Building outpaces buying in housing market
With home construction outpacing the rate at which people are buying homes, the housing market in the Edmonton area continued to face some vulnerability in the first quarter of 2019, says a federal agency.
Canada Mortgage and Housing Corp.’s recent housing market assessment rated the Edmonton census metropolitan area at a moderate overall degree of vulnerability — a rating it has held in every such report since early 2016. The recent release is based on data up until the end of the first quarter of 2019.
The census metropolitan area includes activity in nearby cities and towns, such as St. Albert and Spruce Grove.
CMHC bases its overall assessment of vulnerability on parameters including overbuilding — which was also measured at a moderate degree of vulnerability in the Edmonton area — along with overvaluation, price acceleration, and overheating, all assessed at low vulnerability.
On all of the above-mentioned criteria, CMHC’S vulnerability assessment for the Edmonton area mirrored the previous quarter.
“Home prices trended downwards as demand continued to soften in an economy that is still on a path of recovery from the economic downturn,” says Pershing Sun, CMHC’S senior analyst, economics.
“Supply growth has outpaced the rate of absorption, leading to a record high level of unabsorbed inventory in the first quarter of 2019.”
Over the first three months of this year, shovels turned for 1,914 homes of all kinds in the Edmonton area, says CMHC, easing from 2,200 year over year.
At the end of the first quarter, the Edmonton area had more than 20 unsold units per population of 10,000, which CMHC says is the highest level for this area since 1992.
“With the economic headwinds, potential homebuyers are somewhat standing on the sidelines or possibly choosing the rental market because of the relatively lower average income level for Edmonton and the overall economic conditions in Edmonton,” Sun says.
Looking at new homes alone, between Jan. 1 and the end of March, there were 3,054 completed and unabsorbed units in the Edmonton area. This climbed 30 per cent from 2,266 year over year.
Leading the Edmonton area in constructed and available new homes in the first quarter were southwest Edmonton with 704, followed by Castledown and West Jasper Place, with 341 and 328, respectively.
When determining price acceleration, CMHC looks at factors including the inflation-adjusted MLS average price.
“The price for the (first quarter of 2019) was just below $255,000, and has been in a downward trending pattern overall, suggesting in the first quarter of 2019 and the previous few quarters, Edmonton has been a buyers’ market,” says Sun, referring to the inflation-adjusted MLS average including all home styles.
Fuelling this downtick are “reduced demand” and “high levels of inventory” in this market, Sun says.
At the end of March, the combined average price on unabsorbed single-family homes and duplexes in the Edmonton area new home market was $520,034, says CMHC. This was an $8,989 increase from the average a year earlier.