City housing market to cool published: Friday, Nov.2, 2007

CMHC predicts drop in housing starts and existing home sales provincewide in 2008.

Red Deer's housing market will lose some of its sizzle in 2008, predicts Canada Mortgage and Housing Corp.

The national housing agency is forecating a decline in both residential construction starts and sales of existing homes in the city next year _ a trend expected to occur provincewide.

CMHC is projecting that the number of housing starts in Red Deer will reach 1.700 this year. Of these, a record 1.0125 will be single-detached homes, with 575 to be units in multi-family projects.

These figures are up from 2006, when there were 1.095 single-detached starts and 334 multi-family starts for a total of 1.429.

For next year, CMHC expects 1.525 housing starts in the city: 1.050 single-detached and 475 multi-family. That would represent a 17 per cent decrease in multi-family housing starts and a 10.3 per cent decline overall.

"The reason for the drop-off in multi-family starts is most likely due to the lower net migration we're seeing across the province," said Lindsay Kendall, CMHC's market analyst for the Prairie and Territories region.

Speaking from Edmonton, where CMHC was conducting its annual Alberta housing outlook conference on Thursday, Kendall explained that newcomers tend to rent or buy lower-priced homes in multi-family buildings. So as their numbers decline, so does the incentive for developers to invest in such projects.

Kendall said Alberta has been drawing many people from Saskatchewan and British Columbia, but with a strengthening of the economies in those provinces, people there are staying put. And those who previously moved to Alberta might be tempted to return to their home provinces.

Relative to other mid-sized cities in Alberta, Red Deer is probably less afected by this phenomenon, said Kendall. That's because of its desirable location between Calgary and Edmonton.

"We're seeing a strong population growth as well as employment growth, especially with full time job creation, which is supporting this strong housing demand."

As for the resale market, CMHC anticipates that 2007 will end with a total of 5.400 multiple Listing Service sales of residencial properties in Red Deer. The average price of these will be $204,977.

The high 2007 sales volumes have been fueled by a scarcity of residential land in Red Deer, which is pushing buyers into used market. Also boosting sales have been the high selling price, which attracted a lot of homes onto the market.

Looking forward, CMHC expects MLS sales to decline slightly to 5.350 transactions in 2008. But the average selling price should continue to climb, reaching $297,500 next year.

The decline in MLS sales in Red Deer next year is expected to be one of the smallest decreases in the province, said Kendall. She pointed to the city's advantageous location as a big reason for this.

"It's been a destination of choice for migrants entering into the province, so you'll still see that strong housing demand."