February 9, 2009

All Jobs Not Created Equally

Recently, Alberta's once seemingly invincible labour market has shown signs of fallibility. As of the latest Statistics Canada Labour Force Survey, Alberta had lost 16,800 jobs between November 2008-January 2009 (three month moving average, unadjusted for seasonality). But, as is illustrated by the graph below, employment loss within Alberta was highly varied by region.

The Camrose-Drumheller region was the hardest hit on a percentage of total employment basis; the number of employed people declined by 1,600 jobs, or 1.43%. Similarly, employment in Red Deer was down 1.21%, or 1,300 jobs.

In terms of total job losses, the Calgary and Edmonton regions have seen by far the largest drops. Calgary accounted for 7,700 (-1.0%) of Alberta's 16,800 job losses while employment in Edmonton contracted by 7,200 jobs (-1.1%). Since they are also by far the largest employment regions, the declines are not as high in percentage terms.

Interestingly, the regions on the West side of the province both experienced a gain in employment: Banff-Jasper-Rocky Mountain House had 400 new employees (+0.7%) and Athabasca-Grand Prairie-Peace River created 700 jobs (+0.52%).

It is difficult to say why there has been such disparity in employment across Alberta, but certain regions have shown more clear and pronounced trends. Wood Buffalo for instance, failed to add jobs for all of 2008 after experiencing unprecedented employment growth for most of the period 1999-2003 and 2006-2007.

Considering employment is a lagging economic indictor, it is likely that all regions will show negative employment growth over the next few months as the Alberta economy continues to slow.

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Friday » February 22 » 2008

Friday » February 22 » 2008

Expert recommends research and caution

Freelance

EDMONTON - Don Campbell couldn't believe a recent scene among wannabe

real estate investors at the corner of Yonge and Bloor streets in Toronto, site

of a planned condominium complex.

"People slept there overnight for four nights," said Campbell, president of

the Calgary-based Real Estate Investment Network and author of 51 Success

Stories from Canadian Real Estate Investors. "A sign up above read

'$500,000 to $1.3 million,' although you could go across the street and buy

something very similar for $425,000. Then the developer had the gall to

paste a six over the five to make it '$600,000 to $1.3 million,' and the crowd

cheered, saying 'Look, it's going up.' There was even a fight in the line.

"When you line up around a block with 200 people to buy the condo in the

sky that doesn't exist yet, put $20,000 down and plan to sell it as soon as

it's built, look in the lineup and tell me how many people have the exact

same mentality. Then all you need is for one guy to panic and drop his price

to get out, and the average price in the whole building goes down, and

you're completely at the whim of somebody else. You should only line up for

U2 tickets."

Campbell is concerned about novice investors not researching what they're

buying and what the market potential is. The most common mistakes are

investing for the short term, getting emotionally too high or too low as

markets move up and down, and buying the wrong property.

"If you don't have a long-term outlook, don't invest in real estate, go buy

gold or stocks and roll your dice. You have to make real estate boring,

because that means you're doing it right. Go jump out of an airplane with a

parachute if you want excitement. Right now I am telling everybody to buy

resale, to buy something built in 1997 or 1998, when there wasn't a frenzy

and people had the time to finish the properties."

Campbell is thankful the days of 38-and 42-per-cent annual price increases

in Alberta real estate are over.

"If I can find a market that gives me an eight-per-cent increase every year

and I'm putting 25 per cent down, that means I'm getting 33-per-cent

return on my money on a capital gains basis, and it's not a frenzy."

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He said Edmonton's housing prices, which fell 11.7 per cent during the last

half of 2007, will dip again this spring, then rebound during the second half

and be up 11 per cent on average during 2008. Calgary prices will be up 12

per cent, Red Deer 10 per cent and Grande Prairie 11 or 12 per cent.

"But in 2009, Grande Prairie and Peace River are going to go through the

roof. There's going to be a natural gas renaissance. If we're not drilling the

wells today, we're not going to have supply, and gas is going to go up to

$8.50 or $9, and therefore make the drilling go again."

