By Paige Aarhus - Red Deer Advocate

Published: February 20, 2009 7:34 AM 

Despite hopes for a rebound in 2009, the Canada Mortgage and Housing Corp. (CMHC) predicts housing starts and resale prices across the province will drop this year.

A CMHC report released this week said resale prices will drop for the first time since 1982. In Red Deer, the average house will sell for $271,000 this year, compared with a record high of $278,040 in 2008.

The city’s 2.5 per cent decline is still less than half the predicted provincial drop of 5.6 per cent.

“As listings rise and there aren’t as many buyers, it puts a lot of pressure on the market. But by 2010, we forecast prices to rise to another record high of $280,000,” said Lai Sing Louie, a senior analyst with the CMHC.

Louie said property owners in Red Deer have still done well over the past five years. In 2005, the average resale price was in the $160,000 range.

“Annual averages are a bit deceiving, they’re a bit like a roller-coaster. We’re seeing some price erosion now, but long-term homeowners have still done well in real estate in Red Deer,” he said.

The CMHC predicts Alberta’s multi-family housing market will drop by 55 per cent in 2009, citing a slower adjustment to the weakening economy than the single-family market.

It forecasts only 6,500 multi-family housing starts in Alberta in 2009, compared with 14,448 in 2008. Single-family units will fare slightly better, with 12,700 expected in 2009, compared with 14,700 the previous year. In Calgary, multi-family housing starts are forecast to drop a whopping 75.9 per cent.

“A lot of the high-rise condos were planned back in 2005 and 2006. . . . Even though we were in buyers’ market, once you start one of those condos, they take a while to complete so that’s why this market has been slower to adjust,” said Louie.

Red Deer, which saw a 63 per cent decrease in housing starts last year, won’t feel the effects as dramatically as other areas. Multi-family starts will decline to 200 from 205 in 2008, and the city will see 350 single-family housing starts versus 367 in 2008.

The 3.8 per cent decline in housing starts might seem like small beans compared with the 63 per cent drop last year, when only 572 starts were reported after a record 1,558 in 2007.

“What you have to remember is that 2007 was a year of incredible growth,” said Red Deer Mayor Morris Flewwelling.

Flewwelling said a steep drop back to normal numbers is to be expected after an economic boom, and argued that many people are still moving to Red Deer for jobs, even as the province reported it expects to lose 15,000 jobs and fall into recession this year.

Vacancy rates have also increased to 4.5 per cent, up from a record low of 0.5 per cent in 2006.

“My sense is that 2009 is going to be a year we endure and then we will climb back up again. Hopefully, the climb won’t be as dizzying as before,” said Flewwelling.

Gord Bontje, owner of local business Laebon Homes, said the statistics don’t tell the whole story. According to Bontje, sales slowed for his staff in mid-2007 and have just recently picked up again.

“We’re seeing excellent customer response and frankly, that’s in large part a reflection of the fact that first-time homebuyers can get unbelievably low rates. Like a four per cent mortgage­ — that’s almost breathtaking.”

Growth is expected to improve slightly in 2010 — in Red Deer, 675 housing starts are forecast next year, an increase of 22.7 per cent. Bontje said potential buyers should act now.

“I’ve been around a long time and I’ve seen these cycles come and go. If you’re a teacher or a police officer, somebody that’s not working in the oil business, it’s a phenomenal time to buy because things are so cheap,” he said.

Chance of a lifetime

By Paige Aarhus - Red Deer Advocate
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City councillor Cindy Jefferies hopes Red Deer residents will get on board for a “once in a lifetime” opportunity to completely redevelop the city’s riverfront.

Jefferies presented an update on the Greater Downtown Action Plan (GDAP) at city hall Thursday. She and Lorne Daniel, a head consultant for the project, described a dramatically different downtown Red Deer.

“This will be and is one of the highlights of my council career so far,” said Jefferies, chair of the GDAP steering committee.

