Aug 13, 2010, Economist predicts steadily rising home prices for Alberta

Alberta home prices are expected to rise by 2.6 per cent this year and another 0.9 per cent in 2011, according to an analysis of the Canadian housing market by a senior economist.

Robert Hogue, with RBC Economics, said in his report that the province’s average value of a detached bungalow will increase to $338,000 this year and then to $341,800 next year.

“The sharp drop in demand considerably weakened market conditions in recent months,” he wrote in his analysis. “While supply has begun to adjust modestly downward, it remains plentiful, even a little excessive relative to the current pace of home resales.

“Consequently, the provincial market has shifted very close to being a buyers’ market, which will exert some downward pressure on home prices in the near term. As demand picks up later this year and further downward adjustment is made to supply however, we expect that a stronger balance will emerge that will lead to moderate price increases during the course of next year.”

As for sales of existing homes, Hogue predicts they will decline by 9.9 per cent this year in the province to 51,800 units followed by a 9.1 per cent increase in 2011 to 56,500.

He said last year’s rebound in Alberta’s housing market proved to be temporary as monthly home resales “fell precipitously” so far this year, down 34 per cent year-over-year in June.

“Except for the lows reached at the bottom of the 2007-2008 market downturn, the pace of resales in June was the weakest since early 2001 – and fully 40 per cent below that which was maintained during 2006 (i.e., before the downturn,” wrote Hogue.

“Such weakness amid improving conditions in the provincial economy strikes us as being overdone. We expect that the continued strengthening in the economy (and brightening of employment prospects) will lead to a turnaround in housing market activity later this year, with the amelioration likely to be mild at first but then becoming more pronounced during 2011.”

By Mario Toneguzzi, Calgary Herald