by RE/MAX.

The RE/MAX Condominium Report found that both sales and prices were
climbing in the eight markets examined, including Halifax, Ottawa, Toronto,
Calgary, Edmonton, Kelowna, Victoria, and Vancouver. The highest percentage
increases were found in Alberta, with sales in both Calgary and Edmonton ahead
of 2005 first quarter figures by approximately 40 per cent. The number of
condominiums sold in Victoria, Kelowna, and Toronto were up in excess of
10 per cent, while more moderate gains of five, four and three per cent were
reported in Vancouver, Ottawa, and Halifax respectively.

"Rapid price appreciation has had a definite impact on condominium sales
across the country," says Michael Polzler, Executive Vice President and
Regional Director, RE/MAX Ontario-Atlantic Canada. "As the cost of more
conventional housing rises, condominiums represent the only means of home
ownership for some first-time buyers."

Western markets, in particular, are reporting strong upward pressure on
overall residential average price (includes all single-family dwellings,
including condominiums). To illustrate, housing values in Calgary rose a
substantial 26 per cent to just over $308,000 year-to-date while average price
in Vancouver jumped 22 per cent over the 2005 level to more than $482,000.

Although Toronto experienced a more modest increase of approximately six per
cent over Q1 2005, hot pocket areas are seeing even greater appreciation.

"Affordability has become a serious issue across the country," says Elton
Ash, Regional Executive Vice President, RE/MAX of Western Canada. "Despite
relatively low interest rates and the availability of longer amortization
periods, many first-time buyers are finding they have to stretch their budgets
to realize the dream of home ownership. Condominiums are the easy answer for
most because they offer the best of both worlds -- affordability and

Entry-level purchasers and move-up buyers, typically aging baby boomers,
are most active in the condominium market. The most popular price point is
$150,000 - $250,000, although in markets like Vancouver and Toronto, the
strongest segments are closer to $300,000 - $400,000. Luxury sales are brisk
from coast to coast, with almost all markets surveyed reporting an upswing in
sales over $500,000. In Toronto, sales of condominiums priced in excess of
$500,000 have risen 68 per cent to 170 units year-to-date, compared to
101 units during the same period in 2005.

"For many years, young professionals under the age of 40 dominated
Toronto's condominium market," says Polzler. "The pendulum is now starting to
shift, with baby boomers between 50 to 60 years of age emerging as a force in
the marketplace. The condominium lifestyle is the major attraction for most
mature buyers."

In Vancouver, more and more upscale developments are coming on-stream,
especially in the Coal Harbour and the Beach Crescent neighbourhoods.

"With Canada's economic engine firing on all cylinders, and no dark
clouds on the horizon, it's relatively safe to say that 2006 will be a banner
year for condominium sales across the board," says Ash. "This is particularly
true in the West, where condominiums are becoming an increasingly attractive
alternative to single-detached housing."


- Inventory levels were an issue in many markets examined, resulting in
upward pressure on condominium values.
- Multiple offers were commonplace in three markets during the first
quarter of 2006 - Vancouver, Calgary, and Toronto.
- Condominiums accounted for close to 50 per cent of total residential
sales in the Greater Area Vancouver between January - March 31, 2006.

Tuesday, May 09, 2006

Commercial Leasing Rates Increasing in Downtown Edmonton

Here is an interesting article from the Edmonton Journal... Seems it took a Calgary investor to spark a recent increase in lease rates downtown...have a read:

Calgary investor bullish on Edmonton

Scott Hutcheson sees bright downtown future

Ron Chalmers, The Edmonton Journal

Published: Tuesday, May 09, 2006

EDMONTON - Calgary investor Scott Hutcheson saw Edmonton office space as seriously underpriced so he bought three buildings -- and led the trend to higher rents.

"We decided that Edmonton was a great opportunity, and we came in and purchased a big piece of the downtown," says Hutcheson, president of Aspen Properties Ltd., which he co-founded with three partners in 1998.

The company bought 16 buildings in downtown Calgary, including the Calgary Tower -- then turned to Edmonton. Aspen bought the ING Building in 2003, a half interest in Scotia Place in 2004 and the Allstream Tower in 2005.

