Rebound a work in progress

Jim McLeod May 31, 2011

It appears increasingly unlikely that this will be a bounce-back year for Red Deer’s residential construction sector, after Canada Mortgage and Housing Corp. slashed its 2011 projections for local housing starts.

In its second quarter housing market outlook, issued on Monday, the national housing agency projects that work will begin on just 540 homes in the city this year: 340 single-detached and 200 multi-family units. That’s 10 per cent fewer than CMHC was forecasting in February, when it predicted that 365 single-detached homes and 235 multi-family units would be built this year, for a total of 600.

As recently as last November, CMHC was calling for an impressive 680 starts in 2011 — 410 single-detached and 270 multi-family. That would have represented a healthy recovery from 2010, when there were 585 housing starts, including 353 single-detached and 232 multi-family.

Instead, residential construction in Red Deer is now expected to be 7.7 per cent lower in 2011 that in 2010.

CMHC said in an analysis accompanying its forecast that poor spring weather and a rising inventory of unsold homes have slowed the pace of construction. It added that new home prices in Alberta are likely to remain unchanged from last year.

CMHC’s forecast for other large cities in the province varies greatly.

Housing starts in Medicine Hat are expected to be 28.1 per cent lower in 2011 than in 2010, with Calgary 8.2 per cent lower and Edmonton down 7.1 per cent. Residential construction in Grande Prairie is expected to increase by 11.7 per cent, in Grande Prairie the improvement is pegged at 18.6 per cent and in the Regional Municipality of Wood Buffalo it’s anticipated to jump 30 per cent.

CMHC said the situation for Alberta home-builders should brighten next year, thanks to economic growth and improved market conditions.

For Red Deer, CMHC is expecting 370 single-detached and 240 multi-family starts in 2012, up 8.8 and 20 per cent respectively from the anticipated 2011 tallies. These numbers would result in a total of 610 starts in 2012 — up 13 per cent from the figure forecast for this year.

CMHC’s outlook for 2011 is little more optimistic when it comes to the local resale market.

Multiple Listing Service sales in Central Alberta are expected to number 3,250 this year, up 4.2 per cent from 2010.

An average price of $270,000 is being forecast, up slightly from $269,288 in 2010.

For 2012, CMHC is anticipating 3,350 home sales in the Central Alberta region, with an average selling price of $274,000. Last year, 3,119 Central Alberta homes sold through the MLS system at an average price of $269,288.

CMHC was anticipating in February that there would be 3,300 MLS sales in Central Alberta this year, with an average price of $278,000. Last November, it was projecting 2,950 sales at an average price of $273,000.

CMHC said in its analysis that employment growth and the creation of new households should spur resale activity in Alberta.

The Regional Municipality of Wood Buffalo is expected to record the biggest year-over-year increase in resale activity this year, with MLS deals there up 12.4 per cent. Grande Prairie is expected to be 7.6 per cent higher, Calgary 4.8 per cent, Red Deer 4.2 per cent, Lethbridge 1.4 per cent and Edmonton 0.6 per cent.

Resale activity in Medicine Hat this year is expected to drop by 7.2 per cent.

Across Canada, home construction is expected to slow in the second half of this year, resulting in fewer housing starts in 2011 than last year.

“Single starts peaked in the first quarter of 2010 but have moderated progressively since then,” CMHC said.

“Across the country, most provinces will see a decrease in the number of multi-family housing starts in 2011. The exceptions are Ontario and British Columbia which will post solid gains.”

CMHC expects the slowdown in overall housing starts of both single-family and multiple-family units will be felt in all areas of Canada, although the declines in British Columbia and Ontario will be very modest.

By contrast, the sales of existing homes through MLS is expected to edge higher this year. Mortgage rates are anticipated to be “relatively flat” in 2011 before increasing moderately in 2012.

Extract from the Red Deer Advocate

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