The update reflects a growing interest in long-term high-density urban development and greater pedestrian access to the riverfront, developments that could transform Red Deer’s low-lying downtown core.

“One of the themes we use is ‘growing up.’ Red Deer is moving beyond being a town, a small city and you’ll see some high-rise towers coming up,” said Daniel.

Three new areas— Historic Downtown in the city centre, Riverlands west of Taylor Drive and Railyards west of Gaetz Avenue and north of Ross Street— would be developed using three separate themes of live, work and play.

Daniel said high-density residential development in the Railyards area will offer living space for “people of all ages and income levels. Housing for everybody.”

The neighbourhood would feature high-rise apartment buildings close to the riverfront and smaller apartment and single-family residential blocks in the area formerly known as Cannery Row.

“It will be a mix of low- and high-rise, lots of windows and doors to create a sense of urban safety,” he said.

The Riverlands area, with its theme of play, is attracting the most attention. Developers envision a pedestrian bridge connecting Bower Ponds to a vibrant recreational area tailored to tourism.

On the other side of the river, where the civic and transit garages now stand, there are plans for a “Spirit of the River” plaza with space for outdoor cafes, buskers, market stalls and an “urban-style pool with fire pots” to attract evening viewing.

Riverlands plans also include a new hotel and convention centre and a year-round indoor garden and water centre, initially called “The Ark” and re-dubbed “Prairie Oasis” by developers.

Historic Downtown would get a new civic plaza, parkades to reduce congestion and a pedestrian path that connects Barrett Park to Bower Ponds.

The path will make it much easier for downtown workers to ride a bike to the office instead of driving, said Daniel.

According to the report, the full build-out of the action plan will take anywhere from 20 to 25 years to complete, depending on city budgets, government funding, private investment and the overall economic climate.

“The GDAP 2008 Update is a concept plan ... It guides the future development of area redevelopment plans ... but does not prescribe specifics,” said the report.

But Daniel said baby steps, such as creating new public parks, will be taken as early as next year.

“The idea is to build on what we have right now and not feel that we have to completely re-do things,” he said.

Council will decide on Monday whether to adopt the plan, which includes recommendations to hire a projects manager, hold public design competitions for major development elements and create a volunteer design review panel funded and coordinated by the city.

“I think the plan looks great and I hope council will give it approval,” said Jefferies.

Contact Paige Aarhus at paarhus@reddeeradvocate.com

At first glance, the numbers paint a grim picture of the state of the residential construction sector.

The City of Red Deer issued 1,704 permits for $97.2 million worth of residential projects from January to November — as compared with 2,671 permits valued at $184.3 million during the first 11 months of 2007.

Canada Mortgage and Housing Corp.’s tally of residential construction starts in Red Deer so far this year consists of 325 single-detached homes and 205 units in multi-family buildings. That’s down nearly 65 per cent from the 928 single-detached and 582 multi-family starts accumulated to the end of November 2007.

But there’s more to Central Alberta than Red Deer, says Scott Boyd, executive officer with the Central Alberta branch of the Canadian Home Builders’ Association.

CHBA members obtained 324 building permits in communities outside Red Deer from January to October 2008. That’s just six per cent lower than the 346 permits pulled by CHBA members in rural areas during the same period in 2007.

Boyd thinks this city-town disparity boils down to one key factor.

“It kind of goes back to the lack of serviced land available in Red Deer.”

Jonas Neidert, a partner in Avalon Central Alberta and president of the local CHBA, sees some validity in Boyd’s assessment.

“Early in the year, when there was demand, there wasn’t a lot of serviced land in Red Deer so probably a lot of it was going out of town,” he said.

The situation has improved, added Neidert, with lots coming on stream in the Southbrook and Clearview Ridge subdivisions. Both are projects of Melcor Developments Ltd.

Howard Thompson, manager of Red Deer’s Land and Economic Development Department, said much of the city’s residential land inventory was consumed quicker than anticipated.

