“In 2005, [housing] prices were up 10 per cent. The following year, home prices surged another 50 per cent. The gains came to a halt five years ago, when the market began to weaken. Then, when the recession hit in 2008, panicked homeowners rushed to sell in near-record numbers, flooding the market with inventory and putting renewed pressure on prices.”
Number of Albertan Mortgage Deliquents is Double the National Average
May 5, 2011
While the rest of the country’s housing market has been booming despite the recession one city has struggled: Calgary.
And here’s why: Alberta’s economy is inextricably intertwined with oil prices. And, with pretty much all commodity-based economies, it’s both a blessing and a curse. The province’s boom in the early to mid 2000s was fueled by oil prices.
According to the Globe and Mail:
Since the beginning of the recession, oil prices have plummeted and rebounded to unprecedented levels once again in 2011. Alberta’s economy seems to be back on track as a result.
But, it takes some time for the economic benefits of a volatile market like oil to hit the rest of the industry. Let’s hope the effects reach the market before it’s too late.
0.83 percent of mortgage holders in Alberta haven’t managed to make a payment in the past three months (compared with 0.45 per cent in the rest of the country). And, with interest rates poised to rise, the landscape isn’t looking any better for the rest of the country. The potential saving grace is that oil price appreciation translates into a stronger housing market.
It’s not totally disastrous, though. To put it in perspective, the U.S. has an 8 percent mortgage default rate. And as prices at the pump rise, so too should the number of Albertans making their mortage payments.