The Gist:

When it comes to predicting real estate bubbles, we can look to history to see how property values had risen to a climax in 2007, and then the reasons which caused property values to go down in 2008 including the US financial crisis, lenders taking high risks, etc.

• This continued into 2008 and seemed to only level out in 2010 and 2011. Once oil prices rose to $140/barrel in 2012-2013, we were doing pretty good in the housing market.

• From there, the drop in oil prices resulted in companies closing down and countless job losses in the process. We had a hardship that led to home equity dropping in 2015, which continued all the way until 2019.

Statistically, we haven’t seen a 7 year period in Canada where properties lost value and didn’t recover.

• We were really close to recovering, but then the world changed in 2020. The way it changed meant some things weren’t available anymore — entertainment’s hard to find, travel is extremely limited, and our focuses were solely on our homes, because that’s the only place where we were allowed.

• Families used to buy houses to live out of them. They wanted to go to the places around them, so the location of the house was really important to families to control commutes.

• With work from home, school from home, not being allowed out, and with some lockdown, many things have changed — Some of them are going to go back, but some of them are not.

• Employees have wanted to work from home for a long period of time because the commute can be a waste of time in many cases, and if the culture of a company isn’t dynamic, if being back in person isn’t anything more than accountability, then it’s going to be really tough to argue against the value of limiting commute time.

We’re going to see some interesting sweeps and changes, and thats what we’re speculating the bubble will look like.

• Edmonton is getting more and more affordable. In a situation where rising tides lift all ships, we might actually be a great contrasting option compared to Toronto and Vancouver. You can live here, in a major city centre that gives you amenities at a lower cost than other places.

• Could it be that by the end of 2021, Edmonton is talking about both affordable housing and jobs?

• If that’s the case, then in 2022 we could expect to see more people coming to live here than leaving, which hasn’t been the case for many years.

The condo market has been challenged the most, where there is usually only one buyer for every three sellers. In the general market, there was only one buyer for every two sellers, which means the seller has to out-compete others by offering better options at a lower price, so we saw properties decrease in value.

• In 2021, we’re starting to see the reasons that families chose to buy their last home has changed — they are no longer worried about commute times, and they need more space now because people have to work and school from home. This is causing them to move out to places where they can get larger properties at lower costs, like the suburbs.

• If their income didn’t get disrupted, they’re even upgrading because of the available money from a year of no travel or entertainment.

• From this, we’ve seen property values rising significantly to the point where someone shopping at the average price in Edmonton ($400k) may not be able to shop at their pre-approval limit anymore. It could be that the $400k properties are now selling at $410k, $415k, or $425k in the multiple offer situations we have been seeing.

• Single family properties are now really attractive. Duplexes are more attractive, because they’re now affordable to some of the groups who have been hoping to get a house. We’ve also seen townhomes lift, and we’re hoping that we’ll see apartment-style condos get some more action next.

So what’s next? What about this bubble? When is it going to change?

• In order for it to be a bubble, it has to rise, which we’re just seeing the beginning of.

• The families that are wanting to move but they last bought in 2015 have had an issue with not being able to afford the downpayment on their next home. As the market lifts a little bit and the value of their home goes up, they’re going to be able to do it.

• It’s going to be interesting because of the demand sequence. Because we’re talking to homeowners all the time, we know many people who wanted to move over the last few years and it didn’t make a lot of sense. And because we don’t force anybody, we just start relationships and provide information so they can make good decisions, we’re still in contact with these folks, and we’re starting to see numbers head in their direction.

If you’re looking at Edmonton right now and think that the bubble is going to burst, we think that right now if there is a bubble, you should enjoy it. We haven’t had any lift in awhile, which can mean that families are able to get what they want for a little bit.

It could end up perpetuating mostly because our market has been moving down, and the markets we’ve been watching and talking about in the news are the markets that have been rising for years in cases like Vancouver and Toronto.

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