Edmonton’s real estate market can be quite similar to Calgary’s as both cities employ a great amount of workers in the oil industry. When oil prices change, we both enjoy the good times and the bad times together. It can be thought provoking to compare how the change of oil prices may impact home values.
Do you remember back in 1982 when oil prices were reaching record lows?
They actually went down to under $9 per barrel, and that had devastating effects on the economy. It caused thousands of people in Alberta to become unemployed and it led to the real estate market plummeting. Thousands of people ended up with interest rates that actually went over 20%. Unfortunately those high rates resulted in many giving their homes back to the bank because they couldn’t get their heads above water.
Why is it important to reference this story right now?
Because oil prices are dropping quickly and a lot of people are becoming concerned that they may lose their homes or have their equities wiped out. And while there is reason to have some worry because of past events, it’s important to realize that things aren’t changing immediately. An extended period of low oil prices is what will have the biggest impact on the housing market, as that can reduce migration and lead to massive job losses. Fortunately that has not happened yet, and that’s why experts have shared the facts.
Many industry experts in Canada forecast that home prices in 2015 will likely grow, but not at a very fast pace. In fact, Edmonton has estimated gains of 2.5% while the rest of the country has estimated a 2.9% gain. Home sales in Calgary is expected to be much quieter as well, but their real estate board is still optimistic that they will see a 1.58 per cent gain in property values.
This means that first-time home buyers will have a window of opportunity to enter the housing market and get the keys to their very first homes. This will help to keep the market steady despite the drop in oil prices that so many fear. And while homes will likely appreciate more slowly, it doesn’t mean that there will be massive price drops that cause home loss.
The biggest questions that are on most minds are:
– How long are oil prices going to stay as low as they are?
– What will happen when net migration ceases due to problems finding employment?
– Will people still want to purchase homes if oil prices do stay low?
Remember that even in 2006 when oil prices plunged again, Canada made it through relatively unscathed. Most home values didn’t drop anywhere near what people feared, and the price of oil actually recovered after just a few months. So while you might have fear for your home right now, it’s not something that you seriously need to worry about. Right now the housing market is expected to continue to grow, even if growth wasn’t what it was in the past.
What would you do if the price of oil plunged? Would you stay in the area despite the problems? While you might have an idea of how you would react, it’s hard to say how those who migrated to the area would. Right now it’s best to focus on other things and remember not to put too much worry into something that isn’t an imminent problem.