Housing market pace predicted to decrease, published: November 24, 2007

The markets for both new and resale housing in Alberta are likely to decline this year and next, said a federal agency. The decline will be led by single family homes, which will continue to feel the impact of rising construction-related costs, lower migration of people to the province, and a dramatic increase in resale listings, said Richard Corriveau, Prairie region economist for Canada Mortgage and Housing Corp.

"The recent escalation in production costs will be a dominamt factor pushing single-detached housing starts lower, althought weaker net migration and a strong rebound in active resale listings will also contibute," he said.

Net migration is the inflow of people minus the outflow. Corriveau spoke to 650 delegates at the annual Housing Outlook Conference held recently at the Roundup Centre in the Stampede Grounds.

Following a record 31,835 construction starts of single-family homes in Alberta last year, there will likely be a decline of 12 per cent to 28,250 by the end of this year, says CMHC.

By the end of 2008, a further io-per-cent decline will bring the total down to 25,250 _ the lowest total in four year, it says.

"Fuelled by homebuyers seeking less expensive alternatives to the single-detachecd market, multi-family housing starts will climb to a 26 year high of 19,000 units this year," said Corriveau, adding that 2,000 fewer will be built in 2008.

Despite the expected dcline, the proportion of multi-family housing starts to total starts will likely hold at 40 per cent, the same as expected for 2007 and the highest proportion since 1982.

In terms of resale housing, a surge in activity in the firts half of this year will likely place this year's expected total of 74,000 sales close to last year's record of 74,350.

Sales peaked during the spring of this year as buyers bought in anticipation of further price increases and higher mortgage rates.

But it didn't work out the way.
"Since then, a surge in listings has slowed the rate of price growth considerably and buyers have become increasingly resistant to the recent runup in prices," said Corriveau. "Consequently, sales are now on a downward trend _ and in the face of weaker migration, this trend will continue in 2008, with sales falling five per cent to 70,000."

Following large double-digit price hikes for the past couple of years, price increases in Alberta's resale market are likely to slow in 2008, said Corriveau.

In 2006, there was a record gain of 31 per cent. It is expected to be followed by a 24 per cent jump this year _ most of that attributed to sales earlier in 2007 _ bringing the average price to $355,000.

Due to the number of active listings in the marketplace, combined with weaker demand, price growth in 2008will likely be limited to seven per cent, bringing the price to $379,000.

In Calgary, construction starts of single-family homes will likely slip to 7,250 in 2008, down from 8,000 this year, with the average price likely to climb to $550,000, up from this year's expected average of $475,000.

Meantime, multi-family construction starts will dip from 6,250 this year to 6,000 next year.

Construction of single-family homnes in Edmonton is expected to decline to 6,700 starts, down from this year's likely total of 7,800, while average prices will likely increase $60,000 in 2008 from this year's forecast of $440,000.

Multi-family construction is expected to decline to 5,700 units in 2008, down from this year's expected total of 6,750.