According to reports demand is increasing in the Edmonton housing market, underpinning prices as the market looks to have finally bottomed.
Meanwhile, Goldman Sachs, after being the anti-sheep on Wall Street for month, predicting a weak demand and a “deflationary spiral” while other Wall Street giants including Morgan Stanley turned bullish, is now saying that “underlying demand is now accelerating sharply” and is currently on pace to grow at a 5% rate in the fourth quarter,” as it ups its fourth quarter growth forecast from 2.5% to 3.5% in a note to clients.
Looking at the Edmonton story, it would seem to be a Microcosm of what is happening across the American economy.
In the last few months, the US housing market has looked nothing but volatile, with 24% year on year sale increases in Miami, but only in response to 25% price reductions, while sales dropped in most the rest of the country in the same month, following a rise in the month before and a fall in the month before that, all the while some locations rising during the falls and some locations falling during the rises. Little wonder it has been deemed a rollercoaster.
Meanwhile the Morgan Stanley investment bank has been bullish on the American economy since the beginning of the year, joined by much of Wall Street and now, even Goldman Sachs has crumbled to peer pressure and turned bullish.
While, with thousands of repossessions and repossession orders taking place and being issued each week it is hard to foretell a complete turnaround in the housing market overnight, the story of Edmonton is certainly promising given the other reports.
According to the Edmonton Realtors Association November finally ended five consecutive months of monthly sales declines from a peak in April of 1,740 transactions, as buyers come out to take advantage of the low interest rates and prices.
“Softening prices, a dip in interest rates, increasing sales nationally and excess local inventory all contributed to a month-over-month sales bump,” association president Larry Westergard said in a news release. “It seems that Edmonton is out of phase with the rest of the country and is lagging slightly in comparison to other major markets. All the indicators suggest that an increase in real estate sales is right around the corner.”
According to the release MLS residential sales increased from 1,177 in October to 1,220 in November, which still represented a 1.45% decline compared to last year, but given that the tax credits were in place last year that is a small drop.
A sales increase in November goes against seasonal trends and may indicate higher levels of activity are on the way, although winter may still delay any resurgence, said ATB Financial economist Dan Sumner.
“The market has been pretty slow all summer, and although that general trend has not changed much yet, there are definitely signs of life,” Sumner said. “Overall, with interest rates really low, in some cases even lower than a year ago, I find it hard to believe that housing markets won’t pick up at least a little bit going forward.”
The increase in sales also had an effect on prices. While condo prices fell 2% over the month and 2.99% over the year, Single-detached houses fell just 0.5% over the month and 2.5% over the year. But it is Duplexes and row houses that give the greatest cause for happiness, growing 6% over the month and 10.6% over the year.
But Sumner said he hoped demand and prices don’t overreact to interest rates as they did in the last year.
“Last year around this time the market really started to respond to low rates, but they went a little bit too far,” he said.
“I think low rates will again have an impact to shore up sales volumes, but hopefully we don’t see a 10-percent spike in prices again just to give it all back later in the year when rates do start to trend upwards.”
Photo Credits: Stella Blue via Flickr