Alberta real estate turning the corner

As a special treat for all of you, I asked my good friend and favorite realtor Wayne Paradis from RE/MAX River City to give Lee Distad's Professional Opinion an update on the state of the Edmonton and Alberta real estate markets. Wayne's been around a long time, and seen a lot, and here's where he sees the market going:

After almost 18 months of low inventory and fierce competition between buyers making offers well above asking prices the market appears to be in the beginning of a leveling off stage. Each day we are bringing more listings to market as sellers try to cash in on what has been some incredible appreciation in home prices, With increases of 54% last year and another 25% this year, a $200,000 two years ago house can fetch $400,000+ and that new found wealth has people thinking it might be time to sell. For a condo owner who bought in the spring of 2006, that new found equity is a perfect opportunity to move up into a single family home as the latest wave of first time home buyers are forced to settle for condo living because house prices are simply out of reach. Banks have been creative in keeping monthly payments lower by increasing amortization periods between 30-40 years. A 25 year mortgage is a rarity for the buyer entering the market for the first time.

Increased listing activity has come from a number of sources, with the largest component coming from the recent condo conversion craze. Hundreds upon hundreds of former apartments have hit the market and I predict that will have a sobering impact on those retail investors who may be on the market just a little too late as there are no shortage of choices in those areas. The “converters” have made the big money, now we will see if there was anything left on the table for the retail investor as they realize that rental rates won’t cover the mortgage.

In addition, we have seen listing activity in the moving up sector as well as those who think the Alberta advantage is lost and are looking outside the province where it is cheaper, and a noticeable increase in divorce situations which illustrates that boom doesn’t mean boom for everyone. Affordability will be the key factor in keeping strength in the marketplace and with increases in wages of approximately 2% and mortgage rates creeping up puts tremendous pressure on the buyer ability to service debt. If they can’t service the debt, they don’t buy or they settle for second best and that will effect what a seller can ask and be successful at selling.

Migration to the province continues so there may be strong levels of activity but I think we are at the point where you won’t be seeing $10-20,000 increases per month on the average home. Let’s hope so, there is still a generation or two behind us that will need homes and I can’t imagine what they will have to pay in years to come. My parents bought their first home for around $15,000 in the early 70’s, I bought my first home in the low $80’s in 1985 and 22 years later my daughter is facing $400+ for a similar home that’s 40-45 years old. It will be interesting to see what develops in the coming year as they still haven’t started building the upgraders that have fuelled all this speculation and those workers aren’t here yet. I think we still face considerable increases in our population in the coming years if all that is planned breaks ground and gets built perhaps we return to normal growth of 5-7%, which isn’t a bad increase considering the benchmark has moved so far up the ladder.

Wayne is a stellar realtor, and an eminent expert in his field. He confirms what I had sensed, and I'm taking heed of his perspective.

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