Alberta's wealth will affect its neighbouring provinces.

"A lot of Albertans have made a lot of money in Alberta and they're throwing

it at places; there's no way economic fundamentals are driving Saskatoon

prices up 38 or 40 per cent year after year. Average weekly earnings are

down in Saskatchewan compared to Alberta. Can you do well in

Saskatchewan -- I think so, but I don't know so; in Alberta I know so.

"In B.C., it takes 73 per cent of your average income to buy an average

house in Vancouver. I love Fort St. John and Dawson Creek as an

investment in B.C. I'd be careful about most other regions. We're picking

Abbotsford, Chilliwack and Maple Ridge as the big winners in the Lower

Mainland. Vancouver Island I wouldn't touch with a 10-foot pole unless I'm

in Courtenay-Comox, which is serviced by WestJet and easy to get to by

wealthy Albertans. And right now I wouldn't touch a town that's only

forestry, because this pine beetle thing is massive -- the Williams Lake,

Quesnel, Prince George corridor is going to be devastated."

Campbell sees another hot spot in Canada.

"The Kitchener-Waterloo-Cambridge area in Ontario, which we call the

economic Alberta of Ontario, is driven not by automotives but by

universities, and it's going to do incredibly well."

Campbell says he wouldn't buy real estate in the U. S. until next February.

"We haven't seen anywhere near the full drop -- especially in the Phoenix,

Vegas, Florida areas. The foreclosures will start peaking around October,

which is about three months after the peak of the (mortgage interest rate)

resets. Then the foreclosures have to get on the market and drive the prices

down. If you're just going to go buy and live there, go do it. But if you're

going to do a quick flip or have renters in it, I think you're way too early,

especially if you're going to finance it. The dollar's going to be around 90 to

$1.10 for quite a while."

Ray Turchansky, a freelance writer and income tax preparer, writes

Wednesdays and Saturdays in The Journal. He may be contacted at

turchan@telusplanet.net

© The Edmonton Journal 2008

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DAILY

ECONOMIC COMMENT

Senior Economist Todd Hirsch

February 25, 2008

This report is prepared for general circulation to ATB Financial staff. The information contained is derived from sources believed to be reliable, but

ATB makes no guarantee as to the accuracy of the data. This information should not be construed as offering investment advice

For the second month in a row now, home prices in

Edmonton managed to post a small gain.

In January, the average MLS selling price in the city

was $332,000. That's up modestly from a low point

of $325,000 in November of last year. However, it

is still well down from the highs reached back in the

summer of 2007.

Part of what's driving the price increases in

Edmonton are the relatively greater gains being

made in the red-hot condo market.

Condos continued to be a popular choice in

Edmonton with the average selling prices rising

1.9% month-over-month to $258,000. The average

price for a single family dwelling, on the other hand,

dropped marginally (0.6%) to $380,000. Duplex and

rowhouse prices were down 1.7% to $302,000.

The inventory of unsold homes on the market in

the city popped back up in January after having

been on a steady downward trend since

September.

It's unclear why the inventory level rose. Perhaps

the fact that home prices have been on a bit of a

roll in the last couple of months has encouraged

more home owners to put their house on the

market. But the rise in the inventory level in

January is likely a bit of an anomaly. Typically,

the inventory of homes on the market doesn't

start to rise until the spring.

That home prices in Edmonton have stabilized

and are now showing some small increases is

good news for the overall real estate market in

the city. Wild price increases - or worse,

decreases - help neither the buyer nor the seller

in the long run. A predictable market with prices

showing steady but reasoned gains is the best.

Jan '07 - Jan '08

270

280

290

300

310

320

330

340

350

360

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

0

2,000

4,000

6,000

8,000

10,000

12,000

Ave. resid.

sale price

$000s (left

axis)

Unsold homes

on market

(right axis)

Source: Edmonton Real Estate Board