Average Edmonton Home Now Costs Over $318,000
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.