Red Deer rebounding


The Red Deer real estate market, like much of Alberta, has undergone some fairly significant softening in recent years. Month-over-month and year-to- date prices have sunk well below 2010 levels, leaving many buyers, especially those in the market for a high-end property, apprehensive about purchasing a new home. Move-up homebuyers, reluctant to sell, are waiting out the market as well - a trend evidenced by tightening inventory levels throughout the Red Deer market. From January to April, listings shrunk to 977 - 16.1% fewer than the same time period last year, when there were 1,164. Year-to-date sales, on the other hand, stayed on course for the first part of 2011.

There were 470 sales from January to April - just six fewer than during the same time period in 2010. Yet even with lower levels of supply and steady demand, prices remain soft. According to the Central Alberta Realtors Association (CARA), the average home price in Red Deer was $282,140 in April, 13.8% below the average of $321,009 in the same month last year. Year-to-date figures show a somewhat more positive picture, with only a 7.7% drop being recorded between April 2011, when the price was $282,734, and April 2010, when the price was $306,169.

Numbers game

So why are the prices so low, if demand is stable and supply is tightening? Dennis Zukiwsky, associate broker at Re/Max Real Estate Central Alberta, says it's because the market for high-end homes in Red Deer has been struggling for more than two years. "We are going to see prices come down there; there's no question. In April, there were 66 homes in Red Deer over $500,000, yet there were just eight sales." In a healthy market for the city of Red Deer, Zukiwsky says there should be 35 to 40 high-end home sales out of 60 to 70 listings each month.

Don't get tripped up on the numbers

Regine Durand, an analyst with the Canada Mortgage and Housing Corporation in Central Alberta, says it's important to look at the other side of the trend underpinning the changes in the average price; that is, most of the sales in Red Deer are for home less than $250,000. "The average price is down, but it's really because we're seeing a higher proportion of sales in the lower price ranges," she says. "When you have more sales in the lower price range, it pulls the average price down. It's a mathematical situation, it's not necessarily because demand is slowing down."

 

Consider that during the first quarter of this year, 36% of sales in Red Deer were for homes below $250,000. That's 3% higher than last year. The trend is even larger if extended to all of Central Alberta. During the first quarter, 45% of sales were less than $250,000, compared to 40% for the final quarter of 2010. CMHC does not forecast the average price for Red Deer, but it does expect Central Alberta to have 2% growth in the average price by
the end of 2011, finishing at $275,500. That price will then edge up to $278,000 by the end of 2012.

Gaining strength

CARA President Patrick Galesloot says he believes the average price will rise by as much as 3% or 4% by the end of 2011. "We're coming out of the basement so to speak," said Galesloot, ownerbroker of Century 21 Advantage. "The downward pressure is going to definitely be easing. It's not going to happen in all price ranges. The higher-end price ranges will most likely have a greater lag time," Still, investors have a "tremendous opportunity" now to find cash-flowpositive properties all over the city ahead of the next growth cycle, he says.

 

To learn more about the economic fundamentals supporting the Red Deer market, pick up a copy of our August issue.

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