The sky is not falling. CHBA-AB outlines the positives about the economy

There’s no denying the fact the Alberta economy has stalled and every Albertan is tightening belts, but the sky is not falling.

The province has been through this turmoil

before and risen, and will do so again.

In a recent meeting, the board of directors of the Canadian Home Builders’ Association-Alberta discussed the economic impact of low energy prices, plus, identified many positives about the economy.

Here are their observations:

  • Renters still face low vacancy rates and high rents so they may see this as an opportunity to buy a home.
  • The opportunity exists to lock in low and predictable mortgage payments with a five-year fixed rate of 2.79% or better.
  • New home prices will inevitably rise because of supplies sourced from the U.S. and paid for with devalued Canadian dollars. Builders are holding the line on prices for now but will not be able to absorb costs in the long term.
  • Lower fuel costs will put more money in consumers’ pockets.
  • Other sectors of Alberta’s economy are strong, with agriculture, forestry and tourism expecting record years.
  • Alberta has been through many slowdowns when oil prices fall but always recovers strongly.
  • The impact of lower oil prices on the economy will not be increased by sudden cuts in provincial spending to balance the budget immediately because the premier says that will take until 2017. Changes will be phased in over three years.
  • Alberta expects to add another 80,000 people to the population this year, which will be supportive of new home construction.
  • The decline in the number of people coming to Alberta has been heaviest in the non-permanent segment of migration totals. Workers were still coming to the province from other provinces and they have a greater potential to put down roots and enter the housing market.
  • There is reduced pressure on wages because of lower demand from the energy sector.
  • Inflation is generally low and companies will see savings on fuel prices.
  • In some locations, land supply was a problem last year. A slowdown may ease those issues in the short term.
  • Some players in the oil and gas sector see this as a buying opportunity, indicating the downturn may be short-lived.
  • Unlike the 2008/2009 recession, financial markets are not frozen so issues with corporate liquidity and access to capital will not be as extreme.

-Calgary Sun

Mortgage rate drop a bonus for home buyers

Dialled down interest rates by two major Canadian banks is welcome news for the city’s housing market, say home builders.

Earlier this month, The Bank of Montreal (BMO) pulled back its five year fixed term to 2.79 per cent from 2.99 per cent. TD Bank later posted the same rate.

“It’s incredible, if you think about it,” says Hal Pike, area manager for WestCreek Homes. “If you’re looking to take on a mortgage, it’s pretty cheap money, that’s for sure. It’s crazy that they would be this low.”

Pike sells move-up homes in the southeast community of Legacy. These houses start from the $500,000s.

“Buying a home is one of the biggest decisions and financial commitments Canadians will make in their lifetime, so it’s critical that home buyers get the help they need to make the right mortgage decision,” says Cam Fowler, group head, Canadian personal and commercial banking for BMO Financial Group. “Choosing a longer term, such as five years, along with a great rate will help Canadians own their home sooner while saving them thousands in interest payments over the life of the mortgage.”

Both new construction and resale activity of single-family homes in the Calgary area have been slower over the first two months of 2015 compared to the same time last year. There were 778 construction starts in the Calgary census metropolitan area between Jan. 1 and the end of February, down from 1,010 a year ago.

On the resale side, 739 single-family homes changed hands, a 31.5 per cent downtick from 1,080 sales a year ago.

The new rates will likely influence a number of people considering a home purchase, says Pike.

“It’s definitely going to perk their ears up, that’s for sure,” Pike adds. “As the affordability factor comes down with the interest rates, its going to be very good for the people that want to get into the market again.There’s no doubt about it. It’s going to be a reward for people that are riding that fine line, trying to get into the market. Maybe now they can and maybe last week they couldn’t.”

Savings from the new mortgage rates may result in increased buyer confidence, which would make a difference in a number of home segments, says vice-president of Astoria Custom Homes Lisa Stinson.

“Any time the mortgage rates are lowered, it brings buyers out for another look, and we see another surge of optimism,” says Stinson. Astoria builds in luxury communities, including Watermark at Bearspaw and Artesia at Heritage Pointe.

“We’re talking about very low rates to begin with and a cut in rates gives people an extra boost to invest in a solid market where equity is sure to grow,” Stinson adds. “It’s a great time to buy.”


-Calgary Herald