Question of balanceNobody in the housebuilding industry wants to see a repeat this year of the record-breaking strong pace of 2006 -- or for that matter, the surge, then decline, of 2007.
All the industry would like to see for 2008 is a return to more sustainable, normal levels of sales and construction, something that was most definitely missing in the previous two years.
For much of 2006 and the first half of 2007, Calgary builders, and their tradespeople and suppliers, were run off their feet trying to keep up with demand. Suddenly, struggling under the weight of an excess of resale homes on the Calgary Real Estate Board's MLS listings system, and a shortage of serviced lots and available land, builders saw their market sputter in the latter part of last year.
With 2008 just a couple of weeks old, builders are keeping their fingers crossed and their eyes on land availability, city approvals and resale activity in hopes that demand for new homes will be revived.
"I don't really know when it happened, maybe sometime around July, but it was like somebody turned the tap off," says Bill Beattie, president of Beattie Homes, when describing the change in the industry's fortunes.
There has always been a healthy level of competition between the new and resale sectors of the city's housing industry, but when CREB's resale inventory climbed to monthly levels as high as 11,000 homes, the fallout visibly affected new homes.
Only one of a dozen builders contacted was able to say it had reached its sales projection for 2007. "We were doing fairly well with our budget until the MLS supply increased and the subsequent softening in the new home market caused us to fall short of our 2007 sales budget," says Dave Gladney, vice-president of sales with Morrison Homes.
With 2006 and the first half of 2007 so strong, developers brought on more land to feed the insatiable consumer demand for homes -- and that hunger was so intense, communities and phases within communities were gobbled up rapidly.
"We're like a lot of other builders," says Shane Wenzel, senior vice-president of sales and marketing for Shane Homes.
"What were supposed to be long-term subdivisions finished earlier than expected and now it will likely take longer to bring new ones on. It might even be the middle of the year before we see that."
While all are forecasting -- or hoping -- for a more balanced, normal market akin to 2005, there is still that nagging uncertainty of what 2008 has in store that has forced builders to rein in their projections for this year.
"I think we'll see a general reduction in activity," says Jim Moir, executive vice-president of housing for Jayman MasterBuilt. "Some communities are winding up and other will be starting, so there will be varying levels of sales and construction depending on where a builder is building."
Canada Mortgage and Housing Corp. predicts construction starts of single-family homes will reach 7,250 this year, down from 8,000 in 2007 and well off the record-setting 2006 when work started on 10,482.
The following is a list of individual builder sales projections for 2008 and comparisons with 2007:
- 2007 sales projection: 210.
- Actual sales: 155.
- 2008 projection: 150.
"We have communities in transition. It will be a more normal market and I'm comfortable with our 2008 total," says Allan Klassen, president and managing partner of Albi Homes.
- 2007 sales projection: 430.
- Actual sales: 240.
- 2008 sales projection: 205.
"We've looked very seriously at our 2008 projection and because we don't see the MLS listings easing up for a few months yet, we don't see new sales picking up until later in the year," says company president Bill Beattie.
- 2007 sales projection: 650.
- Actual sales: 495.
- 2008 sales projection: 530.
"Prices will stabilize and you will see more promotions," says Calgary region president Don Stouffer. "We might have a decent first quarter, then the market will become normal by the second quarter."
- 2007 sales projection: 536.
- Actual sales: 582.
- 2008 sales projection: 455.
"I see demand falling back and sales and construction declining to more normal ranges," says vice-president Bruce Hall. "We're losing five or six communities this year -- some of them big ones."
- 2007 sales projection: 255.
- Actual sales: 152.
- 2008 sales projection: 185.
"We could exceed 185 sales with some other land positions we have coming to the market," says sales manager Dan Hippe. "We have lots of irons in the fire."
Homes by Avi
- 2007 sales projection: 518.
- Actual sales; 380.
- 2008 sales projection: 426.
"We have quite a few new areas with big land supply that will cover a wide variety of price bands," says senior vice-president Alice Mateyko. "By the start of the second quarter, the market will begin to strengthen."
- 2007 sales projection: 800.
- Actual sales: 720.
- 2008 sales projection: 765.
"For 2008, I see a general decline in activity, says executive vice-president Jim Moir. "Some communities are starting and others finishing, so there will be varying levels of sales and construction depending on where a builder is building."
- 2007 sales projection: 425.
- Actual sales: 400.
- 2008 sales projection: 350.
"We're looking for a more normal, balanced market in 2008, with new land coming on for us in the fall," says vice-president of sales Dave Gladney.
- 2007 sales projection: 650.
- Actual sales: 550.
- 2008 sales projection: 400.
"The MLS market needs time to work through its inventory, but the market could be back to normal in four or five months," says Shane Wenzel, senior vice-president of sales and marketing. "We had some long-term subdivisions finish earlier than expected and new ones will likely come on by the middle of this year."
Sterling Group of Companies
- 2007 sales projections: 420.
- Actual sales: 330.
- 2008 sales projection: 375 to 400.
"We're optimistic the market will return late in the first quarter," says company general manager Bill Bobyk.
"MLS (resale housing listings) will come down and there will be more show home traffic. As for land, we'll be in a lot better shape than in 2007 and that will allow an uptick in sales."
- 2007 sales projection: 350.
- Actual sales: 325.
- 2008 sales projection: 360.
"We're going to have more good land positions within the city in 2008 and market indicators are looking good," says sales manager Kevin Hatch. "A lower GST and low mortgage rates will help affordability."
© The Calgary Herald 2008 (Saturday, January 12, 2008)