Market Comment - True to expectations, the market started the New Year slowly with sales well behind last year's pace.  The constant barrage of negative economic press from the US seems to be taking its' toll on consumer confidence even in Alberta where optimism has typically run high.  While low oil prices have been a boon at the pumps, they have also caused enough concern here to slow things down in the oil industry which I believe has had a bigger impact on our market than what is going on elsewhere.

There is much debate about oil prices and where they are headed.  Like everything else, there are at least two opinions, but it seems that low prices are due to lower demand caused by the world economic slowdown.  It also appears that when prices were escalating oil was being hoarded.  With prices at their lowest point in years, that hoarded oil is being used which further reduces the demand for new production.

The debate centres around when the excess supply will be used up and the market return to a more balanced position.  Just like housing, the price of oil is determined by supply and demand and despite manipulation by oil companies and organizations like OPEC, it will eventually find its' level.  I don't think anyone expects current pricing to last very long.  Once prices turn the corner it won't take long for the outlook in Alberta to change completely.

In the meantime, our housing inventory remains at very manageable levels, well below what other areas in Alberta are experiencing.  The sales we are seeing this month are the extremely well priced properties and it's apparent by the viewing activity that there are buyers out there who believe that prices will still come down since they are holding off making a buying decision.

The great news for buyers is that prices have come down more than they may be aware.  In addition to lower asking prices, falling mortgage rates have effectively reduced prices even more.  For example, a $250,000 mortgage at 4.9% (a widely available rate today) with a 25 year amortization will cost a homeowner almost $20,000 less over a five year term than the same mortgage at 6.5%, the rate a buyer would have been faced with about a year ago.

The mortgage payments in the above example would be more than $200 per month lower which also makes it much easier for a buyer to qualify for that mortgage.

Of course, those people considering a move up or down in this market have lost equity in their existing homes from the peak in 2006, but will not lose anything in their move because the home they are buying will have a lower price that's relative to the one they are selling, and as a bonus, they too will gain from lower mortgage rates.

Buyers have a couple of additional benefits they haven't seen for several years.  A great selection of homes to choose from in the resale market and, if they prefer a new home, lower new home prices, a quicker build time and quite likely better quality since things have returned to a normal pace and the highly qualified trades have time to focus better on their jobs.  With all these benefits more available in a slower market, it makes sense that astute people are considering buying now while those conditions still exist.