Now it’s preparing to open up new areas in the city’s northeast, but must first install major trunk lines.

“It takes some time and investment to move into new areas,” he said, adding that this servicing has in some cases taken longer than anticipated.

“Some of that (delay) is at the planning stage, some of it’s at the approval/regulatory stage and some is at the actual construction stage.”

The city did hold a public lot draw for 130 city-owned sites in Timberlands, Johnstone Park and Oriole Park Estates on Nov. 26. That only resulted in successful bids on 19 lots.

Another reason that Red Deer might not be as attractive to some builders and buyers is that lot locations are more limited.

Thompson acknowledged that the selection of subdivisions isn’t as broad as it once was.

“I know there wasn’t as much choice for lots over the last couple of years as the different subdivisions filled up and you move to new subdivisions.”

Neidert thinks builders are also looking beyond the city’s boundaries because they now have the resources to do so.

“Now that things have slowed down in Red Deer, we’re looking at doing work out of town,” he said.

“We had a lot of people asking (previously) if we’d do an acreage, or if we’d build here or there. To do that we would have had to hire more people, which at the time wasn’t easy to do, so we just didn’t do it.”

Boyd wonders if land prices are also influencing decisions to build in rural communities.

“They’re typically less costly than in the city, so that could be part of the factor too.”

But Thompson maintains that lot prices also vary within most towns.

The pace of development this year in communities outside Red Deer varies, depending on who you talk to.

Planning officials in Blackfalds and Lacombe expect residential construction to be comparable with 2007, and perhaps even higher. Those in Sylvan Lake, Stettler, Rocky Mountain House, Penhold and Ponoka describe a slowdown relative to last year — although generally not as pronounced as Red Deer’s.

Some pointed out that construction levels appear worse than they really are because they’re being compared with the record tallies of 2007.

Penhold development officer Rick Binnendyk, for instance, estimates that residential construction in his town is about 65 per cent of last year’s pace. But it’s still better than 2006, which was the record year prior to 2007.

“A lot of people say that 2007 was almost uncontrollable,” he said.

“It’s fair to say that things have slowed down, but to me it’s much more manageable at this point.”

Carey Keleman, Ponoka’s economic development officer, agrees.

“It’s still healthy growth, it’s just not as crazy as in 2007.

“It’s kind of going back down to the average before the big boom.”

Thompson takes heart in a Canada Mortgage and Housing Corp.’s forecast that building activity will rebound in the next few years. In the meantime, he doesn’t mind seeing residential construction levels in neighbouring communities outpacing that in Red Deer.

“It’s all good for Central Alberta.”

With two months remaining in 2008, housing starts in Red Deer are down nearly two-thirds from 2007.

Canada Mortgage and Housing Corp. reported on Monday that from January to October, work had commenced on 298 single-detached dwellings and 170 units in multi-family buildings, for a total of 468 starts.

During the same period last year, the numbers were 873 for single-detached homes and 485 for multi-family units, for a combined 1,358.

This decline of 65.5 per cent was the greatest among Alberta’s seven major urban centres.

The Edmonton metropolitan area had the second-biggest drop at 54.5 per cent, Medicine Hat was down 44.1 per cent, Grande Prairie experienced a 41.6 per cent slide, Lethbridge was off 26.3 per cent, and the Regional Municipality of Wood Buffalo fell 24.1 per cent. The Calgary metropolitan area recorded the smallest decline, at 13.8 per cent.

During the month of October, there were 42 construction starts on single-detached homes in Red Deer, as compared with 61 in October 2007.

No starts on multi-family units were reported in the city this October or last.

Total housing starts across the seven urban centres during October decreased 43 per cent from last year, to 1,682 from 2,931.

Nationally, CMHC said housing starts during the month were six per cent lower than for the same period in 2007.

The Red Deer region remains a buyers’ market, says the president of the Central Alberta Realtors Association.

