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Housing prices offer good deals-Time to buy before interest rates increase


Blog by Art Lee | September 26th, 2010


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Housing prices offer good deals

 

Time to buy before interest rates increase

 
 
 

The first half of this year was a boon to builders coming off a dismal 2009.

As a result, Canada Mortgage and Housing Corp. is predicting 20,325 construction starts of single-family homes by the end of this year.

Starts dropped dramatically in 2009 from the highs of 2006 and 2007.

While single-family homes in Alberta reached a high of 31,835 starts in 2006, they dropped to 14,344 last year, says CMHC.

In terms of multi-family housing, Alberta had 5,954 starts last year, down from 20,231 in 2007.

This year, CMHC is forecasting a total of 8,125 total multi-family housing starts in the province.

"The last quarter of last year to the middle of 2010 was somewhat heated as consumers felt the bottom of the market had come," says Alice Mateyko, senior vice-president of Homes by Avi, which builds in both Calgary and Edmonton.

The market slowed in mid May for Calgary and mid June for Edmonton as the urgency to buy had subsided, she says.

"Sales slowed considerably as the uncertainty of the U.S. and Canadian economic outlook and the negative immigration to Alberta affected our market deeply," says Mateyko.

As a result, prices of new homes have dropped.

"There are still deals to be had in the market as builders look to sell off their existing land inventories," says Dave Gladney, president of

Morrison Homes in Calgary.

"But this will not be long-lived as in many areas across the city land prices are rising. Combine that with rising rates and this is the time to buy."

The same is true in Edmonton, says Miles Kohan, general manager of Sterling Homes, which also builds in Calgary under Bill Bobyk.

In terms of proposed development agreement fees, "any fees that get put on to builders or developers will inevitably have to get passed directly through to the consumer." says Kohan.

The City of Calgary and builders and developers are in the process of reviewing a new development agreement for the city.

"Hopefully, the new council will work with the industry to do what is in the best interest of all Calgarians," says Gladney, who is part of the committee.

Prices have been relatively stable throughout the year, "even though there have been a lot of code and bylaw changes that have added significantly to the cost of building a new home," says Bill Bobyk, who is general manager of The Sterling Group in Calgary.

That won't last.

"These costs, for the most part, have been absorbed by the builders," he says. "I think that for the remainder of this year, the prices will be adjusting and once we get to 2011, the prices will be more consistent."

He's expecting a three-percent increase in prices for next year.

In both Calgary and Edmonton, prices for starter homes currently begin anywhere from the low $300,000s to the mid $350,000s.

First-move-up homes -- those with attached, front-drive double garages -- start anywhere from $425,000 to $465,000, while estate homes are from $600,000 and up.

Generally, Edmonton prices tend to start at the lower range.

Kohan says he has seen a change in buyers.

"There is a sharp return to the value-driven purchaser," says Kohan. "Homebuyers are more and more discerning, wanting the combination of good quality with well-priced options that suit their lifestyle."

Builders in both cities have "kick-started" the market by working with tradespeople to reduce the overall sales price, says Kohan.

"With the American housing market still in a low-production mode, some of our material costs are lowered as well," he says.

But that won't last. "While local builders, trades(people) and land developers have tightened their belts in recent times, prices will likely hedge up as the economies around the world pull out of recession," he says.

The changes to CMHC's lending criteria have had an impact on sales, says Gladney.

"This has really confused the public," he says. "Many people do not understand that you can still purchase a home with only five per cent down."



Read more: http://www.calgaryherald.com/Housing+prices+offer+good+deals/3578353/story.html#ixzz10en46spr