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Monday, August 28, 2006

Average Edmonton Home Now Costs Over $318,000

The most interesting bit of info in this article, is that the average home in Edmonton (not greater Edmonton) now costs over $318,000. Especially when 5 years ago only 6% of homes in Edmonton sold for over $300,000. So what does it all mean? Has the cost of housing inflated in Edmonton too quickly - will it deflate just as fast? Or have the prices here just caught up to the rest of the country, and the booming economy? In my opinion we're just catching up - it is still cheaper to buy a home here than in Montreal, and what's so great about their economy? The biggest problem is not the cost of housing (yet) but that there is nowhere to house all the people that are needed to fill all the jobs we have to offer. Don't get me wrong - we can't continue to sustain the kind of growth our real estate market is seeing, it has got to slow down. I just don't see any bubbles bursting....yet. We'll see what August's stats show in a few days.

Skyrocketing house prices create own problems

Paula Simons, The Edmonton Journal
Published: Saturday, August 26, 2006

Saturday morning breakfast. We're sitting at the kitchen table, reading the paper. My husband's snagged the front section. My daughter has the colour comics. I've got the real estate ads.

Not that we're in the market, thank God. I just have a half-giddy, half-morbid fascination with housing prices.

This morning, I almost choke on my Cheerios. A house four blocks away from us has just listed for $539,000.

"Five hundred and thirty-nine thousand dollars!" I hoot, gobsmacked at the hubris. "Are they crazy?"

Ours, to put it mildly, is not a half-a-million dollar neighbourhood. Or at least, it didn't used to be. After the last eight weeks, who can tell?

It's been that kind of a summer. Everyone, it seems, has a story. Friends of mine in Parkview are dumbfounded when the severely modest 1950s bungalow up the road from them sells for $450,000, in the blink of an eye. One of my relatives, a widowed senior, bought a pleasant condominium less than a year ago. The other day, one of her neighbours walks up, unsolicited, and offers to buy it from her for 40 per cent more than she paid for it last fall.

Around here, a house listing for $1,000,000 used to be big news. Right now, there are 12 houses with asking prices of more than a million on the local MLS listings -- with two listed at over $2 million.

Of course, in cities like Vancouver and Toronto -- or even Calgary and Fort McMurray -- prices like this are nothing new.

The market in Edmonton has been depressed for years. Part of what we're seeing now is long-overdue catch-up.

But much of it is being driven by an overheated economy -- and a certain sense of consumer hysteria. Yes, there are more people moving to Edmonton. But there is also a new sense out there of what people are willing to pay. As a community, we've crossed a psychological barrier. Prices that would have seemed ridiculous six months ago suddenly seem reasonable today.

Five years ago, says Madeline Sarafinchen of the Edmonton Real Estate Board, only about six per cent of the houses in Edmonton were selling for more than $300,000.

Last month, $303,304 was the average price for a single-family home in the greater Edmonton area, which includes places like St. Albert, Redwater and Calmar. That was up more than 35 per cent from July of last year.

Prices are trending up again in August. So far, the average selling price in metro Edmonton is $304,900. In Edmonton proper, things are trending even higher. The average selling price in the city itself right now is $318,942.

For those looking to buy a house for under $250,000 or $200,000, the competition is ferocious. Sarafinchen says it's not uncommon for sellers to get six or eight competing offers, for buyers to bid higher than the list price in an effort to get the house.

Looking for a new house in a new burb? Finding a builder, or even a building lot, isn't easy. In some cases, indeed, builders are handing customers back their deposits, because they can't deliver a new home -- or at least not at the agreed-upon price.

"Most of the builders are at capacity. Everyone's at capacity. Developers have released all the land they're capable of releasing," says Sarafinchen.

"New home builders don't have a lot of standing inventory, and most of it is priced over $300,000," agrees Richard Goatcher, a senior analyst with Canada Mortgage and Housing Corporation. "Of course, they're building as fast as they can. We've got record levels of single-family house construction. But builders are totally backed up with orders."

In a perfect, balanced real estate market, Goatcher says, there should be a "sales-to-active-list ratio" of 30 per cent. Of all the houses listed in a month, that means 30 per cent sell within 30 days.

Right now, he says, the sales-to-active-list ratio is closer to 100 per cent -- which means that pretty much every house that lists in a month sells in a month. And that, he says, can lead to panic buying, frantic bidding that pushes houses above list price.

The result? Some buyers end up bidding more, and assuming more debt than they can comfortably handle. Or they end up making unconditional offers on houses and get stuck with lemons that require major, unexpected repairs. Or they end up priced out of the market altogether.

"This situation is not sustainable," he says. "These accelerated markets sow the seeds of their own destruction. We should start to see a dropoff in sales."

