A sizzling Edmonton housing market is expected to smash records it set just a few years back.
New home starts, specifically single-family, are up dramatically and show no signs of easing throughout the rest of 2005.
In fact, even though industry analysts expect the numbers to cool down slightly in 2006, the figures for next year are currently projected to remain strong.
"In Edmonton, single-detached starts right now are on a record-setting pace and we expect the numbers for single-detached starts this year to exceed the previous record, which was set in 2002," says Richard Goatcher, a senior market analyst at the Canada Mortgage and Housing Corp. (CMHC) in Edmonton.
"We're looking at volumes of over 7,000 units and that's never happened (for Greater Edmonton). It's an all-time record."
For 2006, Goatcher sees a small easing for single-family home starts, though he notes that the market for new homes will still be solid.
"There will be a bit of a cooling, but not a big pullback. I expect numbers similar to 2004 when single-detached starts were 6,614. We'll beat that, but we won't be over 7,000. It will be between 6,500 to 7,000," he says.
All the good news about the economy is helping drive the confidence in the housing sector.
"You have a pretty healthy mixture of consumer and business sentiment," Goatcher says.
"Consider what's going on in the oilsands right now, which of course has a huge impact on the capital region, and also this is the capital city," he adds. "You have a provincial government that is spending a lot of money on infrastructure. So these things combined create a definite feeling in the city of optimism and that type of optimism drives big-ticket purchases."
On top of that, interest rates have been accommodating and even with projected increases from the Bank of Canada, Goatcher says CMHC is not calling for these hikes to have a major impact.
The other key driver is the strength of the job market.
"It's fine to have low mortgage rates, but you also have to be able to qualify for a mortgage and having a full-time job allows you to qualify for a mortgage," says Calgary-based Vinay Bhardwaj, manager of market analysis for CMHC.
Eighty-three to 85 per cent of workers in Alberta between the ages of 25 and 44 have a full-time job. The typical age of a first-time homebuyer is 25 to 34, while move-up buyers fall into the 35-44 range.
But this year, Edmonton will outpace Calgary when it comes to the total number of new housing starts in the province, Bhardwaj says.
"Typically, when you go beyond provinces and look at major centres or CMAs (census metropolitan areas with a population greater than 100,000), Alberta has been No. 1 among the provinces and Calgary has been No. 1 among CMAs," trailed by Edmonton, says Bhardwaj.
However, this year, he notes, Edmonton is tops among CMAs, with Calgary in the runner-up spot.
The good-news story is not just Edmonton, adds Bhardwaj, who says the numbers being posted this year will likely be some of the strongest since the oil boom in the late 1970s.
"For Alberta, the housing starts again this year are going to exceed 35,000 units, with 30,000 having been the benchmark.
"This year, 2005, will be the fourth straight year that housing starts (single- and multi-family) in Alberta will exceed 35,000 units. For Alberta to be at this level, activity has to be strong throughout the province."
However, Bhardwaj is quick to add that 2005 will not be a record year for the province. That record, he says, will remain unscathed - it came in at 47,925 starts in 1978 when the provincial government had a program in place that boosted the number of multi-family units that were built.
"But this is the strongest period since the 1970s and it's entirely the markets driving the markets," says Bhardwaj.
Edmonton's resale market is also on target for new highs.
"By the end of this year we expect to hit $4 billion in (total) sales. It will be a first," says Jim Kulak, president of the Edmonton Real Estate Board (EREB). "At the end of August we hit $3 billion in sales and that was about six weeks ahead of last year."
Year-to-date, says Kulak, Edmonton's resale market is being described as very good.
"We expected prices to increase by six per cent overall and we were at 6.9 per cent at the end of September, though we might have a tendency to slow down by end of year, and that will take us to the six-per-cent level," says Kulak.
Meanwhile, no one is talking about a real estate bubble.
"We're not anywhere close to that," says Kulak.
"The Edmonton region is a very steady, sustainable market month over month, year over year. It's not out of reach for a vast majority of homebuyers."
Bhardwaj agrees, saying the analysis he has conducted so far does not point to a bubble because the economy is doing so well. "There's continued job growth, continued income growth."
Bhardwaj notes current gains in housing prices in Edmonton may be pulling slightly ahead of income growth, but until recently, housing prices in the city didn't have much growth for many years. "They were stable for so long," he says.
"The overall concern is a bubble forms when house prices decline and demand for housing falls off. Given the current positive economic climate for the province, underpinned by the oil and natural gas sectors, the Alberta economy will continue to perform at a very high level," Bhardwaj predicts.
"The jobless level will remain very low and eventually house prices, which have risen quite rapidly, will moderate over the coming years and allow price gains to catch up with income gains."
(Laura Severs can be reached at email@example.com)