“New home buyers from Grande Prairie to Lethbridge are jumping back into the ownership market, despite the fact recessionary clouds are still hovering.

Favourable conditions in recent months--including low mortgage rates, inventory reductions and price stabilization--have allowed potential homebuyers in Alberta and across the Prairies to re-enter the market, says Lai Sing Louie, Prairie region economist for Canada Mortgage and Housing Corp.

"As a result, the fourth quarter outlook is more optimistic than our previous forecast," he says, referring to the period from October to December.

Predictions for housing construction starts for the remainder of this year and next have been upgraded, he says.

The construction gap between 2008 and 2009 has closed dramatically in Alberta.

At the end of the January to March period, detached housing starts were 43 per cent behind the same time in 2008.

For April to June, the difference had narrowed to 33 per cent.

Then came July to September, in which the beginnings of a turnaround were more than just a bit noticeable , with the gap shrinking to just 13 per cent. "The outlook for detached construction up and down the province has improved because of increased demand, declining inventory and less competition from the resale market," says Louie.

After a weak first half of 2009 when sales and construction struggled, the market began to pick up speed. CMHC says that momentum will continue through 2010 --although it will stay below the 10-year average.

The federal agency's forecast is for just over 13,000 detached housing starts this year, likely climbing 21 per cent to 15,800 by the end of next year.

But there is still some fragility to the economy.

The employment issue remains. While Alberta has the lowest unemployment rate in Canada, job creation is still spotty--especially in terms of full-time jobs, which are vital to household formations and homebuying.

In the province's five largest centres outside Calgary and Edmonton, employment figures are mixed, thereby affecting new home construction.

Red Deer

Through the first nine months of this year, 1,200 new jobs were created in the construction sector in Red Deer -- bringing year-to-date job gains to 2,400 as of September, says Statistics Canada.

"In Red Deer through September, the participation rate was at 79 per cent, which is a positive for demand for housing," says CMHC market analyst Regine Durand.

Construction investment will also boost residential construction next year.

In May 2009, there were $3 billion worth of construction projects valued at $5 million or more planned, underway or recently completed in the Red Deer region.

In 2010, 600 homes are expected to break ground in Red Deer, a 26-per-cent increase from 2009.

"With inventories fully exhausted by mid-2010, builders will feel driven to start stocking up again," says Durand.

"Stable prices and economic growth will also fuel demand for new homes next year, and help the market gain leverage.

"From a resale market perspective, lower carrying costs on existing homes will continue to boost MLS sales this year and next across central Alberta."

Throughout the region, 3,900 existing homes will likely change hands in 2010, a five-per-cent increase from 2009.

"From a price perspective, steady declines in resale inventories -- combined with stronger demand for housing -- will spur price growth in 2010," says Durand.

With demand more in line with supply next year, and lower inventories, the average MLS price will likely climb to $280,000 next year -- a four per cent gain.

Medicine Hat

Natural gas uncertainty has also affected Gas City's economy. Like Grande Prairie, it is driven mainly by natural gas exploration and development.

"The natural gas sector has experienced a slowdown in the last several months, a result of the uncertainty of the impact of the new resource royalty framework, the economic outlook and high shale gas levels in the United States," says CMHC market analyst Lindsay Kendall.

The natural gas price declined to about 66 per cent of last year's price, causing drilling activity to remain low. Lower drilling activity, combined with the economic downturn, has resulted in lower employment levels, says Kendall.

Employment declined by 2,500 jobs in September compared to a year earlier, with the labour market shedding more full-time jobs in favour of part-time work.

Homebuilders will use 2009 to reduce production in order to manage their supply levels.

Figures from CMHC show that under-construction levels have been falling month-over-month for 16 consecutive months, while inventory levels remain above one hundred units.

If supply levels--those units under construction and in inventory--are sufficiently managed and given economic recovery in 2010, single-detached starts are anticipated to pick up in 2010, says Kendall.

Lower demand due to economic uncertainty-- combined with near-record highs for active listings--had the Medicine Hat resale market favouring buyers in 2009.

"With more supply and fewer sales on the market, price growth has begun to reverse, causing potential buyers to wait to see if prices bottom out before signing a deed," says Kendall.

"As a result, the forecast calls for sales to fall in 2009. Price stabilization, combined with economic growth, should bring buyers back to the market, increasing sales in 2010."

