Housing market stabilizing with increased listings

Single-detached home construction in Edmonton took a hit in July, falling 39 per cent following a record performance the previous month.

But the current downward trend may soon change due to a recent surge in existing homes being put for sale, says Canadian Mortgage and Housing Corporation senior market analyst Richard Goatcher.

“Now, there’s a lot more choice in the resale market, or at least there will be over the next few months,” he says. “That’s going to cause inventory replenishment in the new home market because they now have a lot more competitors in the existing market. That should put some downward pressure on new home starts next year.”

Single-detached housing starts within Edmonton fell from 487 in last year’s record-setting month of July, to 296 in 2007.

The decline was countered by a year-over-year increase in multiple-family construction, which rose 62 per cent from 255 in July 2006, to 413 this year.

Year over year, the total fell by 4.4 per cent in July while year-to-date numbers have followed suit with a near 10 per cent decrease overall. Single-detached home construction is down one quarter from this time in 2006, from 3,288 to 2,477. Multiple-family homes are up by 10 per cent from 2,542 to 2,793.

In the existing home market, escalating prices and higher mortgage rates are cutting into the demand for existing homes across the province.

“Activity levels will start to moderate because of the affordability impacts of mortgage rates that moved up over the past year and the kind of price acceleration that we’ve seen in the marketplace over the past year to 18 months,” says Goatcher. “That acceleration seems to have slowed down in the existing market here in Edmonton. Still prices have moved up over the past year and that’s starting to take its toll in terms of what people can afford to buy.”

Average resale prices in Alberta will continue to have the highest rate of growth in the country this year, despite the slowdown caused by an increase in existing home inventory.

“That’s going to rein in price increases going forward,” says Goatcher.’

However, with the amount prices have risen so far in 2007, Goatcher says the question remains how much mortgage debt are people able and willing to take on.

But is the housing crunch over in Edmonton?

“I think that would be kind of a misleading thing to say because for people in a certain income bracket, there’s still a shortage of housing,” says Goatcher, noting just because a house is available doesn’t necessarily mean it’s affordable for everyone.

The good news to potential house hunters in Edmonton is prices aren’t expected to increase substantially over the rest of 2007.

“Our view is the growth in prices for this year has already occurred,” says Goatcher, adding the increased inventory in existing homes has shifted the market away from sellers to a more balanced position. “A normal market where people aren’t going to pay over list price, where houses are going to take 30 to 40 days to sell. People have to price them accordingly or they’re going to sit. It’s definitely a different market from the one back in April.”

Although the CMHC no longer includes a forecast for Edmonton’s average single-family dwelling prices in its reports, the average residential resale price is currently $403,649.

“I don’t see that moving much this year and then maybe a five to 10 per cent increase next year,” says Goatcher. “Prices could move lower if we see a continued high level of new listings coming on the market. From our perspective, if prices start to edge downward that would discourage people from listing. They’ll pull those listings from the market and they’ll just wait it out. There’s a potential for some downward pressure, but I don’t think it’s going to be that big.”