Housing Bulletin Monthly Report

August 2010

Issue HIgHlIgHts

10) The malaise in Canada’s housing market is deepening as record-low interest rates and a vast supply of homes prove to be insufficient incentives to entice buyers (Globe and Mail, auGusT 5, 2010). The ma

C a na da’ s P R e li M i na Ry H o u s i n g s ta R t s s l i p i n J u ly

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Global housing recovery has cooled after a strong performance in the first quarter of 2010, and Canada has been among those most affected(CBC News, August 10, 2010).

Housing StartsEdmonton and Calgary multi-family starts up in June 2010.

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Home PricesCalgary most attractive city in Canada for real estate investment.

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Overnight Lending RateMortgage carrying costs edge higher with recent rate changes.

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• Alberta’sJuly2010totalpreliminaryhousingstartsincreased13percentoverJune2010and48.2percentoverJuly2009.* Datareflectscentreswithapopulationof10,000andoveronly.Source:CanadaMortgageandHousingCorporation

• Canada’stotalpreliminaryhousingstartsforJuly2010weredown1percentoverJune2010butwereup34.3percentoverJuly2009.AccordingtoCanadaMortgageandHousingCorporation(CMHC),thedropinnationalhousingstartswaslargelyduetoadecreaseinurbansingledetachedstarts.

• AccordingtoCMHC,thetotalnumberofseasonallyadjustedstartsacrossCanada(189,200)wasaheadofmarketexpectations,butmarkedthethirdconsecutivemonthofdeclinesandthelowestlevelofhomebuildingactivitysincethestartof2010.

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Pre l iminary Hous ing st ar ts in A lber t a* and Canada*Ju ly 200 8 to Ju ly 20 1 0

AlbertaCanada

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uly 31, 2010) according to CMHC, alberta is back on top in terms of detached single-family homes and total housing construction starts per capita (CalGary Herald, July 31, 2010). according to CMHC, alber

s i n g le - d e taC H e d s ta R t s Co n t i n u e t o R i s e i n a lB e R ta

M o R e M u lt i - fa M i ly u n i t s b e i n g B u i lt

• AcrossAlberta,single-detachedhousingstartsincreased67.8percentfromJune2009toJune2010.Althoughthisisanimpressiverecovery,constructionactivityremains30.9percentbelowthelevelsseenduringthehousingconstructionboominJune2007.

• FromJune2009toJune2010,housingstartsforsingle-detachedhomesincreased136.6percentinEdmontonand42percentinCalgary.

• WoodBuffaloexperiencedthelargestyear-over-yearincreaseinsingle-familystartsfrom23newhomesinJune2009to62inJune2010,anincreaseof170percent.

• ArecentreportbytheAltusGrouppredictshousingstartswilldip7percentin2011(Calgary Herald,August12,2010).

Source:CanadaMortgageandHousingCorporation

• Overall,constructionofmulti-familydwellingsdecreased15.4percentfromJune2009toJune2010acrossAlberta’smajorcentres.Incontrast,Calgaryrecordedanincreaseinmulti-familystarts,risingfrom60inJune2009to154startsinJune2010,anincreaseof156.7percent.

• Edmontonalsoreportedasubstantialincreaseinmulti-familystartsof73.6percentfromJune2009toJune2010.

• DeclinesinstartswererecordedfromJune2009toJune2010inGrandePrairie(-100percent)andRedDeer(-100percent).

• Themostnotabledeclineinmulti-familystartswasinWoodBuffalo,whereactualhousingstartsdroppedfrom294inJune2009tojusttwoinJune2010.