Plenty of listings, stable prices and steady mortgage rates has created a situation that’s “about as good as it gets” for home shoppers, said Randy Weins in a news release issued by the association on Thursday.

Weins’ assessment was based on Multiple Listing Service statistics for the third quarter of 2008.

It indicated that 400 single-family homes were sold in Red Deer from July to September, up from 344 during the same period in 2007.

The median price of those 400 homes was $324,000, down from $330,000 for the corresponding quarter last year.

In the case of townhomes, there were 76 sales with a median price of $233,000 during the past quarter in Red Deer.

That compares with 52 deals and a mid-point price of $239,000 for the July-to-September period of 2007.

In the case of half-duplexes, 55 sales with a median price of $266,000 were recorded in the most recent quarter. During the corresponding period in 2007, the figures were 53 and $275,000.

The news release said that Weins considers single-family sales to be the market benchmark.

Elsewhere in the region, the Central Alberta Realtors Association recorded 90 single-family home sales in Sylvan Lake during the third quarter, with the median price of these $325,000. That compares with 85 sales and a median price of $347,000 a year earlier.

In Lacombe, 38 single-family homes were sold, with the median price of these $316,000. That was down from 51 sales for the same period in 2007, when the median price was $307,000.

In Blackfalds, there were 29 single-family homes sold at a median price of $284,000 from July to September.

During those months in 2007, the figures were 31 and $296,000.

The association reported 28 MLS sales of single-family homes in Stettler in the last quarter, with these attracting a median price of $218,000.

The number of sales was unchanged from 2007, but the price a year ago was $236,000.

Ponoka had 25 sales of single-family homes during the past quarter, with $255,000 the median price. A year earlier there were 31 deals in this category, with the median price $243,000.

There were also 25 single-family homes sold in Rocky Mountain House between July 1 and Sept. 30. The median price of these was $290,000.

Last year, Rocky generated 32 sales of this home type, with the median price $291,000.

Innisfail produced 23 single-family sales with a median price of $269,000 during the same period this year. For 2007, the numbers were 33 and $302,000.

Weins suggested that sellers looking to close a deal on apartment condominiums or homes priced in the top 20 per cent of the market are probably having the toughest time.

“If your property is listed in the top end of your competitive price range then you can likely bring out the Christmas tree and put it up,” he said.

The inventory of homes are declining in most communities, added Weins. And he warned that prospective buyers should act before credit tightens and mortgage rates rise.

The Central Alberta Realtors Association has cautioned that general price information can help identify trends and provide comparisons over time, but may not reflect the actual price of a specific home.

September was another slow month on the residential construction front in Red Deer, with housing starts down 85 per cent from the same month in 2007.

Canada Mortgage and Housing Corp. reported on Wednesday that work was started on 30 single-detached homes in the city last month, as compared with 56 during the same period in 2007. The big decline occurred in the multi-family sector, with just four units started in September, versus a tally of 166 a year ago.

Although multi-family construction starts can fluctuate greatly from month to month as new projects get underway, year-to-date stats issued by CMHC indicate that the local slowdown has been a sustained one.

Single-detached housing starts during the first nine months of this year totalled 256, down 69 per cent from the 812 homes started from January to September 2007. In the case of multi-family starts, the 170 units recorded to the end of last month marked a 65 per cent drop-off from the 485 of a year ago.

The situation isn’t unique to Red Deer. Total housing starts in Alberta’s seven largest centres in September were down 63 per cent from the 2007 figure, dropping to 1,544 from 4,134.

Although the September decrease was most pronounced in Red Deer, the Edmonton metropolitan area experienced a 78 per cent decline, the Regional Municipality of Wood Buffalo was down 60 per cent, the Calgary metropolitan area fell 59 per cent and Lethbridge was off 55 per cent. Housing starts in Medicine Hat and Grande Prairie were up 11 and 94 per cent respectively, but the number of single-detached projects was down in both cities.

Residential construction in Red Deer hit record levels in 2007.