MARKET UPDATE – November 15, 2016

Mon, 21 Nov by Dale Russell

Strong sales in Red Deer in the first half of November compared to the same time last year continue to support our theory that we may be on the road to recovery.  That theory is further supported by the lower number of active listings compared to last month.  In a normal market we expect to see lower inventories as we move into winter, but high inventory levels are a symptom of a slower market, that we might expect in spite of the season, if the market was still in decline.

Anyone paying attention to the news will undoubtedly be wondering where our economy is heading.  Oil prices briefly went over US$50 but are back down to the mid $45 range again.  The future of oil prices will be decided by foreign oil producer’s (OPEC and Russia’s) ability to agree on lower production levels going forward.  It is impossible to predict how that will play out, but common sense suggests that those countries are suffering the same as we are and production cuts are the answer.

The US election may provide some relief for Alberta as there is now optimism that the Keystone pipeline will be approved soon.  That likelihood is putting pressure on our federal government to approve the Kinder Morgan expansion to Burnaby.  So, there is some hope that we are now at the bottom of this economic slowdown.  But, the recovery will be slower and it is likely that we will see similar real estate markets as we’ve experienced in 2016 well into 2017 at least.  That is not the end of the world.  Our local markets have fared reasonably well.  Yes prices are off a little from their most recent highs reached in 2014, but are not down significantly except possibly at the high end of the price spectrum.

Recent Alberta Treasury Branch economic updates are reporting some good news in various sectors – vehicle sales in Alberta in September were up a little, manufacturing shipments from Alberta are only down 5% this year and were up a little in August and September, travelers to Alberta are experiencing lower accommodation prices which should encourage more travel here and the economic gain that accompanies that, the new home price index in Alberta is unchanged over the last two years, and there has been a lot of positive news about added activity in the energy sector.

We don’t believe there is a boom in our near future, although approval of two pipelines would give a tremendous boost to our confidence and the economy.  Let’s hope common sense prevails on both sides of the border.

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MARKET UPDATE – October 31, 2016

Tue, 08 Nov by Dale Russell

Red Deer sales in October were down slightly compared to September’s, but were slightly higher than last October.  The number of active listings fell dramatically which helped keep the market in balance with a sale to listing ratio of 21.5%.  Year to date sales in Red Deer are down only 9% compared with the same time last year, a good indication that the market is slowly recovering. The most active price range by a large margin last month was the $300,000 – $350,000 range where the number of active listings also dropped.

Largely due to a recovery in oil prices to around US$50, the ATB is predicting a modest rebound for Alberta of 2.1% growth after a contraction of 2.6% in 2016.  It’s not a boom for sure, but it is a move in the right direction.  The contraction in our economy has been longer and more pronounced and there is no doubt it will take longer to recover.

In addition to rising oil prices, strong agriculture, tourism and high tech industries and the rebuilding of Ft. McMurray will contribute to a stronger Alberta economy in 2017.  While the recovery will be slower, we are confident Alberta is still a great place to live and invest.

MARKET UPDATE: October 15, 2016

Tue, 08 Nov by Dale Russell

The number of active listings is down again, a very good sign that the economy and housing market are heading in the right direction. Sales were off a little in the first two weeks of October compared to the same time in September, but still very acceptable, all things considered.

The most active market continues to be between $300,000 and $400,000, which also has the highest number of active listings. A good balance between supply and demand in that price range means buyers will continue to have lots of choices while serious sellers will continue to have buyers for their homes.

Housing Starts Rebound – Todd Hirsch, Chief Economist, ATB Financial

Shiny new condominium projects and charming new subdivisions have become familiar sights in Alberta, but there’s no question that the pace of new home construction has been slowed by the recession. However, new data from the Canada Mortgage and Housing Corporation are more positive.

After hitting a multi-year low in August, housing starts in Alberta roared back in September. Builders began construction on nearly 29,000 units last month, up from less than 20,000 the month prior. (The figures are seasonally adjusted to take into account regular and predictable fluctuations that occur each month; they are also presented at annualized rates, meaning the number of homes that would be built in an entire year if the same pace of activity was maintained for 12 months).

There are few economic statistics that are better indicators of consumer sentiment than housing starts. The drop in new home building activity over the last two years—illustrated clearly in the graph below—suggests Albertans have become a bit more hesitant to make a major purchase like a new home. It also reflects weaker demand as fewer people have been moving to Alberta. Over the last 12 months, total starts are down 32 per cent compared to the previous 12 months.

The good news is that home builders are pulling back on supply in reaction to softer demand—and that has helped keep the residential real estate market in reasonably good balance. New home prices have been virtually unchanged in Alberta’s two major cities throughout the downturn.

rd-october-2016-graph housing-start-insert

September 30, 2016 – Market Update

Wed, 05 Oct by Dale Russell

Sales in Red Deer in September kept pace with July and August’s, demonstrating continuing consumer confidence in the local real estate market.  The number of active listings dropped just over 5%. However, the slight increase in sales relative to a drop in the number of active listings pushed the market further into balanced territory.

