Lethbridge Real Estate Market: On the Verge of What Exactly?

Real Estate Market QuestionsIt’s the question on everyone’s mind, but perhaps more so in a seemingly “no-news” market like Lethbridge real estate: what’s really going on and where is the market headed?

While there isn’t much news to tell right now, the underlying fundamentals are definitely worth a second look. Specifically, there are 3 key areas that, together, provide an intriguing picture of the Lethbridge real estate state of the union:

  1. Lethbridge Historic Home Prices
  2. Alberta Home Prices Versus Inflation
  3. The Bakken Oil Play

1) Lethbridge Historic Home Prices (Single Family Detached)

Lethbridge home prices have been relatively flat since the boom, and inventory remains somewhat heavy if you look at sales versus listings on the MLS® System combined with an uptick in single family housing starts. And while Lethbridge’s population growth is steady, it’s not nearly as robust as it was five years ago.

Looking back over the past ten years, you can see that we have little to complain about, however. Prices for single detached family homes* remain at historic highs:

Lethbridge Historic Home PricesOf course, those who bought during the boom have to live with the disappointment that they haven’t profited from their primary residence. But speculative buying generally isn’t the domain of home ownership. Home ownership is but a hedge against inflation. Which brings us to another key question:

2) Alberta Home Prices Versus the Canadian Price Index (Inflation)

The chart below paints an interesting—and possibly precarious—picture of Alberta house prices versus inflation over time:

CPI vs House Prices Alberta

Ben Rabidoux (TheEconomicAnalyst.com), who provided this chart, reminds us in a recent Globe and Mail article that house prices track inflation over time. In other words, one would expect to see these peak prices start to correct. However, Alberta’s strong economy may insulate us somewhat from the broader national trend, which does seem to indicate downward pressure on house prices.

3) The Bakken Oil Play

The above real estate stats should no doubt serve as cautionary notice to all homeowners. The American—and global—economic situation also create a backdrop of uncertainty. However, the Bakken oil play in southern Alberta introduces a compelling dynamic to the Lethbridge real estate equation. And, judging by the most recent news on this story, the numbers are starting to materialize.

The Bakken Formation which is found in parts of Canada and Montana also lays under areas of the city of Lethbridge. The 350 million-year-old formation holds about 500 billion barrels of oil, and has recently been deemed commercially viable.

‘They say it could rival similar fields is Saudi Arabia, so our expectation, certainly what we’re hearing is there is going to be more of this activity coming,’ says Jeff Greene, Director of Planning and Development for the City of Lethbridge.

~ Global Lethbridge, November 14, 2012

It would seem that the forces at play are pushing and pulling Lethbridge real estate in different directions. The Alberta economy is supporting high house prices, but conventional wisdom says this can’t last. Yet local conditions such as Bakken oil could stimulate significant economic growth for southern Alberta. The technology is in place, leaving us to speculate mainly on oil prices as a key driver of continued exploration and development.

Tell me then: what do YOU think this means for Lethbridge? In the short term or in the long term? I’d love to know your thoughts. Please share in the Comments!

*Lethbridge real estate market data provided by the Lethbridge and District Association of REALTORS® and compiled by Karri FlatlaInformation herein deemed reliable but not guaranteed.