In the three years since Aspen arrived, Edmonton's downtown office vacancy rate has dropped from almost 12 per cent to under six per cent.

"Aspen's timing was impeccable," says Alan Menon, a commercial realtor with CB Richard Ellis.

As leases were renewed, Aspen raised rents -- and inspired other owners.

"They have been very bullish," Menon says. "They started pushing and all the others jumped on board."

Some Calgary offices rent for $40 per square foot per year, so Hutcheson could see that Edmonton was underpriced.

"When we started to purchase, with $7 base rents, it was clear that there would be a shortage within five years," he says.

Vacancies fell steadily until, suddenly, our downtown was almost full.

"In the last two months, we have seen four or five leases done in excess of $20," says commercial realtor George Dawson of Colliers International.

"Previously, that was unheard of. Six months ago, the benchmark would have been probably less than $14."

Today's rents still are below the $25 to $30 that developers say they would need to start new construction.

Aspen's aggressiveness has helped create "a new mindset" among owners, Menon says. "It used to be that one would undercut the other, but now it is almost a race to raise rates."

Hutcheson, a member of the Canadian Alpine Ski Team from 1978 to 1982, agrees that his attitude is contagious. "We were optimists, and when we started to talk about what we saw, a light went on with many others."

Local landlords and tenants had suffered "20 years of lethargy," he says

"We came in with a very different outlook. We started to talk about what we saw, and said, 'Wake up, guys.' "

But in real estate -- as in ski racing -- cheerleading alone does not define reality.

"All we did was vocalize what a great place Edmonton was and would be," Hutcheson insists. "I'm not sure that our presence changed the market dynamics. We did not change supply or demand."

Our economy is spurred by support services to northern oil sands, exploration, diamond mines and pipelines -- but Hutcheson also sees another angle.

"Within the next decade, Calgary will burst at the seams and costs will go up," he predicts. "Edmonton will become a great alternative for a lot of business and back offices."

Demand for downtown space will soon exceed our small supply.

Compared to Calgary's 30 million square feet of office space, "Edmonton is quite a small downtown market, with only about 13 million square feet, including government," Hutcheson says.

But Edmonton's economy has been growing strongly for five years -- so why have rents escalated only with the recent arrival of a Calgary company?

"Sometimes it may take somebody who is not local to say, 'Look what is happening here,' " Hutcheson says.

Monday, May 08, 2006

Alberta Housing Market to Set Record in'06 (duh!)

Seems CREA has revised their forecast for home sales in Canada for '06. Everything is well ahead of what was originally forecast and new records are being set all over the place. Here is their release:

MLS® home sales on track to set new records in 2006
OTTAWA – May 4, 2006 – Canada’s resale housing market will set new records in 2006, according to a revised forecast prepared by The Canadian Real Estate Association (CREA).
After setting the fifth consecutive annual record in 2005 at 483,250 units, CREA expects national resale housing activity to inch even higher by 1.0 per cent to 488,160 units in 2006. Activity is then projected to ease by 3.3 per cent in 2007.

Rising interest rates have so far done little to cool resale housing transactions this year. In the first quarter of 2006, sales activity reached its highest level for any quarter on record in Alberta, Prince Edward Island and Newfoundland, and remained exceptionally strong in all other provinces. Alberta is expected to post the biggest annual increase in transactions this year, which reflects its upbeat economic, employment and population growth prospects arising from investment in the energy sector.

After climbing 10.2 per cent in 2005, CREA projects that the national MLS® residential average price will increase by a further 6.1 per cent in 2006 and 4.7 per cent in 2007. Annual increases in average price are expected to remain above 10 per cent in British Columbia and Alberta, where resale housing markets should remain tight.

“Further increases in home prices and interest rates may cause resale housing activity to ease next year, but housing demand will remain very strong and support further price increases,” said CREA’s Chief Economist Gregory Klump.

