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Wednesday, June 14, 2006

Alberta Housing - A League of its Own

Found this quote from an article in the Globe and Mail, it's by TD Bank economist Sébastien Lavoie:

"Alberta is in a league of its own. They are a bit like the Tiger Woods of housing -- they are at the top of the leader board on every measure."

Thought that was kind of cute. Anyway, there are more stats from CMHC and CREA below to support the above statement. These excerpts are taken from two articles in the Globe and Mail.

Canada's housing market is increasingly becoming a tale of two solitudes -- Alberta and the rest of the country -- and two key numbers released yesterday provide further evidence of the trend.

Huge increases in Calgary and Edmonton helped push the national monthly rise in new home prices to the highest levels in 17 years in April. As well, housing starts for the country as a whole barely budged last month, but those in the Prairie region, which includes Alberta, where up 9 per cent. Most industry watchers say that number would have been much higher but for a shortage of land and labour in the province.

The incredible increase in new home prices in the province shows just how wide the gap is becoming. In the past twelve months, the cost of a new home in Calgary jumped close to 35 per cent, Statistics Canada reported yesterday. In Edmonton, the increase was 18.6 per cent. For the country, the annual rise was 8.2 per cent and only one city outside Alberta had a double-digit increase. That was Winnipeg at 10.7 per cent.

The cost of a new home rose 4.7 per cent in Calgary in April alone, Statscan said, and it was up 3.9 per cent in Edmonton. It attributed the jump to high demand, along with higher material and labour costs and increased land values.

For housing starts, May marked the fourth month in a row of gradually declining activity in the core single-family category, Canada Mortgage and Housing Corp. said. Starts of single family homes in urban centres were down 1.3 per cent, compared with April, on a seasonally-adjusted basis. Multiple starts slipped 0.1 per cent.

While start levels are still above last year's numbers for the same period, the decline is in line with an expected moderating trend, CMHC economist Brent Weimer said. This is the "soft landing," many economists have predicted for the industry as pent-up demand wanes and rising prices and interest rates make home ownership less affordable.

The market in Alberta is anything but soft. Indeed, some economists have begun to fret that strong activity and rising prices may be laying the groundwork for bubble conditions.

Mr. Weimer does not believe the market is in danger of overheating, but he, too, said the province is bucking the national trend. "Definitely the story is different in Alberta," he said. "A lot of it is demand driven . . . You do not have a lot of units to choose from and a whole lot of potential buyers chasing those units."

Under such conditions, he said, double-digit price increases are not a surprise.

The average national price of an existing home in Canada surged above $300,000 for the first time ever in May, with actual sales activity smashing through all previous records as buyers rushed to buy a house while they can still afford to do so.

The latest data shows that despite forecasts of a slowdown, Canada's sizzling housing market continues to fire on all cylinders, particularly in oil-rich Alberta.

The price of a residential home in Canada surged 12.9 per cent from a year ago to $303,836 in May, topping $300,000 for the first time, according to sales tracked through MLS by the Canadian Real Estate Association. The 12.9 per cent rise is the biggest year-over-year increase in two years.

”May marks the fourth consecutive month in which the major market average residential price broke all previous records,” CREA chief economist Gregory Klump said.

Soaring house prices have resulted in a growing shortage of lower-priced homes in the resale market, he said, which is crimping sales of lower-priced homes and driving up the national average price.

"With prices on the way up and a shortage of listings in lower price ranges, some buyers may feel that if they don't buy now, they may not be able to afford to later,” Mr. Klump said.

Alberta's resale market led the gains, with home prices in Calgary soaring 43.6 per cent to $358,214. Home prices in Edmonton jumped 23 per cent to $242,936, in Vancouver they rose 23.7 per cent to $518,176, and in Toronto they rose 5.5 per cent to $365,537.

New listings in May hit the highest level on record, but failed to match sales, leaving the market tighter.

Mr. Klump attributed the continued strength in the housing market to a booming labour market, rising incomes and resilient consumer confidence. Those factors are boosting sales activity, despite rising interest rates and home prices.

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