Realtor's Association Of Edmonton Economic Forecast 2008

八年移民 · 发表于 2008-1-10 17:06

The newly name Realtors Association of Edmonton held its annual economic forecast seminar for the 20th year on Wednesday. I was delighted to get up at 5am after arriving the day before in Edmonton after 15 hours of travel, with only about 2 hours sleep in 48. Sara bailed on me...something to do with a cold. Anyway I met Gord McCallum for breakfast, the president, CEO , founder and owner of First Foundation Residential mortgages (www.firstfoundation.ca) for a tete a tete about almost everything. I enjoy his bright insightful mind on the mortgage industry and always leave learning something new.

Hilites from the forecast

First up was the prez and CEO of the SERVUS credit union with a infomercial on SERVUS.  Fortunately his Chief Financial Officer, Ian Glassford hit clean up for him and came to the plate swinging. His presentation was titled “Earthquakes and aftershocks and maybe a happy ending.” An obvious reference to the liquidity crisis and its effects on lending and its other impacts.

“Its hard to convey just how big of a hole this really is” he stated. He continued by saying that there were still “serious challenges ahead.” He was impressed and spoke about the reaction to the infusion of capital by sovereign states, and I think he was implying the central banks response as well.

He indicated the liquidity issues affect Canada as well.  He pointed to mortgage rates to show its impact on the economy already.  They have always been tied to certain bond yields and based on current bond yields we should have seen reductions in the 5 year mortgage rates by now. Instead the bond yields have changed and the mortgage rates have not dropped. The extra cost being passed to the consumer right now is almost an extra full percentage point. In simplistic terms his perspective is that it will be harder to borrow money and more expensive in 2008. This should slow down asset inflation(including housing) and could put the U.S. into a recession.

His forecast for Canada was that the economies of Ontario and Quebec are really going to soften in 2008, due to the higher dollar and weaker U.S. demand. Western Canada won’t be as bad since there is still good global demand for our extensive natural resources. He did spend some time expressing his views that Canada is not as exposed to credit issues as the U.S. He expects at least one more .25% cut in the prime, and more likely two, which will likely depend on what happens in the U.S.

His commented: “if there is any where in the world I’d want to be watching the subprime parade go down its from Alberta” which is something I’ve been saying for quite some time.  It was weird to hear it come out of someone else’s lips.

His forecast for Alberta is that it's probably the best place in the world to be in 2008. House prices will face confidence issues with constent negative headlines from the U.S., but there is stronger demand and the ability to work off inventory is greater here than anywhere else. His reference in his title to a happy ending comes from the his belief that this may actually help towards sustainable growth by tempering the prices and labour costs.

Just before Ian’s presentation, Ron Gilbertson, president and CEO of Economic Development Edmonton Corp gave his presentation.  In December we posted the full report to EEDC’s an economic power house redefined (there is a video version that’s awesome).

Key points

If the Edmonton – Calgary corridor was a country it would be the WORLD'S 1 economy today.
The world is noticing Edmonton.  He feels like the prettiest girl in the room when he goes to presentations.  He referenced just one article from a United Kingdom financial magazine titled “City's potential is without peer...best economic potential of large cities in North America”
Stressed that his figure for $200 billion in major projects in our service area is on the low side and that it could easily be higher.
He pointed out that Edmonton’s GDP growth  will be slowing down to around 4 – 5% down from 5.8%  which still ranks it as an over heated economy
Cited housing affordability compared to other major Canadian markets is still favorable with affordability under Calgary, Vancouver and Toronto. Vancouver is almost double the cost of Edmonton.  He made a reference to affordability in Europe being at 100 – 200% of income where Edmonton is at 42% as a comparison for standard of living.
He noted that if Alberta goes ahead with its Oil and Gas value added strategy that would add another 179 Billion in major projects for Alberta.  “No place in the world can match our economic environment” he added.
U.S economy expected to decline in world prominence as India and China rise and Alberta is well positioned as an “economic super power to take advantage of that”
Edmonton is becoming an industrial power and ranks extremely high in the world among comparable cities in terms of economy, health, education, environment, and culture
It ranks poorly in safety (something I’ve ranted on), urban transportation (something else I’ve ranted on) and image (something I’ll rant on later)
“Mr. Sunshine” ended his presentation that Edmonton is on the threshold of a  becoming a great city and that it is up to us to determine where we want to go in that regards.

Next I’ll go to the CMHC presentation.  I’ve often picked on CMHC (Canada Mortgage and Housing Corporation is Canada’s dominant player in mortgage insurance) for their conservative predictions.  This is probably the first time that I can remember that my expectation is lower than theirs. They gave a the same qualified 7-8% increase in prices that they gave in November - if we can burn through some of the current inventory.

Hilites from CMHC:

Job growth for 2007 after 10 months was in the bag was predicted at 5.3% but was actually 6% and is expected to be 2.5% in 2008
edmontonfriendtly has a 7-8 month supply of residential listings
They expect sales this year to be below 2006 and 2007 levels but above 2005
Huge amount of multi family inventory coming down the pike
Actually the speaker was really hard to hear so even though her presentation was the largest I caught about 1/10th of what she was saying. We did cover CMHC’s thoughts fairly substantially in November at their forecast seminar.

And last but not least was the Presentation given by the incoming President of the Realtors Association of Edmonton, Marc Perras.  His presentation was brief and I noted  the following:

strong economy, global interest in our petro chemichals, positive in migration, consumer confidence still high, reduced small business confidence, caution is urged for speculators.
The west and south areas of the city have done better than most areas in Edmonton (we’ll be doing an area breakout in an upcoming post.
Residential average price forecast is 4%
The conclusion spelled out guarded optimism, the market should be an orderly and balanced market, 400k average price is now a reality.
This post is already too long to add my comments and thoughts.  So I’ll give my thoughts in another post.

寒江雪 · 发表于 2008-1-10 18:01

10 years ago, when US sneezed, Canada got a cold. But now Canada is very NB in terms of its economic growth. So there is reason to believe the real estate market in Alberta will not be afftected by subprime credit crisis in US.

wyy · 发表于 2008-1-14 00:16

great article,so appreciated it. i want to know you in future,for am anew comer to Edmonton. just couple of weeks. my MSN wuyayu04@hotmail.com. eager to see u then.and maybe we could have good communication.

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Realtor's Association Of Edmonton Economic Forecast 2008

hope to know each other later