Source:CanadaMortgageandHousingCorporation

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CalgaryCMAEdmontonCMAGrandePrairieCA

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Actua l Hous ing st ar ts - s ing le Det ached(June 200 6 to June 20 1 0)

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Actua l Hous ing st ar ts – Mul t i - fami ly Dwel l ings ( June 200 6 to June 20 1 0)

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over the next six months, key economic indicators will continue to bolster consumer confidence to help ensure a fundamentally healthy housing market (CalGary Herald, auGusT 7, 2010). over th

s u B t le i n C R e a s e i n a B s o R P t i o n s ac ro s s a lB e R ta a s d e M a n d P i C k s u P

n ew H o M e P R i C e s H o ld i n g g R o u n d

* Theterm“absorbed”meansanewlybuilthousingunitisnolongeronthemarket.Thisusuallyoccurswhenabindingcontractissecuredbetweenabuilderandaqualifiedpurchaserbyanon-refundabledeposit.** Q1=January-March,Q2=April-June,Q3=July-September,Q4=October-December.Source:CanadaMortgageandHousingCorporation

majorcentresinAlberta.ThelargestincreaseshaveoccurredinRedDeer(55percent),Calgary(38percent),andEdmonton(37percent).* Dataincludescentreswithapopulationof50,000andover.WoodBuffaloinformationisnotincluded.CanadaMortgageandHousingCorporationanticipatestoincludedataforWoodBuffaloin2010,as

accordingtothe2006Census,thisregionnowmeetsthepopulationcriteriaforthisreport.Note:Datareflectstheaverageunitpriceofnewlycompletedandunabsorbedsingle-detachedandsemi-detacheddwellings.Source:CanadaMortgageandHousingCorporation

• FromQ1**2010toQ2**2010,absorptionsofnewlyconstructedhomesincreased30percentacrossAlbertawiththemostnotableincreasesinRedDeer(60percent),Lethbridge(57percent)andCalgary(54percent).

• FromQ2**2008toQ2**2010newhomepurchasesthroughoutAlbertafluctuatedalongwiththeriseandfallintheeconomyanddemandfornewhousing.

• MedicineHatexperiencedthelargestdropinabsorptionsovertheQ2**2008toQ2**2010period(-50percent),followedbyEdmonton(-37percent).

• Newhomepricescontinuedtostabilizeoverthepastyear,withonlyslightincreases.RedDeerandMedicineHatshowedthelargestyear-over-yearpriceincreasesat19.3percentand8.2percent,respectively.

• AccordingtoarecentreportbytheScotiaBankGroup,newhomepriceshavelargelytrackedresalepricesinAlbertaandSaskatchewan,whichareamongtheonlyprovincesthatdonotshowdivergencebetweenpricesofnewandresaleproperties.

• FromJuly2007toJune2010,theaveragepriceofanewlycompletedhomehasincreasedacrossallofthe

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Quar ter ly Absorpt ions* o f s ing le-det ached Homes Across A lber t a (Q2** 200 8 to Q2** 20 1 0)

CalgaryCMAEdmontonCMA

GrandePrairieCALethbridgeCA

MedicineHatCARedDeerCA

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Average Pr ice o f Newly Completed s ing le and semi-det ached Dwel l ings in A lber t a ’s Major Cent res* ( Ju ly 2007 - June 20 1 0)

CalgaryCMAEdmontonCMA

GrandePrairieCALethbridgeCA

MedicineHatCARedDeerCA

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H i g H R e s a le i n v e n t o R i e s d a m p e n e d M o n t o n M a R k e tyeAr-to-yeAr C o m pAr i s o N o f H o u s i N g r e sAle ACtiv ity i N e d m o Nto N

i N tH e m o NtH o f J u ly

eal esTaTe board) Calgary’s housing market is cooling off after its record-setting pace in the post-recession period (CalGary real esTaTe board). Calgary’s housing market is cooling off after

CalgaRy MaRke t Co oli ngyeAr-to-yeAr C o m pAr i s o N o f H o u s i N g r e sAle ACtiv ity i N CAlgAry

i N tH e m o NtH o f J u ly

sINgle-fAMIly DwellINg CoNDoMINIuM

month New days month New days Average end listings on the Average end listings on the price inventory Added sales market price inventory Added sales market

Jul 07 $505,920 4,510 2,548 1,495 35 $318,582 1,634 1,117 603 33

Jul 08 $456,380 6,038 2,559 1,313 52 $285,032 2,888 1,183 535 52

Jul 09 $436,782 3,314 2,089 1,585 43 $285,032 1,587 918 702 50

Jul 10 $464,655 5,525 1,942 915 45 $291,168 2,457 890 396 51

• Thenumberofsingle-familyCalgaryhomessoldinJuly2010fell42.3percentcomparedtoJuly2009,whilepriceswereup6.4percent.

