The second quarter of the year is generally the most active one for Edmonton Real Estate. We began by coming off a very weak 1st quarter due a cocktail of factors. In addition to a sluggish economy, our winter was colder than usual, the new mortgage stress test pushed many would-be buyers out of the market and the provincial election was coming. As many of these factors dissolved at one, it helped to propel 2nd quarter sales to a much healthier level. Sales were back on par with those of the past 2 years and new inventory slowed drastically as many would-be sellers opted not to list their homes after investigating their potential sale price.
The average selling price reported is $365,949, down from $380,050 last year. This shows a decline of 3.6%, however It’s important to note that this is the average of what consumers are spending, not what they are getting for their money. The true value of a given house has diminished closer to 10% year over year, keeping in mind variances on different products and areas.
Buyers are now taking advantage of deals that we haven’t seen in our market for nearly a decade and half, while sellers who don’t need to move aren’t as quick to list their homes for sale.
The result is that supply and demand is balancing, and price declines appear to have settled. New listings to market were only 3.4% higher than our 5-year average, but sales were also up by the same percentage. If this continues, I’m cautiously optimistic that we may begin to see modest price increases.
A New Government Strategy
In effort to cool the hot markets of Vancouver and Toronto, the government had implemented a stress test that resulted in negative impacts in smaller major markets like Edmonton. To counter this, they’ve now implemented a new program to help buyers qualify for a higher loan amount. It is in essence, a “mom and dad” type of loan. With your 5% down payment for a home of up to $500,000, they will double it to top you up to a 15% down payment amount in the form of an interest free loan. The loan is to be paid back over 25 years OR when you sell. They would retain interest in your property as the loan is unpaid and if you sell at a gain, they will share in the gain, but if you sell at a loss, they will also share in that loss.
A similar program was implemented in the 1980’s for the same purpose. It isn’t for everyone, but it may help some of the first-time buyers who were initially pushed out of the market to come back in. The jury is still out on how much it will affect us, but the good news is that it if there is any impact at all, it will be a positive one. At least in near future.
What is to come?
I expect the third quarter numbers to align closely to our 5-year average. Signs are pointing to a generally healthy market. The activity we’re seeing while in the trenches is more than positive. The only wildcard in the short term is the Federal Election. This often slows activity as buyers wait to see what happens. When the majority are satisfied with the results, we see a jolt in sales when they aren’t, it simply goes back to business as usual. Overall, the general outlook is trending in the right direction. Consumer confidence plays a major role in market activity and momentum is building. Cautious optimism is the theme for the short term, however it is flourishing, and I suspect we may be dropping the “cautious” part soon…