“Rising household incomes will help to support housing affordability,” says Klump. “The tax cuts outlined in the 2006 Federal Budget will ease the overall tax burden for individuals, put money back in the pockets of Canadians, and increase consumer confidence about making major purchases.”

“The reduction in the GST rate to six per cent and the one per cent reduction in the federal portion of the HST will reduce the costs associated with buying, selling and owning a home,” Klump continues.

“With all of these new tax reductions and the continuing strength of the real estate market, consumers can count on their REALTOR® to have the most up-to-date information on how the changes will impact them,” said Alan Tennant, FRI, President of The Canadian Real Estate Association.

CREA’s Chief Economist notes that the GST is charged on professional services used by consumers during the course of a housing transaction, such as fees paid to lawyers, appraisers, home inspectors and REALTORS®. The tax is also charged on the goods and services purchased by consumers when they move from one home to another. These include moving costs, renovations, and the purchase of furniture and major appliances.

Saturday, May 06, 2006

Edmonton Real Estate Market Report

Here is the monthly news release produced by the Edmonton real estate board. Being out in the market everyday, I can say there is a very high demand for housing. We've recently sold 3 homes for $10,000-$15,000 over list price, with multiple offers, the first day on MLS. Here are the stats...

Edmonton, May 2, 2006: The Edmonton Real Estate Board reports that the resale housing market remains animated. The booming economy and high demand are causing housing prices to rise beyond forecast expectations. In January EREB forecast that residential sales would remain at last years record levels but that prices would rise 8%. So far this year sales have risen 12.4% and prices are 18% ahead of the same time last year.

“This market is nothing like the 80’s boom,” said Madeline Sarafinchan, EREB President. “Prices are increasing steadily but housing is not overpriced. Mortgage rates remain low and consumer confidence is high.” She added that there is no increase in foreclosures and resale property retains its value because it is priced well below new construction.

Inventory levels for resale housing are lower than typical. The MLS® residential inventory at the end of April was 2,219 as compared to 4,810 last year. As a result sales are animated and buyers are forced to make decisions quickly when they see an attractive property.

Average days on market in April was just 23 days. Slightly slower than March (19 days) but still half of last year’s April figure of 46 days.

The average price* for single family dwellings rose 3.7% over March to $265,557. Condo prices were up 3.6% to $162,565. Average prices on duplexes and rowhouses finally topped $200,000 at $221,941 up from $193,000 last month.

The average residential price hit a new all time high of $226,846 in April (up 3.0% from the previous month).

Over 40% of single family homes on MLS® sold at or over the list price in April. “In the market today you need to have a sophisticated pricing and negotiation strategy,” said Sarafinchan. Last April less than 15% of sales met or exceeded the list price. “Solid, reliable information about recent sales and neighbourhood trends can only be obtained from your REALTOR® who has records of 91% of the residential sales in Edmonton.”

Highlights of MLS® activity
April 2006 activity Record * % change from 2005
Total MLS® sales this month 2,300* 12.9%
Value of total MLS® sales -
month $532 million* 33.9%
Value of total MLS® sales -
year $1.72 billion* 45.0%
Residential¹ sales this month 2,026* 12.4%
Residential average price $226,846* 18.2%
SFD² average selling price -
month $265,557* 21.3%
SFD² median³ selling price $254,900* 21.9%
Condo average selling price $162,566* 20.9%

¹. Residential includes SFD, condos and duplex/row houses.
². Single Family Dwelling
³. The middle figure in a list of all sales prices

* Average prices indicate market trends only. They do not reflect actual prices, which may vary.

If you're thinking of buying or selling, contact us for information and advice on dealing in this incredible active market.

Thursday, May 04, 2006

Edmonton Best Place to Invest

According to the "Real Estate Investment Network" and an article in the Vancouver Sun this morning, Edmonton tops the list of places to invest in Canada.

Alberta touted as hot spot for real estate investment
Mario Toneguzzi, CanWest News Service;
Published: Thursday, May 04, 2006

CALGARY - Alberta is the best place in the country to buy residential real estate for long-term investment, according to the Real Estate Investment Network.