Then, he stops himself and chuckles: "Mind you, I've been saying that for months and it hasn't happened."

South of the border, housing prices in key markets are dropping, along with consumer confidence. Not here. Not yet.

But our superheated economy creates its own problems. Our job market is as hot as our housing market. We need more workers -- from doctors to drywallers -- to move here. But we don't have other housing -- affordable or luxury -- to meet demand.

We've now reached the part of the column where I'm supposed to come up with some smart, glib solution. I haven't got one. There's no short-term government initiative to solve this dilemma, at least not much faster than the market can itself. (To be sure, the national energy program "fixed" our last boom, but that's not a model I'd favour.) The bittersweet truth is that these prices may be the new normal. After Edmonton's years of languishing in the real-estate backwaters, it may take us all a while to adjust.

2 Comments:

  • At 3/15/2007 03:07:00 AM, Anonymous Anonymous said…

    I want to illustrate how the average Edmontonian is hit by this crazy spiralling housing crunch. I will use myself as an example. I had interest in acquiring a condo townhome in the west end that was 128k last year. I planned to finish university and put a downpayment on one of the units.

    This year a unit in the same complex sold for 297k. This is an over 100 percent jump. In fact it's closer to 200 percent in one year. It is not an isolated case. Anyone who would say that it is, is lying.

    I was hoping to put a good downpayment on a unit this year but the crunch has put a damper on my ability to purchase my first home. I am not a young person and am stuck paying in excess of 1200 for a two bedroom. This essentially means that that my income is eroded by rental increases so much that it will take forever to increase the amount I can save to enter the market.

    My savings are a joke now. My children crammed into 2 bedrooms with me on the couch and you say its not so bad? People are in it over their heads, bankrupcys were at record levels last year, the minimum wage is 7.00 an hour and lower middle class is now living on the edge of homelessness. Over 100 children under the age of 10 were homesless in Edmonton last fall.

    HOW CAN ANYONE IN THEIR RIGHT MIND BELIEVE WE ARE NOT IN A CRISIS?

    The only people doing well, are the speculators, people from the east with money from home sales, oil industry types and of course those already in the market holding onto their pre-hyperinflation properties for dear life.

    Nothing makes sense here. Edmonton's prices were only depressed when compared to hyperinflated housing costs. For those of us living here, prices rose at a reasonable rate and people actually had opportunities to enter the market.

    Now entry levels were last year's second home costs. Even derelict inner city 450 sq ft. condos go for almost 200k. Where is the sense in any this?

    I guess someone is making a killing and its hard working lower middle class, low income and disabled, homeless and new graduates with student loans on top on inflated rental payments to worry about.

    The Edmonton City Council and the Alberta government MUST do something about this more than freezing rent or building limited so called affordible housing units. Building rooming houses is an insult to the dignity of working Albertans. Surely we deserve better, It is our back breaking work that enabled this province to become the richest in teh country. To have homelessness an issue is disgust we should be ashamed of.

    To have housing at a cost so great as to shove hard working people onto the street in increasing numbers is not only digusting and disgrace but should be criminal.

    Here I am, on the edge of homelessness and working 40 hours a week. If this keeps up my children will be better off in foster care and that is the biggest crime of all. How many other parents are desperate?

     
  • At 3/15/2007 11:05:00 AM, Blogger Sara MacLennan said…

    I am really sorry about your luck, honestly. However I'd like to point out that home ownership for most of the world is a dream. Here is my story...

    When I finished University, in the east, in 1993, we were in the middle of a recession. I had a University degree and was unemployable. I spent four months looking for a job - any job. I couldn't even waitress because there were no jobs. I finally took a 100% commission job selling cell phones door-to-door in an industrial park. I walked those streets for two months without a single pay cheque. Even my sales manager only managed to sell a couple.

    I finally found a minimum wage job doing data entry. So much for that degree eh? I spent 8 hours a day, typing the contents of a 500 page business directory into an Access database. It took 6 months. I lived in a 3-bedroom apartment with 4 people, that was the only way we could afford the rent.

    From there I worked my way up the ladder to become the National Director of Marketing and Technology for Coldwell Banker Canada. 10 years later I could finally afford to buy a home, a 1.5 hour commute from my office. 14 years later I'm still paying off my student loans.

    Yes, buying a home in Edmonton is expensive, we are the 6th most expensive city in the country. We have the best job propsects in the entire country. 97% of employed Albertans are making more than minimum wage and more Albertans are employed here than anywhere else in the country. Kelsey's across the street from my office is hiring cooks for $20 an hour. You have University degree in the best job market in this country. You have a golden opportunity my friend. Sure, you can't buy a home within months of graduating - since when was that normal?

     

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