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Edmonton Real Estate Board 2011 House Price Forecast – Part 1

I’m blogging this morning from the EREB 2011 Housing market forecast at the Shaw Conference Center. It took me a bit to get here, and Lord only knows where I’m parked, but I’m here. The schedule of events for today:

  • Welcome and Opening – Ron Hutchinson, EVP, REALTORS® Association of Edmonton
  • Edmonton’s Strength – Garth Warner, President and CEO, Servus Credit Union
  • Edmonton Business and Commercial Climate – John Rose, Chief Economist, City of Edmonton

[Ed Note: If you’ve surfed here looking for the price of your own home, you can signup for a free market evaluation on my main site.]

Then we get a bit of a break, and hopefully I’ll get to publish this (they’ve canned the free Edmonton wi-fi apparently) by tethering my iPhone.

Then after the break (circa 10:15 or so):

  • Development Trends – Patrick Shaver, President, Urban Development Institute (UDI)
  • Edmonton Housing Analysis – Richard Goatcher, Senior Market Analyst, CMHC
  • MLS System Market Forecast – Chris Mooney, President, REALTORS® Association of Edmonton

And we’re away to the races, right on time! I didn’t catch this gents’ name, but he’s an EVP for the Realtor’s Association. Apparently this is the 23rd annual forecast.

Ok, we’re about to get rolling with Garth Warner from Servus. He’s babbling about goal setting and new year’s resolutions. While he’s a good speaker, it’s a good reminder to avoid the cheesy jokes when doing public speaking. There’s a lot of thank you’s and rambling, so I’ll spare your eyeballs reading any more out Garth’s optimism.

That was slightly painful.

Now we’re on with John Rose from the City of Edmonton. He’s a little more upbeat, and just compared his job to being the Angel of Death for the last year or two.

The Global Economic Environment has been improving since mid 2009, but with some caveats. Mild concerns about a global double dip, and some fragile global financial market issues. The possibility of reducing stimulus too quickly and other policy mistakes might cause a bit of a bump, but not a full-dip collapse. Beyond the EU monetary issues, there’s a small risk that the US mortgage debt crisis will have more impacts and that’s related to the mortgage rate issues.

Natural Gas is likely to remain low (forecast to stay below $5). Oil is going to remain in the high $80’s or low $90’s for the foreseeable future, but over $100 oil is unlikely. It’s still a very solid price point and good news for us here.

GDP-wise, Alberta was lagging, likely because natural gas didn’t respond to the recovery as expected. The CMA (core) Edmonton was more likely around 3.2% GDP growth, and we weathered the storm quite well.

The dollar being at parity, and he’s expecting we’ll stay around $1.00-1.05 USD for the while ago. It’s fuelled by weakness on the US side more than strength on ours. That’s bad news on two sides: first, it causes competitiveness concerns, and second, it puts upwards pressure on commodity prices. Interest rates, John thinks the Bank of Canada is softening us up, since rates have no where to go but up. He things we’ll see fairly dramatic increases in the second half of 2011, about 0.75% this year, and in 2012 as much as 2%.

Edmonton specifically, has inflation which is essentially 0. Employment is back below 6% (currently at 5.8%), and the good economic prospects stimulating net in-migration. CPI (inflation) is essentially flat, and has been since 2008, which is good news in that costs are in control and prices are moving up modestly and providing stability.

Unemployment is trending down and Canada has recovered all the jobs lost during the recession, as has the city of Edmonton. We’re actually creating jobs at twice the rate of Alberta (which isn’t doing too bad at all). It’s going to take the US at least 4 years to get back to their pre-recession levels, and that doesn’t even take new entrants into account. 6 of every 10 jobs created in Alberta were in the Edmonton area. There’s some remarkable strength in the Edmonton area.

Are we risking another boom and bust cycle? No, the huge growth in 2004-2005 was driven as much by natural gas and conventional oil as it was oil sands growth, and the juice just isn’t there.

He did a three baseline forecast. Baseline (55% probability), High (15%) and Low (30%), used to create the average numbers to drive his forecast. He’s not a fan of the US market at all, and they’ve seen some exceptionally poor performance. The growth outlook is around 3% now, to 3.5-4% in 2012 with a taper off to a 2.2% level out to 2018. The slow down is largely due to demographics, and an ageing labour force.

The Edmonton CMA is going to do well, and the City will be able to expand faster further out, having a slightly younger demographic. There’s another great graphic for the City vs the CMA GDP growth forecast that I’ll try to grab later and edit this post.

Summary:
– Low interest rates won’t last, longer term rates will move up to the more traditional levels, and short term rates have nowhere to go but up.
– Inflation is relatively low, tracking the national rate of 2%, and then moving up to the 3%.
– Modest but solid and sustainable growth out to 2019, and not so much risk of the boom-bust cycle.
– Some downside risk due to the US being sluggish and taking a while to get their stuff sorted.

That’s it for the moment, it’s break time!

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