The Edmonton real estate market has been extremely resilient in the last three months considering the fact that the economy in Alberta has been nothing short of terrible. The pain and suffering has been much more evident 3 hours to the south in Calgary where the bulk of the energy related layoffs have occurred. Things have gotten so bad that the vacancy rate in Calgary’s downtown office towers is over 20% and is projected to go even higher with the completion of 3 new buildings in 2017.
One mitigating factor in the case of the Edmonton market is all the government employees that reside there. These highly paid bureaucrats do not have to worry about layoffs or even salary cuts like everyone else in the province. The NDP government is a friend to big labor and their unions, so you can expect them to protect all their union supporters and friends. Because of this fact, Edmonton’s real estate market has fared much better than just about any other jurisdiction in Alberta.
Sales have been down dramatically in April, May and June compared to the same time period in 2015. While this undoubtedly has a negative effect on prices, the decreases have been relatively minor. In April prices were essentially the same as April of 2015, while prices decreased by 2.9% and 1.8% respectively in May and June when compared to 2015.
Inventory was up in all three months which is no surprise, and could certainly be seen as a positive if you are a buyer just entering the market. There is a lot of product to choose from and you can take your time to find the best home that suits your needs. Another thing that is keeping the market from being too depressed is the persistently low interest rates that we have had for several years now. You can still get a 5 year fixed mortgage for under 2.5% which is extremely low when compared to the last 30 years.
I am starting to believe that mortgage rates will not be allowed to increase substantially for a long time to come. This is because there are so many people in Canada that have bought homes that they can barely afford even at these historically low rates. If rates were to go up to 5% there would be an avalanche of foreclosures when those 5 year terms expired and the home owners had to renew at the much higher rate, which would effectively almost double their payments. Things would be especially bad in places like Vancouver and Toronto where the prices are out of control. If they ever had substantial price decreases, it would throw a lot of people under water on their mortgages which would also cause a lot of foreclosures.
Here are some infographics that show all the numbers for April, May, and June courtesy of Team Eskiw at RE/MAX Edmonton