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Oil is Falling.... Is the Sky Falling Too?


Blog by Sara Kalke | December 10th, 2014


So.  Let's talk oil prices. 

Regarding oil prices and economic forecast for Alberta.  Note in particular the graph of world market chronology since 2000:  http://en.wikipedia.org/wiki/World_oil_market_chronology_from_2000, the oil price drop in 2009,

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and the corresponding price correction in the Calgary market (Edmonton not available, but followed the Calgary trend) in the MLS housing price index: https://www.dropbox.com/s/pd82ffwnc5lb49y/Screenshot%202014-12-10%2012.38.58.png?dl=0

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Full source available at http://homepriceindex.ca/hpi_tool_en.html


What I remember from the last oil price drop (2009) was that we experienced a very minimal slowdown in spite of a huge amount of fear and anxiety.  The US economy was still experiencing record lows, and a great deal of uncertainty surrounding their real estate market.  Our market had a small blip compared to other areas, and our economy relatively speaking remained extremely strong.

What will happen in the future?  I do not know and I definitely am not a high level economist (see articles below regarding their thoughts).  My expectation is that we might see a slowdown of inmigration from other provinces, a slowdown in our astronomical housing starts numbers, and likely a small correction in the housing numbers.  Is it possible that the sky will fall?  Absolutely.  Is it possible that we will have a similar outcome to 2009/2010?  Also, absolutely. 

We have been very spoiled in Alberta with fast returns on real estate investments.  I like to remind clients and myself that historically, real estate has been an excellent LONG TERM investment, and a terrible short term investment.  For the average Canadian homeowner, real estate ownership has meant costs such as home maintenance and repairs, mortgage interest, taxes, etc etc., but the benefit of course is a long-term savings plan and the freedom of living in your own home. 

I hope that helps shed some (okay probably too much) light on your text from late last night with regard to the real estate market here.  Really to sum up I don't know what will happen, but can give stats on what happened last time. 

Let me know if you have any questions!
Sara



Additional Resources:

Third Quarter Market Analysis 2014, REALTORS Association of Edmonton (attached).

Suncor - Petro Canada Merger information, effective 2009:  http://www.suncor.com/en/newsroom/5445.aspx?id=2335569

Real Estate Investment Network - Calgary and Edmonton top ranked: http://www.calgaryherald.com/business/Calgary+Edmonton+investment+markets+real+estate+Alberta/10352513/story.html