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Local housing market continues on a steep decline

An increase in inventory, coupled with less buyers, has caused a major slide in local housing prices and experts say it's not over yet.
The average price of a Bonnyville home dropped seven per cent in 2015.
The average price of a Bonnyville home dropped seven per cent in 2015.

An increase in inventory, coupled with less buyers, has caused a major slide in local housing prices and experts say it's not over yet.

“You're looking at the amount of product on the market, it has increased substantially and the number of sales has decreased, prices have dropped,” said Gerry Storoschuck with Royal LePage Northern Lights Realty.

A realtor with Remax Bonnyville Realty, Vince Kelly echoed that sentiment, “Previously we didn't have a whole lot to offer...We have about 60 to 70 homes (for sale) in Bonnyville now, so about four times the number of homes on the market.”

The housing market has been on a downward trend since the end of 2014, following that of the oil industry. In an area once known for its high housing prices, homeownership is more within realm of reality for many as prices come down close to normal levels.

According to Kelly, over the last two years housing prices have dropped 14 per cent, with 2015 seeing a decrease of about seven per cent.

“It is kind of a good thing. It had gone up for so long, we kind of needed a reset,” said Kelly.

He added, “It's been slow...but it's been good for the people that are buying, they're seeing some big savings.”

Currently, it will cost the average buyer around $350,000 to get into a home in Bonnyville. While there is still the odd $600,000-range house that will sell, buyers are being more stringent with their budgets.

“People are purchasing more affordable homes. The higher end homes have come down a fair bit but people are still worried about job security I think,” Kelly noted.

Storoschuk added, “There was a time when you had a certain price range and boom, they were gone. Now you have 30 houses in that price range. There still are those people right now that want the new houses, but the lower to mid-range is going to be where the market place is.”

Being in the realty business since 1978, a dip in the market isn't anything Storoschuk hasn't seen before. With the low oil prices many are seeing flashbacks of the 2008 recession. In the realty world, this time around Storoschuk said the drop in the oil industry actually hit them much worse.

“This one's been a lot harder because it's dropped so drastically, in the past there's been a gradual reduction. It was just like somebody turned a valve off and boom, it hit us unexpectedly – not that we could have done anything about it.”

He added, “This is way worse. (Last time) it was reasonably flat, we had seen an increase, increase and then we were flat and after a couple years we started going again. This time, there was no flat line.”

It's not just houses for sale that are seeing an influx in inventory. The list of apartments and rental housing up for grabs is continually growing – something this area hasn't seen in quite a while.

“Rentals are not scarce right now, there's quite a few rentals, more so then there's ever been. The price of rentals has dropped dramatically. Before, you had to beg somebody and they charged whatever they wanted,” explained Storoschuk.

With the decline in the price of houses, Kelly expressed that could be freeing up the rental space as people are finally able to afford the down payment on a house.

“People had been paying huge rental rates $2,000 or $3,000, they can clearly afford a mortgage but it's just getting the downpayment. With the rental rates going down, we will see some of those tenants finally being able to save up and get over that hump to saving a downpayment.”

As of Jan. 10 the price of a barrel of oil was sitting at $33.16, Western Texas Intermediate. A looming royalty review and carbon tax has caused uncertainty to remain in the oil industry, and there are no expectations of a major rebound anytime soon. What does this mean for the housing market in 2016? Well, it's anyone's guess.

According to Storoschuk, predictions are that in the large cities, Edmonton, Calgary and Fort McMurray, housing prices are expected to drop even further before hitting a plateau. It's a trend he believes will be replicated locally.

“How much more is it going to drop? I don't know, but I think it will slide a little bit. It depends what the oil industry does. The government hasn't come out with the royalty plan yet, so a lot of uncertainty.”

Storoschuk added, “Inventory is high, the sales aren't dynamic, we just have to wait. I've seen it before, this is a little worse...if somebody doesn't have to sell, they want to retain their equity.”

Houses in the higher price range will be even harder to sell, after the federal Liberal government announced new rules for mortgages on houses worth over $500,000. The minimum down payment for a government-backed loan will jump from five per cent to 10 per cent on the portion of a house above $500,000. However, Storoschuk said that buyers in that price range usually have the cash to put 10 per cent down anyways.

While the market is slow right now, Kelly said it is those houses in the $300,000 range that are still selling, it's just taking a little longer. If the inventory keeps climbing there's a good chance prices will slide even further, but there's always the chance they won't.

“I think it's going to be competitive in the market, but we are going to see buyers take advantage of the prices. The prices might not go down any further, and that's something I want to stress,” said Kelly, adding that it's really up in the air right now.

“If there's a greater inventory, inevitably, yes, it will drive down the prices even further. I think we could see it slide a couple more percentage points.”

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