First, tumbling oil prices forced a significant economic downturn in Fort McMurray, and then one of Canada’s biggest wildfires tore through the area, destroying more than 2,400 homes and buildings, and forcing the largest fire-related evacuation in Canada’s history.
The city that is the heart and soul of Alberta, and that drives the Canadian economy, has had more than its fair share of heartache in the last 24 months. I used to call Fort McMurray my home. It’s where I built my mortgage business, and I have seen the housing market fluctuate through ultimate highs and ultimate lows.
Twenty-four months ago, the housing market in Fort McMurray was a prime example of limited supply and high demand. The oil sector was humming along, and many Canadians were picking up their lives and families and relocating to Fort McMurray, as employment was indeed bountiful.
However, many things have changed since then. The question on a lot of people’s minds right now is: How long will it take for Fort McMurray’s housing market to correct? The answer to that is not a simple one, as this situation is unique. We can speculate and hypothesize based on numerous variables and factors, but the truth is, no one is really sure. Is this major disaster likely to kickstart Fort McMurray’s housing market? In short, the answer is yes. However, I believe an unknown timeline is at the forefront of this question.
I spoke with Mark Hartigan, a long-time resident and Realtor with Coldwell Banker in Fort McMurray, and his opinion was rather reflective of mine.
“Yes, the housing supply has decreased; thus, demand will rise, which will push prices higher,” he says. “However, there are a few other factors to consider. Many residents who have lost their homes may not be returning to Fort McMurray. For those who plan on returning, a lot of those residents will have to work through a lengthy insurance process prior to rebuilding or purchasing a new home in the region. Immigration into Fort McMurray has slowed down significantly due to minimal job opportunities in the oil industry. At the moment, I do not see prices increasing in the near future – again, timing is playing a big factor. Many also believe CMHC will try to control the housing market to make sure prices do not escalate quickly, although a nice steady rise is what we would like to see.”
As people assess their future plans, be it remaining and rebuilding, renting, or choosing to relocate outside of the city, forecasters will certainly get a better idea of how the city will adjust once residents start to settle back in.
The cost of constructing new homes will very likely go up. I spoke with a well-known local homebuilder, who indicated to me that the cost of lumber has already increased by 20%. Everyone will be trying to rebuild at the same time, contributing to a lack of contractors who can do it fast enough, and this will in turn drive the price of labour up. Considering that the average sale price has fallen 20.2% in the last year alone, this situation may very well end up having an unforeseen, yet positive, impact overall. We do know that a lot of new jobs will be created to rebuild the city; thus, we will begin to see an influx of people moving back to Fort McMurray. This tragedy may just offset the oil recession – not completely, but it may just give the city the boost it needs.
I would also like to mention and recognize how overwhelming it was to see the country come together from coast to coast to help the people of Fort McMurray. I am proud to say that the banks and lenders in our industry came to the table by not only offering some reprieve of financial obligations for their clients, but also by raising thousands of dollars for the victims of the Fort McMurray fires.
When will Fort McMurray’s housing market rebound? We don’t know. But we do know that it will – Fort McMurray is the city that rolls with the economic punches, the highs and the lows, and always comes out better than before.
Rayna Boychuk is a mortgage broker with Dominion Lending Centers Primex Mortgages and is based out of Coquitlam, BC.