The housing market in Westlock has seen an increase in the number of listings for sale in the last six years, but not enough buyers to balance those numbers, a problem which extends beyond the area to the provincial and even national level.
Across Westlock County there are 92 listings on the Multiple Listing Service (MLS), of which 62 are homes, while the rest could be vacant lots. The town has 66 active listings (two are empty lots). These figures do not include the sale-by-owner homes.
“We have approximately 100 listings as an office,” said Trent Muller, managing broker at Muller Realty in the Town of Westlock, who confirmed that currently there are not enough buyers to accommodate those numbers.
Although this makes for good business, Muller would like to see demand rise to the level of supply.
According to researchers at Point2 Homes, the number of vacant or ‘ghost’ homes (developed properties which are unoccupied) in places like Grande Prairie has increased twofold between 2006 and 2016.
Grande Prairie, Leduc and Fort Saskatchewan are the only three cities in Canada where the number of vacant homes more than doubled in that time period.
“This jump in the number of vacant properties — and especially newly built vacant properties across Alberta — is mostly due to the uncertain economy and harsher labour market conditions. Additionally, higher mortgage rates and tougher mortgage financing rules were also influential, although to a smaller degree,” reads the Aug. 29 study.
Although focused on ‘ghost’ homes, the study did point to a major issue on the Canadian housing market in general, and a particular one for Alberta.
The situation in places like Vancouver or Toronto is quite different and has distinct driving factors behind the same phenomenon.
“It’s a typical problem for Alberta right now, and especially places like (Grande Prairie) … it’s a little more attached to the economics of the oil field. Westlock is only slightly attached, but that combined with a little bit of an agricultural business slump, I feel that we are in the same boat here. We’ve been building a supply of listings for the last … six years. Every year, there’s more people trying to sell than we have buyers and it’s kind of a snowball effect — every year you kind of add another layer. So we have an oversupply right now,” said Muller.
For him, the state of the housing market is worse now than it was in 2009.
A report on the Alberta housing market in 2018 from the Canadian Real Estate Association confirms that the pressures on the Westlock market which Muller observed mirror provincial ones in recent years.
“In addition to the challenging economic climate, the 2018 housing market also faced additional pressure throughout the year as consumers had to adjust to higher lending rates and stricter qualifications. These factors contributed to the overall pullback seen in the province. In 2018, provincial sales totaled 53,190 units, seven per cent below last year’s levels and the lowest sales activity since 2010.”
While realtors see a turn for the worse in the last six years, mayor Ralph Leriger pointed to the fact that there has been stability in the number of homes sold over the past few years.
He noted that the town has been “flatlining” for sales: 70 in 2016, 59 in 2017, 62 in 2018, 42 to date for 2019 according to MLS numbers.
“If you look at these stats, what’s really happened is the effects of the so-called ‘stress test’ that was put in place in January 2018.”
Leriger is referring to federal legislation which tests potential borrowers’ financial ability to purchase at an interest rate two per cent higher than the actual rate of their loan.
Additionally, borrowers must purchase insurance, especially first-time buyers who put a down payment less than 20 per cent the value of the home, which adds to the financial commitment. The stress test as the originator of the buy-sell conundrum might be true, were it not for this problem extending beyond 2018.
As for the numbers provided, a stable situation is not necessarily a good one. It is true that based on numbers of homes sold alone, it appears the town has been coasting. But a look at the percentage of homes sold out of listings available presents a different picture altogether.
With 42 homes sold until Aug. 30, there are still 66 active listings.
Although the Point2 Homes study remains unclear on whether or not the empty homes in Alberta are on the market, it does point to a trend of outward migration from specific Albertan towns (or from Alberta proper). It could also indicate that developers built, but there was no interest in buying so the homes remained empty.
The real estate market in Westlock points to a similar phenomenon, with more people looking to sell their homes than there are buyers.
According to Muller, “We have some people coming from out of town, a small percentage. The rest are mainly people moving around the area.”
The majority of buyers are thus local. This means that the buy-sell process in this area has to be self-sustainable since it works primarily on a recycle basis: people who want to downgrade create and sustain the market for those who want to upgrade and vice versa, for example.
The relatively higher number of sellers does indicate that people are looking to leave the area, since they are not contributing to balancing the available listings, creating some instability in the ratios.
This creates the potential for more vacant homes, but since currently it is so difficult to sell, the impact is mostly immediate and on the sellers for the most part.
For Muller, things are going in the right direction for the future.
“I feel that Alberta is going to come out of this recession in the next couple of years, and we’ll get back to a new normal, at which time the market will pick up and eventually reach an equilibrium between listings and buyers and at that time market values will increase again,” he said.
