OUSING Market outlook

[Pages:8]H OUSING Market

outlook

Canada Mortgage and Housing Corporation

Housing Market Overview

Demand Remains High Across Region

While much of the North American economy remains mired in the doldrums during the fall of 2001, the outlook remains bright for Metro Edmonton. Thanks to massive investments in the energy sector, job creation has been very strong in 2001 and this has fuelled demand for all housing forms across the Capital Region, a pattern that will continue into 2002.

Resale housing continues to see records shattered on the MLS? for sales and average prices this year and we see no letup on the horizon. Strong demand, coupled with shrinking inventories, has pushed prices upward but falling mortgage rates have provided a buffer. This will end in 2002 as capital markets react to an improving global economy. As interest rates start to rise next year, affordability constraints will put a break on sales growth as the year progresses.

In 2001, Edmonton's new home construction is expected to post the best numbers since 1992-1993, when

All residential units

Chart 1

Sales Remain Near Record Levels in 2002

16,000 15,000 14,000 13,000 12,000 11,000 10,000

'97

'98 '99 '00 '01* '02* MLS* sales

Source: Edmonton Real Estate Board *Forecast: CMHC

total starts each year exceeded 6,700 units. With production in high gear across the region, unsold inventories were surprisingly low this summer, setting the stage for a busy fall season. Meanwhile, resale listings are down and prices way up, causing more purchasers to consider buying new homes. As such, builders will be facing another hectic year in 2002.

With Edmonton's labour market experiencing rapid growth this year and

strong demand eroding available listings in the existing home market, the demand for rental units will remain very high going into 2002.While the market has been creating some new rental housing, vacancies will remain close to record low levels.These shortages will continue to bolster rent levels as well as fuel demand for affordable options in the ownership sector.

Edmonton

Fall 2001

IN THIS

ISSUE:

1 Housing Market Overview Housing demand remains firm in 2002 due to a relatively strong economy.

2 Resale market Following another record year, sales remain at high levels in 2002. House prices will again hit new heights. Condos continue to gain market share.

3 New Home market Singles starts in 2001 reach highest level since 1992. Activity to remain high in 2002. Multiples to hit 2,500 units in 2002 - best year since 1993.

6 Rental Market Tight markets spur new rental construction. Despite new supply, rents are driven higher as vacancies remain hard to find.

7 Economy Investments in the energy sector will continue to shelter Edmonton's economy from the weakness afflicting much of North America.

8 Forecast Summary

Resale Market

Records Continue to Fall in 2002

The resale market in the Edmonton Metro area is performing above the levels seen last year, and this recordbreaking performance will carry over into 2002.From January-through-August, sales of single-detached homes totaled 7,997 units compared to 7,121 units sold a year earlier. CMHC has been tracking MLS sales since 1982 and sales on Edmonton's MLS? through the first seven months of 2001 represent the best performance over this period.

Northwest North Central Northeast Central West Southwest Southeast

Table 1

MLS? Residential Sales January - July (% chg 2000/2001)

2000 270 784 349 334 549 690 998

Sales 2001

270 896 390 371 675 797 1,023

%chg 0.0 14.3 11.7

11.1 23.0 15.5

2.5

Average Price

2000

2001

110,200 118,399

131,417 140,426

115,807 121,646

79,194 84,184

170,439 182,955

193,209 202,157

131,683 138,559

%chg 7.4 6.9 5.0 6.3 7.3 4.6 5.2

Higher sales activity accompanied by a Edmonton City 3,974 4,422 11.3 140,402 149,892

6.8

steady decline in active listings since St.Albert

584

596

2.1 167,282 180,795

8.1

the start of the year have pushed the Sherwood Park 498

600 20.5 166,853 178,052

6.7

sales-to-active listings ratio to its highest Leduc

122

158 29.5 134,640 137,514

2.1

point since the early 1990s. Indeed, with Spruce Grove

149

199 33.6 128,672 136,947

6.4

a sales-to- active listings ratio above 40 Ft. Saskatchewan 105

112

6.7 127,920 135,954

6.3

per cent, the balance between supply and

All EREB areas 6,183 7,025

13.6

139,852 149,258

6.7

demand in Edmonton's resale market

Source: EREB

clearly rests in the sellers' favour. At the current pace of sales, it would take about 2.5 months to exhaust the existing supply of active listings.

With the resale market remaining firmly in the sellers' range, average home prices will continue to rise faster than the

Through the first seven months of 2001, homes priced greater than $150,000 accounted for nearly 32 per cent of total sales compared to 26 per cent over the same period a year earlier.

Prices Higher for Singles

overall rate of inflation. From 1995 to 2000, the average home price increased at an annual rate of 1.7 per cent. The overall consumer price index over this period climbed at an annual rate of 2.1 per cent. However, through the first seven months of 2001, the overall average resale price in the Edmonton CMA jumped by 6.8 per cent, while the consumer price index rose 3.2 per cent. Higher-priced homes have again captured a greater share of the market this year.

The average price of a single-detached home in the CMA rose by 6.7 per cent through the first seven months of 2001. Higher prices have occurred in all zones of the Edmonton Real Estate Board. The strongest price gains to date have been observed in Morinville and St. Albert at 12.1 per cent and 8.1 per cent, respectively. Within the city, the Northwest and West zones have posted the strongest price gain. In fact, all zones except for Leduc have seen

Chart 2

Sales-To-Active Listings Ratio In Sellers' Range

60 50 40 30 20

hikes in excess of the overall inflation rate.The market share of single-detached homes with prices over $150,000 rose to 42 per cent of sales during the seven months of 2001 compared to 34 per cent of sales a year earlier.

moderate pace. A modest slowdown in demand coupled with a slight rise in the inventory of active listings will help to ease price gains closer to the four per cent range.

Looking at the supply side, at the end of July there were fewer than 1,550 single-detached active listings in the City of Edmonton, Sherwood Park, and St. Albert on the MLS?. Nearly 60 per cent of these were priced above $160,000. Most of this high-end product is listed in the Southwest, West end, Sherwood Park, and St. Albert. Meanwhile, on a proportional basis, Central Edmonton had the greatest supply of listings under $100,000. In terms of prices, the Northeast appears to have a more even mix of listings in all price ranges. About 52 per cent of the single-detached listings in the Northeast are priced more than $160,000 compared to 67 per cent for the City of Edmonton, Sherwood Park, and St.Albert

Active Condo Market

The condo resale market has also

Per cent

10

Going forward into 2002, we registered impressive growth in 2001,

0

'99

'00

'01

Residential units

Source: EREB, Aug. 01

anticipate continued price gains in the single-detached market - albeit at a slightly more

with sales up 18 per cent to 2,276 units during the first seven months.This represents the best sales performance

2 Housing Market Outlook, Edmonton, Fall 2001

Chart 3

Higher-Priced Houses Gain Market Share

Single-detached Units (January-July)

Per cent

35

30

2000 2001

25

20

15

10

5

0 ................
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