Lethbridge

Of the seven largest centres in Alberta, Lethbridge is the only one that is not directly driven by the oil and gas industry, relying instead on food manufacturing.

This sector gained three per cent from August 2008 to this August, says Statistics Canada -- but it has not helped with employment.

"This sector is promoting economic activity in the Lethbridge region, although -- like the rest of the province -- Lethbridge is experiencing unemployment, which in turn is one factor contributing to lower demand for housing," says Kendall.

At the end of September, the unemployment rate was 6.9 per cent.

Construction of single-detached homes during the past three months boosted overall activity levels compared to the first half of the year.

However, single-detached homebuilders continue to control supply by cutting back on production compared to the previous year, as inventory levels remain high by historical standards.

With further drawdowns in inventory in order to manage supply levels -- combined with a healthier economy next year -- should allow for housing construction starts to increase in 2010, says CMHC.

In terms of resale housing, recent price declines and low mortgage rates have boosted sales in the summer months, while the amount of supply -- or active listings -- on the market has declined.

"With these positive signs, sales in 2009 are expected to decline by six per cent compared to 2008," says Kendall. "As the economy improves next year -- combined with signs of price stabilization -- more buyers are expected to hit the market."

Prices in 2009 are expected to decline from 2008 levels.

Balanced market conditions returned in the second quarter of this year, resulting in upward price pressures.

As the economy moves into positive territory, resulting in job growth, further upward price pressure is expected in 2010.

Grande Prairie

Natural resource-based industries account for 20 per cent of this city's economy.

The natural gas sector is particularly important because it creates spinoff jobs in other areas of the economy, such as wholesale and retail trade.

In September, the average price for natural gas was down 60 per cent from a year earlier, leading to reduced drilling activity.

The total number of active drilling rigs to the end of the third quarter was down by one-half compared to 2008, while the utilization rate sat at below 20 per cent.

As a result, employment growth declined in the Grande Prairie-Athabasca region, which also encompasses Peace River, Slave Lake, High Level and Whitecourt.

After the first quarter of this year, average employment in the region stood at 132,600 people. But by the end of September, it had declined to 131,700.

As in other centres, homebuilders have focused much of their attention on reducing standing inventory in response to weaker demand.

"Single-detached starts activity has been lower in the first half of 2009. However, there have been some signs of improvement since then as inventory levels have moved lower," says Fang Qin, market analyst for CMHC.

in 2010, construction starts of detached housing are expected to increase compared to 2009.

As for the resale market, it will likely be next year before it improves because economic uncertainty has held buyers to the sidelines for much of the year, says Qin.

This has also resulted in higher inventory levels and softening prices in 2009. But the average price is expected to stabilize in 2010 as the economy improves and supply levels move closer to being balanced.

Wood Buffalo

Oilsands development is the main economic driver in Wood Buffalo, which has Fort McMurray as its population and administrative centre.

As of June, there were more than $104 billion worth of projects either being proposed, under construction or recently completed in the region, down $10 billion from December 2008.

More than 91 per cent of these investments were in the oil-sands.

With an economy anchored solidly in oil -- and with the price of oil improving recently from a low of $39 US per barrel in February to $70 by September -- some projects that were placed on hold have restarted.

Others remain on hold or delayed until economic conditions further improve.

There have also been signs that employment in the region is starting to see some signs of recovery.

"Employment has recorded five consecutive month-over-month increases to the end of September," says Oin. "Correspondingly, year-to-date average employment losses have been declining."

Unemployment has moved lower to 4.6 per cent in September, down from 6.8 per cent earlier in the year.

As with all other centres in the province, builders are reducing construction this year because of stronger competition from the resale market, as well as an elevated number of units under construction. "There have been some signs of higher starts activity and this is expected to carry into 2010," says Qin.

Strong price growth in recent years -- coupled with economic uncertainty -- contributed to a weak level of activity in the first quarter on the resale market.

Although activity has picked up since the summer, sales are expected to finish 2009 down from last year.

An improvement in economic conditions is expected to support higher sales in 2010.

Prices have been decreasing year-over-year during 2009 because elevated supply levels have persisted in the market for much of the year.

The decline in the average price is not expected to reverse until 2010, in line with an expected economic recovery”.