• Listingsforsingle-familyhomesweredown7percentfromJuly2009toJuly2010andweredownmoderately(7percent)fromJune2010toJuly2010.

• Theaveragepriceforasingle-familyhomeinCalgaryinJuly2010was$464,655,wellbelowthe2007boomwhenaveragepricestoppedat$505,920.

AverAge priCe Average year to monthly date single- days sales to sales to family duplex / on the residential residential listings listings dwelling Condominium rowhouse market listings sales ratio ratio

Jul 06 $304,805 $188,322 $232,762 20 2,207 1,972 89 91

Jul 07 $415,860 $274,379 $341,680 30 4,548 1,459 32 58

Jul 08 $376,231 $253,206 $321,516 58 3,594 1,761 48 41

Jul 09 $373,294 $243,869 $296,521 47 3,060 2,223 72 58

Jul 10 $378,979 $240,371 $304,032 51 2,955 1,294 43 46

• Theaveragepriceofasingle-familydwellinginEdmontonincreased1.5percentfromJuly2009toJuly2010.Overthesameperiod,theaveragepricefell1.4percentforacondominiumandincreased2.5percentintheduplexandrowhousesector.

• ListingsinJuly2010decreased3.4percentoverJuly2009,andsalesweredown41.8percent.AccordingtothePresidentoftheRealtors’AssociationofEdmonton,increasinginventoryisgivingbuyerschoice.Asaresult,manybuyersaretakingtheirtimeandpricesarebeginningtosoftenslightly.Atthesametime,somesellerswhohavebeenstandingfirmhavebeenpushedtodroptheirinitiallistprice.

• Condominiumsalesfellby43.6percentfromJuly2009toJuly2010.TheaveragepriceforacondominiuminCalgarywas$291,168inJuly2010,2.2percenthigherthan2009levels($285,032)but8.6percentbelowthepeakpricesof2007($318,582).

Source:CalgaryRealEstateBoard

• AhomeinEdmontonsatonthemarketforanaverageof51daysinJuly2010,anincreaseof8.5percentoverJuly2009.

Source:Realtors’AssociationofEdmonton

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• TheRealEstateInvestmentNetwork(REIN)createsarankingoftopCanadianinvestmentcitiesbyanalyzingkeyeconomicvariablestoidentifycitiesandregionswithafuturelong-termrealestateinvestmentpotential.OfthetopelevenCanadianrealestateinvestmentcities,Albertahasfourcitiesintheranking:Calgary(1),Edmonton(3),St.Albert(7)andRedDeer(9).•TheREINrankedCalgaryasthenumberonecityforinvestment

inreal-estate,accreditingtheadjustmentperiodfollowingthelasteconomicdownturnforprovidingastrongfoundationtobuild

upon.AccordingtotheREIN,strongin-migrationcombinedwithrenewedaffordabilitywillpropelthemarketinthe

comingyearswhileremaininginlinewithhealthymarketfundamentals.•Edmontonrankednearthetopofthelist(in

thirdplace)duetothediversityofitseconomythatwillencouragejobgrowthandattractmigrants.AccordingtoREIN,thiswillbuild

thefoundationsforrealestatedemand,withoutthefrenzyofthelastboom,whichendedin2008.

Source:RealEstateInvestmentNetwork(REIN)

P R o P o R t i o n o f a lB e R ta M o R t g ag e s i n a R R e a R s e d ge d u P wa R d i n J u n e 2 0 1 0

and renewed affordability (rein) Calgary is in a unique economic and geographic position to take advantage of strong in-migration and renewed affordability (rein). Calgary is in a unique economic an

C a l g a Ry R a n k e d # 1 a s M o s t at t R aC t i v e c i t y i n C a na da f o r l o n g -t e R M R e a l - e s tat e i n v e s t M e n t

• TheCanadianBankers’Associationconsidersamortgagetobeinarrearswhenthreeormoremonthsofpaymentsareoverdue.