Sales in September were most active in the $250,000 – $350,000 price range, which coincidentally, is also where there are the most choices for buyers. This appears to be the ideal market for buyers with plenty of choice, very low interest rates and the likelihood that the market is gradually starting to improve.

There are positive signs for energy prices in the months to come. OPEC has finally made an effort to work to manage oil supply suggesting that higher prices may be in the future. Oil prices over the $50US mark would definitely help some of our struggling oil companies while bolstering consumer confidence.  Recent activity in the central Alberta real estate market seems to support that idea.

September 15, 2016 – Market Update

Wed, 05 Oct by Dale Russell

Sales in the first two weeks of September are up dramatically compared to the same time in August, and even up from the same time a year ago.  The number of active listings is up very slightly from last month but quite a bit higher than they were a year ago.  The level of sales this month so far suggests we are heading in the right direction when it comes to balancing supply and demand.

The most active price range was between $250,000 and $450,000, although there was activity across most of the price spectrum, even two sales in the $750,000+ price range.  It is an encouraging sign that there is still confidence in the local market when people are investing in higher priced homes.

Another sign of confidence in the Alberta housing market is evidenced in the article below.  Albertans are spending money at a record pace, renovating their existing homes even if they aren’t buying new homes.

Home renovations holding up well Todd Hirsch, Chief Economist, Alberta Treasury Branches

As THE OWL reported yesterday, the slow economy may be wearing on new housing starts in Alberta.  But it doesn’t seem to be tempering the enthusiasm for renovating existing homes.  In fact, the most recent numbers suggest spending on residential renovations are near an all-time high.

In the second quarter of the year, home owners spent $1.56 billion on expansions or improvements to their properties.  The data include renovations on primary residence as well as cottages or recreational properties.  And because the survey captures only major renovations (i.e., those which must be done with a municipal building permit) it probably underestimates the total value of renovations—minor, unreported renovations such as new flooring, paint or lighting are not captured.

Renovation spending in the second quarter would, in fact, be a new record high if it was not for the spending that was registered in late 2013 and early 2014.  The renovation spending during these quarters were elevated by the southern Alberta flood in June of 2013 when millions of dollars were spent restoring houses that were devastated by the rising water.

The recent enthusiasm for renovation is a good sign that many Albertans are still investing money in their homes.  They may not be snapping up new properties to the same extent as they were a few years ago.  But they’re still finding the cash to put into their existing properties, creating homes and cottages that are larger, more modern and perhaps more energy efficient.

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August 31, 2016 – Market Update

Tue, 20 Sep by Dale Russell

August sales in Red Deer kept pace with July’s and, for the first time this year, were higher than the same month last year.  The number of active listings was down just a little and the market manage to stay just inside the balanced territory.  All in all, a very positive result in a difficult economy.  The strength in the Red Deer market continues to be in the $300-000 – $450,000 price range where supply and demand are in balance.

When the economy slows as it has over the past two years, the housing market is surely going to slow as well.  Sellers have to adjust their expectations when there are fewer buyers and more competition.  Recent sale results provide proof that there are still buyers for competitively priced homes.  Very low interest rates are contributing to better than expect market activity.

In spite of some continuing economic gloom, news of falling supply and increasing demand for oil in the world market provides home that prices will get past the magic US$50 mark for good in the coming months.  Energy companies have become streamlined and more cost efficient and will be able to generate profits at that price and put some of our unemployed workers back on the job.  Ultimately that is what will help get the Alberta economy back on track.

August 15,2016 – Market Update

Tue, 20 Sep by Dale Russell

Red Deer sales in the first two weeks of August were down slightly compared to the first two weeks in July.  The number of active listings is down slightly, so we don’t see anything in this market to be too concerned about.  We will only be concerned when the ratio of sales to listings goes below 10% for an extended period of time.  A slower market is a function of our current economic reality, but as long as supply and demand remain in reasonable sync, it’s just a slower market, not a calamity.

June’s wholesale trade numbers bring some good news, Nick Ford, Economist – ATB Financial

