Saline Creek is a new subdivision on the south side of Fort McMurray, Alberta's ever-expanding oil town. Lots are up for grabs, but sales have stalled – a new phenomenon in the city's real estate market.
The upper end of Fort McMurray's real estate market – houses priced around $850,000 and over – has slipped, according Brett Campbell, the team lead for ReMax's Wood Buffalo Property Group. As a result, home builders are staying on the sidelines when it comes to areas like Saline Creek.
"Our higher-end market has fallen quite a bit, to the point that a lot of the builders are putting the stops on new builds," Mr. Campbell said. "Typically, builders just jump all over the lots in Fort McMurray, but because of our current market, a lot of people have held back in terms of purchasing.
"That's kind of something we've never seen before."
Builders do not want to carry too much inventory until the market picks up. And in Alberta, and Fort McMurray in particular, the pace of housing sales is heavily influenced by the price of oil. Crude prices have skidded this fall, and the North American benchmark price for a barrel of oil closed at $82.09 (U.S.) on Thursday.
Fort McMurray's housing prices have suffered over the past few months as the price of oil slides, Mr. Campbell said. Single-family homes there sold for an average of $729,473 in September, according to the Fort McMurray Real Estate Board. In the same month last year, these properties sold for an average of $750,798. Single family homes in Fort McMurray sold for an average of $777,549 this February – the hottest month so far this year.
High-end buyers who work in the northern city, Mr. Campbell believes, have packed up for places like Calgary and Edmonton thanks to fly-in/fly-out programs popular with the country's oil sands companies. This has created a gap near the top end in Fort McMurray.
Employees who swap Fort McMurray for Calgary are likely able to trade up. The average price of a single family home in Calgary in September was $567,862, according to the Calgary Real Estate Board. That is 22 per cent less than the average sale price in Fort McMurray in the same month.
Fort McMurray's rental market has also softened, Mr. Campbell said. Many home buyers in that city insist on having a basement suite to rent out. (Many buyers, he said, have pay cheques fat enough to cover their mortgage payments, but had bought with small down payments. Basement suites help them build up equity faster). Rental rates for suites have stabilized around $2,100 to $2,600 per month now that suites are more common.
Mr. Campbell welcomes Fort McMurray's calmer real estate statistics.
"It is something that Fort McMurray needs. It is always a hot market. Just to see this correction is good because obviously a lot more people can get into a house rather than rent," he said. "That's their biggest frustration about Fort McMurray. They come here to try to make it – this is a place where they can make good money – but they end up paying a good majority of their income to their rental."