New house prices steady

THINK OUTSIDE THE BOX:  Although the number of sales has declined, new home prices remain stable.

If you’re an Albertan in the market for a new house in Calgary or Edmonton, you may not be noticing much movement in the price lately. In fact, new home prices continue to win the award for “Most Boring Graph”.

In July, the index price of a new home in Calgary was 109.5 (with the index setting prices in 2007 equal to 100). That has barely budged over the last two years. It peaked at 111.3 in January of 2015 and has moved very little since then. Prices for new homes in Edmonton have been even more consistent, hovering right around 91.5 for the last four years.

The current recession in Alberta has done very little to knock down prices for new homes. This may seem surprising, but it is consistent with prices in the existing home market. Resale prices for homes in Edmonton haven’t slipped at all, and Calgary prices are down only slightly. Given the elevated rate of unemployment and shaky consumer confidence, one might reasonably expect prices to be under greater pressure.

In the new home market, part of the reason for such remarkable price stability is the fact that builders are adding fewer homes to the market each month. New housing starts in the province have pulled back from around 40,000 per year to a level closer to 25,000 more recently. This reduction of new homes coming onto the market is keeping pace with the reduced demand, so prices have remained stable.

Todd Hirsch Chief Economist      ATB Financial-The Owl      September 8, 2016

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