Wholesale activity managed to jump up in June. According to this morning’s wholesale report, June’s sales grew by $181 million, or 3.0 per cent from May (this figure is adjusted to account for seasonal variation). Despite the monthly incline, wholesale trade still remains 7.6 per cent lower than where it was at this point last year.
Wholesale trade is often forgotten, but is crucial to an economy. Wholesalers sell products to governments, institutions and other businesses and can be a strong force that works in conjunction with retailers. Like many sectors in our province, wholesale has had to battle strong economic headwinds.
But, today’s wholesale report does bring some decent economic news. While, virtually all types of wholesalers have seen activity dwindle from last year, sales are beginning to increase again. The value of goods sold from Alberta’s largest wholesale supplier, machinery, equipment and supplies merchants grew 18.0 per cent in June from May. In addition, the value of goods sold by building material and supplies (11.1 per cent) and food and beverage wholesalers (4.0 per cent) were up from May too.
Like June’s monthly Retail Trade Survey, June’s monthly Wholesale Trade Survey added three questions to assess the impact of the Fort McMurray wildfire. In June, about 1,250 companies responded to the additional survey questions. Of these companies, 147 wholesalers indicated that they had been affected by the wildfire, down from 212 wholesalers in May. While the effects of the wildfire were felt across many wholesale subsectors, responses indicated that the machinery, equipment and supplies subsector had the largest share of companies reporting an impact in June, the same as in May. Responses to the supplementary questions also revealed that wholesale establishments in most provinces had been affected, led by those in Alberta, Ontario and British Columbia. Although the responses showed that many had been affected, the overall impact of the wildfire and evacuation on wholesale sales was relatively small.

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Market Update August 1, 2016.

Fri, 12 Aug by Dale Russell

Prices to just over Year to date sales in Red Deer haven’t kept pace with last year.  The year started out slow but rising oil US$50 per barrel for West Texas Crude in the spring gave consumer confidence and we experienced a busy three months in April, May and June.  When the price of oil recently dropped below US$50 on its way to the current level around $42, consumer confidence went with it.  The slower market has also caused inventories to go up slightly, although not as high as might be expected.

The good news for central alberta is, the light at the end of the tunnel is still on.  An August 3rd article in the Financial Post quotes Martin King, vice-president of institutional research at First Energy Capital Corp in Calgary. The gist of the article is that large reductions in capital expenditures in the world energy industry will have a direct impact on the long term supply of oil going forward.  Since the price of oil is driven by the relationship between supply and demand, lower capital investment means lower production that will lessen supply and bring prices back to a more equitable level.

Their prediction is US$60 average in 2017 and US76.50 through 2019. US$60 currently translates to about $78 Canadian which is likely enough to keep our energy industry working. Alberta will survive this latest downturn just like all the others before it.

July 15, 2016 – Market Update

Thu, 21 Jul by Dale Russell

Red Deer – a little slower start to the summer market in Red Deer with sales in the first two weeks of July down from last month as well as last year at the same time. It’s a bit of reversal from the last couple of months when we were seeing positive signs – higher sales and slow inventory growth. Sales do typically slow somewhat as we move into July and the decrease isn’t far off typical.

It seems that history does repeat itself. The number of active listings is creeping up to levels we last saw in 2010 – 2011 while sales for the first half of the year are on par with those in 2009 and 2010. Coincidentally the price of oil was below $50 at the beginning of 2009, and the difference between then and now is that the price did recover back to $US 80+ within just a few months.

The one thing we do know is that the world is still using lots of oil and will do so for many years to come. That means there will be a market for Alberta oil. Left alone, the market will always find balance between the place where consumers are willing to buy it and producers are able to bring it to the market. This time, we don’t expect prices to recover as quickly, but we do expect to see producers become more efficient in order to generate profits even at lower prices.

 Alberta Treasury Branch – Alberta Economic Outlook – Q3 2016

Without question the third quarter of 2016 is going to be difficult for many Albertans and businesses in the province. More layoffs in the energy sector and the setbacks presented by the Ft. McMurray disaster will add strain to an already struggling labour market. Adding to this is the heightened level of volatility in global markets and the questions surrounding the Brexit vote, all of which will continue to grind on optimism.

Yet while the unemployment rate may drift higher over the summer and early fall, there are signs that better days aren’t too far off. Oil prices have stabilized and should rally modestly to the range of $US 55-60 by the end of the year, which will bring stability to Alberta’s petroleum sector and the labour market. And barring any additional turmoil stemming from Europe (such as another major economy threatening to leave the E.U.) financial markets should calm down by the fall. In the meantime, Alberta’s retail, manufacturing, housing and construction sectors will continue to be challenged.

ATB’s economics and research tem are forecasting a contraction of 1.9 per cent this year – the second consecutive year of recession. This will be followed by a modest recovery of 2.0 per cent growth in 2017.

Red Deer July

July 15, 2016 – Market Update

Thu, 21 Jul by Dale Russell

Blackfalds – a decent start to the summer market in Blackfalds with sales in the first two weeks of July on par with last month, and also even when compared to last year at the same time. It’s a continuation of the last couple of months when we’ve been seeing positive signs – higher sales and slower inventory growth. Sales do typically slow somewhat as we move into July but hopefully this good start is a sign of things to come.

The Blackfalds market has defied logic this year with year to date sales up slightly compared to last year, unlike any other central Alberta markets. The number of active listings is down from last month, but up a little when compared to last year at this time. In spite of very active new home construction over the last few years, the active listing count remains relatively stable when conventional wisdom would have expected it to skyrocket when the economy slowed.

Blackfalds July