Cautious Optimism for Edmonton's Real Estate Market
December 22, 2020
One of the unlikeliest real estate success stories to arise from this pandemic year is Edmonton’s, where residential home sales have been their most active since 2014.1
A potential correction in the city’s housing market has been a long time coming. From 2006 to 2016, Edmonton’s population increased by 28%; in 2011’s federal census, it was identified as the fastest-growing urban centre in Canada. And the majority of Edmonton residents owned their own home. For years, favourable increases in household income and an attractive market helped the city maintain a higher rate of homeownership. Alberta’s Capital Region Board anticipated 150,000 new housing units needed by 2040. But the back half of the ’10s were a big setback.2
Things started to change in 2015, when housing inventory piled up and sales fell almost 10% from 2014. In this buyer’s market, new homeowners were taking their time deciding, and many houses sat unsold.3 Next came the mortgage stress test in 2016, which only complicated matters. Using what was then the five-year 4.64% standard rate as a measure, borrowers were tested to see whether they could afford to pay back a mortgage loan if interest rates rose. At the time, the stress test was applied to insured mortgages for buyers putting down less than 20% up front, which affected many first-time home buyers (in 2018, its reach expanded to insured mortgages). As a result of the narrowed field of qualified buyers, demand for housing fell dramatically.4
By December of 2016, the median price of a two-storey home in Edmonton fell 1.8% to $434,924, with bungalows dropping 2.7% to $366,653 and condominiums slipping 1.9% to $238,685. Alberta’s economy, also hobbled during the mid-’10s, set the stage for Edmonton showing the poorest housing market results out of 53 cities surveyed across the country to gauge their state of decline.5 By 2018, there were a record-high number of homes for sale in the region.
It wasn’t a good time for either buyers or sellers. The chair of the REALTORS® Association of Edmonton called it the worst market he’d seen in his 18 years of business. Yes, the stress test had done its share of the damage, but Alberta’s struggling economy and rising interest rates were also major contributors. At the end of June, 10,000 homes were up for sale. This kind of supply, coupled with low demand, could only result in prices dropping farther.6
And indeed, come July of 2019, Edmonton properties witnessed the biggest price drops in Canada.7 By October 2019, the benchmark house price had fallen to its lowest point in six years at $316,200, despite sales being slightly higher than the year previous, new listings being slightly down, and overall inventory dropping nearly 10%.8
No surprise, then, that in January of 2020 things were looking bleak. The REALTORS® Association of Edmonton said the stress test had killed the housing market. Their new chair Jennifer Lucas was forecasting a 2020 that looked very similar to 2019: “The Finance Minister (Bill Morneau) has been told he needs to revisit the stress test,” she said. “That was a federal policy to put downward pressure on Vancouver and Toronto and it has absolutely stolen the equity from homeowners. We don’t have a need to have a stress test here in Alberta, so we’re asking for some regionalization.”9
What a difference a hard year makes.
It turns out COVID-19 has been a catalyst for what could be a resurgence in real estate activity.
In the early days of lockdown, housing was hit hard across the country. By summer, though, when Canadians had adopted social distancing and long grocery lineups as everyday expectations, real estate started perking up across the country. As some lockdowns softened or lifted, the usually brisk business of the warmer months was beginning to resume. By fall, Alberta sellers were beginning to see the benefits of high demand and low supply. All the larger centres of the province improved, driven by gains in the detached and semi-detached home sectors, though Edmonton may have fared best of all.
In the most recent data released by the REALTORS® Association of Edmonton, November saw a 75% sales-to-new-listings ratio, easily the best in years. Across the Census Metropolitan Area (CMA), average prices were up from the same month the preceding year: single-family homes rose 4.39%, condos 1.18%, and duplexes 4.79%. There was also a heartening 27.18% increase in year-over-year residential sales, and the average days on market fell by 15 days year over year to 54. Perhaps most hopeful of all, heightened buyer demand reduced Edmonton’s saturated buyer’s market to 6,205 active listings, a 15.07% drop from last November and 10.94% from just one month ago. While certainly not back to pre-2019 levels, this stirring in the market is allowing for cautious optimism: buyers are resurfacing, homes are gaining value, and many sales are closing.10
As this crazy year winds to its close, Canada continues to grapple with the pandemic – though the arrival of vaccines may have brightened the light at the end of the tunnel. For the moment, sellers in Edmonton are enjoying the beginnings of what we hope could signal an even bigger and more lasting turnaround in the new year.
If you’re planning to sell your Edmonton home, the guidance and insights offered by a real estate professional can’t be underestimated in today’s markets. A local Purplebricks REALTOR® will help you navigate the market safely with professional insight, all while saving you thousands in commission with a low fixed fee. And if you’re buying, we offer clients $2,000 in cash back* as a thank you! Call 1-855-999-9740 to learn more.
1. CREA: REALTORS® Association of Edmonton November 2020 Market Report. Retrieved November 17, 2020
2. Global News: A Snapshot of Edmonton’s growth in 2016
3. Global News: It’s now a buyer’s market when it comes to Edmonton real estate
4. CBC.ca: New mortgage stress test rules kick in today
5. Edmonton Journal: Edmonton home prices performed worst in Canada in 2016, report says
6. Edmonton Journal: 'The market is tough': A record number of homes for sale means 2019 will be another rough year for sellers
7. CTV News: New homes in Edmonton see largest price drop in Canada
8. CTV News: Home prices drop again in Edmonton, benchmark lowest in six years: report
9. Edmonton Journal: Stress test ‘killed’ Edmonton housing market: realtors association
10. REALTORS® Association of Edmonton November 2020 Market Report