The latest assessment for Edmonton from Canada Mortgage and Housing Corp. held few surprises, pointing to the market continuing to be a low risk for overvaluation, price acceleration and overheating.
Only the fourth category — overbuilding — is rated as a moderate risk.
All metrics were based on third quarter data.
The recently released assessment for the first quarter of this year is an improvement from the assessment for the fourth quarter of last year.
CMHC, a federal government agency, rated the overall risks for the first quarter as low, down from moderate in November.
Senior market analyst at CMHC Heather Bowyer says the city remains firmly in “buyer’s territory with low evidence of overheating and a sales-to-new-listings ratio below 50 per cent.”
She notes the metric measuring demand versus supply in the resale market was 47.5 per cent in the third quarter of last year.
A sales-to-new-listings ratio between 50 and 60 per cent is considered a balanced market. A market is considered to favour sellers when the ratio is higher than 60 per cent.
“We haven’t seen strong sales growth in awhile, and average prices are continuing to fall.”
Bowyer adds the city’s economy would need to pick up significantly for sales and prices to turn around.
“Overall we’re seeing the Edmonton market operate below pre-recession levels,” she says. “Even looking on the labour side of the market — what really drives housing demand — we’re seeing lower employment, specifically full-time.”
Beverley Hasinoff, a realtor with Liv Real Estate, says the report is a “fairly good reflection” of what is happening on the ground. Conditions are improving slowly, but demand is not yet strong enough to move the market toward stability. On the upside “there seem to be fewer single-family spec homes being built by the builders.” She adds spec homes tend to increase competition for sellers in the resale market.
As well, “vacancy rates seem to be trending downward,” she adds.
Indeed the report shows improving vacancy: 4.9 per cent in fall 2019 down from 5.3 per cent the previous year.
But unemployment remains challenging. At eight per cent, Edmonton’s rate in December was highest among the 15 municipalities in the CMHC assessment.
Despite the headwinds, Hasinoff says changes (coming in April) to lending rules — i.e. relaxing certain aspects of the stress test — could boost demand by improving buyers’ purchasing power.
But the effect may well be muted this spring because of the influx of new supply that typically comes with the warm weather.
“I am concerned this will exceed demand from buyers and keep us (in) a buyer’s market,” Hasinoff says.
Bowyer further notes the report showed overbuilding continues to be a problem, which could also hold back prices in the resale market.
Additionally, uncertain economic conditions often favour higher “activity in the lower end of the market price-wise,” she says.
And demand for affordability helps depress average prices.
For a more balanced market, Edmonton must see accelerating job and wage growth, Bowyer says.
“If we see those fundamentals improve, then we can expect to see housing demand improve, but it will be awhile still before we see conditions we saw during the boom periods in Edmonton.”