• AsofJune2010,0.42percentofmortgagesinCanadawereinarrears,keepinginlinewiththedownwardtrendwhichbeganinMarch2010.

• InAlberta,0.75percentofmortgageswereinarrearsasofJune2010.

• Alberta’sproportionofmortgagesinarrearsfirstmovedabovethenationalaverageinJuly2008,andhascontinuedtoclimbeversince.Despiteaslight

reprieveinAlberta’smortgagearrearsfromJanuarytoMay2010,recentdataindicatesareturnofthecontinuedupwardtrendinarrears.• Withthechangestomortgagerulesannouncedearlierin2010andrecentincreasesininterestrates,mortgagearrearsandloanlossesarepredictedtofallastherearefewer‘badloans’approved.AccordingtoananalystatBarclay’sCapital,creditqualitycontinuestoimproveaseconomicconditions,thoughchallenged,havelargelystabilized(CanadianPress,August22,2010).

* DataforNorthwestTerritoriesandNunavutareincludedinAlberta.Source:CanadianBankersAssociation

ST. ALBERT

RED DEERSURREY

MAPLERIDGE

KITCHENER

SIMCOESHORES

HAMILTON

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top Canadian Rea l -est a te Investment C i t ies (20 1 0-20 1 5)

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Per cent o f tot a l Mor tgages in Ar rears A lber t a* vs . Canada

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Canada Alberta

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2010) Competition among banks for new business along with falling bond yields have meant mortgage rates have been largely unaffected by bank of Canada moves (Globe and Mail, auGusT 5, 2010). Compet

vaC a n C y R at e s i n C H l ow e R i n e d M o n t o n

• TheCMHC’sSpring2010surveycompletedinApril2010recordedavacancyrateof5.2percentinEdmonton.TheCBRichardEllis(CBRE)July2010MarketUpdatereportshowsthevacancyrateinEdmontonat2.9percentandreportsanecdotalevidencethatlandlordsarebeginningtoeliminateincentivesfornewtenants.

• AccordingtoCBRE’sresearch,theaveragetwo-bedroomrent

inEdmontoninQ2*2010was$1,003,verymuchinalignmentwithCMHC’sSpring2010rentalmarketdata,whichreportedanaveragerentof$989foratwo-bedroomunit.CBREexpectsrentalratestoclimbinthelatterhalfof2010.

* Q2=April-June.** Averagevacancyrateforallunittypes(i.e.,Bachelor,1-Bedroom,2-Bedroomand3-Bedroom+).***CBRE’smulti-housingmarketviewisbasedonasurveyof32,000unitsin331building.Source:CBRichardEllis

Ba n k o f C a na da H i k e s R at e s f o r s e Co n d t i M e i n 2 0 1 0

• AsofAugust1,2010,theadvertised5-yearconventionalmortgageratestoodat5.79percent,and1-yearmortgageat3.5percent.• EconomistspredicttheBankofCanadawillraisetherateagainbytheendof2010.Sources:BankofCanada

• ThetargetfortheOvernightLendingRateisthemaintoolusedbytheBankofCanadatoconductmonetarypolicy.WhentheBankchangesthetargetfortheOvernightLendingRate,thischangeusuallyaffectsotherinterestrates,includingmortgageratesandprimerateschargedbycommercialbanks.

• Julymarkedthesecondtimein2010thattheBankofCanadaraiseditstargetfortheOvernightLendingRateby0.25percentagepointsto0.75percentonJuly20,2010.

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Vacancy and Rental Rates in edmonton (2002 - Q2* 2010)

EdmontonVacancyRate**EdmontonAverageRentalRate(2-Bedroom)

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Bank of Canada In terest Rates , January 200 5 to Ju ly 20 1 0

OvernightLendingRateTargetConventional1-yearMortgageConventional5-yearMortgageRate