In a list of top places in Canada to invest, Edmonton, Grande Prairie, Alta., and Calgary are noted as the hot spots in the country for buyers to make money in residential real estate.

"This is for long-term fundamentals. Long-term hold,'' said Don Campbell, a real estate consultant, author and president of the Real Estate Investment Network.

"The next three years all kinds of regions across the country are going to look spectacular. But these ones will outperform over the long period of time.''

The rest of the top places for residential real estate investment include Kitchener-Waterloo in Ontario, Fort St. John, B.C., Barrie, Ont., Halifax and Hamilton.

Richard Corriveau, regional economist for the Canada Mortgage and Housing Corp. for the Prairies and Territories, said the "one thing you can bank on is future appreciation.''

"The difficulty for investors will be how do you cash flow a property. You purchase a new condominium, a new single-family home (they) might be very difficult to cash flow a property. A renter might not pay your carrying costs but you'll get the return at the back end of the sale once your home appreciates,'' Corriveau said.

He said it is difficult to determine how many people are buying residential real estate for purely investment purposes as opposed to living in the properties.

"Anecdotally we hear upwards of a quarter of all new condominiums,'' Corriveau added.

"The question remains whether they are speculative investors and they intend to flip the property prior to the structure even being completed or whether they intend to rent it to people.

Campbell said that in British Columbia there's no question the Fort St. John region (and Dawson Creek) is "the No. 1 place to buy for investors.''

In Ontario, it's the Kitchener-Waterloo and Cambridge triangle.

"We're actually calling that the economic Alberta of Ontario. It's got strong, strong growth and lots of in-migration and average income is increasing quickly. If I was to invest anywhere outside of Alberta, that would be my second choice. Absolutely,'' Campbell said.

Wednesday, May 03, 2006

Prices Set Records, but Housing Still "Affordable"

This article from the Edmonton Journal compares today's real estate market with that of spring 1981, when housing prices hit a record level. By including inflation, today's mortgage payment is actually still less than the previous records in 1981. Here are the details...

Ron Chalmers, The Edmonton Journal
Published: Wednesday, May 03, 2006

EDMONTON - Edmonton-area home prices have soared for five years, yet have barely reached the heights of 1981 -- after adjusting for inflation.

With today's low interest rates, the monthly costs of home ownership remain far lower than during the ruinous inflation of the early 1980s.

In April 1981, average home prices hit a then-record level of $94,223 before slumping all through the '80s.

Exactly 25 years later in April 2006, prices "hit a new all-time high of $226,846," the Edmonton Real Estate Board reported Tuesday.

After adjusting for inflation, however, that figure compares directly to prices of 25 years ago. In today's dollars, homes sold in 1981 for an average of $213,359.

But prices are only half of the story.

With a further adjustment for mortgage interest rates, the monthly cost of home buying now is far less than in 1981.

Anyone buying an average Edmonton-area home today, with a 10 per cent down payment and a mortgage rate of 6.75 per cent, amortized over 25 years, would pay about $1,400 per month.

In April 1981, with mortgage rates at 16.5 per cent, the payment on an average home was about $1,150 -- or $2,600 in today's dollars.

"This market is nothing like the '80s boom," Madeline Sarafinchan, president of the Edmonton Real Estate Board, said Tuesday.

"Mortgage rates remain low and consumer confidence is high," she said. "Housing is not overpriced."

Resale homes are priced below new construction, and foreclosures are not rising, Sarafinchan said.

Research in the U.S., where prices have surged in the past decade -- after two decades of slow growth -- also has found little sign of a housing price bubble.

"Recent price growth is supported by basic economic factors such as low real, long-term interest rates, rapid income growth, and housing price levels that had fallen to unusually low levels during the mid-1990s," reports the National Bureau for Economic Research in its April, 2006 NBER Digest. It cites a recent study of 46 U. S. housing markets, which found that prices have not been fuelled by speculation. "Expectations of outsized capital gains appear to play, at best, a 'very small role' in house prices," the Digest reports.

It cautions that a rise in real, long-term interest rates or a decline in economic growth could cause prices to fall.