Did everyone make it through the winter intact? Because I believe, it may actually be spring. It’s been a few weeks since we actually saw snow and the warmer temperatures have allowed the huge snow piles to all finally melt away.
All this moisture is even allowing a significant amount of green to start appearing on lawns again. If I can be bold enough to loudly announce, “Spring is Here!” I may also be able to announce the spring jump in Real Estate activity won’t be far behind. Even though it was delayed.
To be fair there are still some challenges in front of us, but with all the economic activity taking place throughout the province there is a significant amount of positive news in place. Employment is up, unemployment is down, in-migration is up and rental vacancies are down, all of which are incredible indicators of things to come.
Couple this with the delayed spring fever that occurs once Alberta comes out of the extended winter and we could have a very interesting couple of months leading into the summer. Historically the activity starts increasing in the market in March and this year wasn’t an exception, but it wasn’t until after the snow melted and after the Federal Election that things really appeared to heat up.
While much of the market is still being driven by first time buyers, some interesting numbers came out of April’s statistics. The most important one I saw was a $20,000 increase in the median price of properties to $420,000. The median is the middle sales number of all properties sold in an area and to me is a more accurate indicator of what is happening with values than average home prices.
A $20,000 increase is showing us that there is more activity taking place in higher priced homes, or at least higher than $420,000. So what does this tell us? First off, it is a good indicator that we have moved past the stage where the market is being driven solely by first time buyers rushing in to purchase before they get priced out.
Homes in excess of $400,000 are not your typical first time purchase and are more likely second or third homes. For a homeowner to be looking at this type of investment it reflects their confidence in their job security, the prospect of the market at least maintaining its value and belief that the worst may be over.
If we are seeing renewed confidence due to these factors, it is just a matter of time before it continues to spread. Couple this with all the other activity taking place relating to employment and in-migration and we could well find ourselves in a even more active market as available rental properties start disappearing and rents again start increasing.
Once rents hit a certain point, the affordability of owning becomes more of a reality, especially when concerns about job security are drastically reduced. Right now, it really is starting to look like 2005 all over again. Let’s just hope this time we see a bit more restraint!
Investor Perspective – The Spring Real Estate Market
We are so tied to the energy markets around here that it’s scary. The other side of the coin though is that because we are so tied in, we should be able to see the writing on the wall when oil prices are back up around $100 a barrel. We still tend to play it conservatively though, until all hell breaks loose and the Real Estate market explodes.
Of course that’s when everyone else jumps in and over saturates the market. We make the big leap from investing to speculation and that inevitably leads to our downfall.
If you currently own a rental property, keep a very close eye on the rental market over the next year. Rents will be going up, we are already seeing decreases in apartment vacancies and single family home rentals, what is going to happen when even more people return to the province?
There will be some good opportunity to increase your rents to keep pace with the market and it will become even more important to be diligent with your screening. Try to keep leases to six months for now as it will give you the flexibility to potentially raise rents more often. You are limited by law to raise rents once a year for your tenants, but if they move in six months you can alwys start at a new higher price.
If you are looking at buying investment property, there really isn’t a better time. Except all the smart investors are currently out there buying up what they can as they see what is happening. Many rental properties being sold right now are great deals and will provide some very great returns, especially over the next several years.
My last observation is the huge increase in luxury home sales. This is a very solid sign the people at the top of the market are feeling quite comfortable about the economy right now. If they are comfortable, it’s only a reflection on where they think the market is heading.
Final note, we just sold one of our investment properties (conditions came off last Friday), in total we had five offers on it. First offer fell through due to financing issues, second one disappeared after waiting for the first offer to fail, third offer fell through as the investor didn’t want to do the extra work at this time, fourth offer was the ticket and a fifth offer came in as a back up offer and was actually higher than any of them, but was dependent on the fourth falling through.
These are signs people! Signs the market is moving in a great direction, so what are you doing about it!
Thanks Bill for the update. Things are looking up everywhere energy is a product of the economy.
Hi Theode,
We are definitely energy driven, but you can see it everywhere right now. As the energy industry gets busy, it just moves down the stream and restaurants, retail stores and everyone else feels the spending habits change!
Bill