Monday, July 27, 2009

CONSUMER CONFIDENCE


Demand Rising
Buyers get into ownership
By Marty Hope
Calgary Herald
July 25, 2009

Just a few short months ago, the forecast for single-family building lots was about as cold as the weather--and the economy.

In the interim, though, land developers have started to move lots to support builders, who are seeing consumers warming to the idea of home ownership.

"We're well ahead of our budget for the year," says Michael Dutczak, senior vice-president of Alberta land for Carma Developers. "We're ahead of where we wanted to be by September and I'm confident we'll sell in excess of 1,100 lots this year."

Back in January, the company forecast was for 800 lots to come to the market during 2009.

But consumers responded to record low mortgage rates and lower house prices.

There was also an increase in confidence-- that maybe the economy was coming back sooner than expected.

For builders and developers, Dutczak says the increase in activity is also being helped by the strong pace of sales of used homes. Because sales are up and inventory is down, more house hunters are starting to look at new homes to get what they want.

Since January, monthly sales have more than tripled and the catalogue of available homes has dwindled to a two-month supply, down from 11months at the beginning of the year.

"A rise in demand, along with fewer listings, has helped bring supply into balance with demand," says Bonnie Wegerich, president of the Calgary Real Estate Board.

Don McLeod, chairman of the Calgary chapter of the Urban De-Development velopment Institute, is also feeling better about the industry's fortunes.

In an interview in late January,

McLeod expected a maximum of 1,000 single-family lots to be brought to the market this year, saying there was a serious lack of demand and that builders had as much inventory as they could use.

Fast forward to a recent warm day in July.

"There's some optimism out there," says McLeod. "Consumer confidence is growing, rates are still low, the resale market is moving well and the quality of traffic into builders' show homes is much better."

He is now looking at somewhere between 3,000 and 3,500 lots to be brought on the market.

While he says contractors are still working at only half their capacity, the future looks brighter.

"This is promising," he says. "There's no one large development coming on, just new phases to existing communities, but at least it's something positive."

Among the more active areas in communities surrounding Calgary, Airdrie has brought on 267 lots, with another 138 in Cochrane.

Inside Calgary, the north-central area has 420 new single-family lots, with another 610 in the south--with Carma's New Brighton accounting for about one quarter of the total, says McLeod.

It was in New Brighton where homebuyers Tyler Schlosser and Liz Fleming decided to purchase a spec house built by Carma subsidiary Heartland Homes.

Such houses are built in advance for people who don't want to order a home, then wait for it to be constructed.

The couple

started making the rounds of southeast show homes in January. Two months later, they and their golden retriever, Drako, moved into Heartland's Belvedere model.

"The house we bought was the very first one we looked at," says Schlosser. "We looked around at others, but came back to this one."

The layout of the home was what Schlosser and

Fleming were looking for--open concept with plenty of upgrades, such as tile and hardwood flooring.

"And then there was the price," says Schlosser. "We looked at others, but none could offer what we were getting for the price we paid."

This is the first home for Fleming, who was living with friends.

As for Schlosser, he moved from an 800-square-foot condo that he will continue to rent.

"We started talking about things and decided to move in together because it would be more affordable than me paying a mortgage on the condo and her paying rent on an apartment," he says.

New Brighton has proven to be successful suc-cessful for Carma because of its mix of housing styles and prices, as well as community facilities and green space, says Dutczak.

"We developed New Brighton to cater to the needs of young families either starting out or moving up in the marketplace--and having the amenities ameni-ties of McKenzie Towne next door doesn't hurt either," he says.

Carma is a long way from being finished with this southeast neighbourhood.

Dutczak estimates that another five years of work is still to be done, bringing the number of single-family homes to 4,000.

He also says that when Carma's other southeast communities, such as Cranston and Auburn Bay, are added to the mix, the developer has a 10-year supply of land.

In the north-central area, Dutczak estimates the company has enough land for the next 15 to 20 years.

Because builders are seeing the bulk of the renewed market activity in entry-level price ranges, that's the type of lots developers are bringing to the table.

But homes in higher prices are slowly resurfacing as the market gradually improves.

"It'll take time to work through this whole thing, but this is a good beginning," says McLeod.

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