CMHC Market Outlook

I am puzzled by CMHC's Alberta reseale price forecasts released in the latest Housing Maket Outlook. They list several downward pressures yet forecast appreciation of 6.8% for Alberta in 2008.

A strong first half of 2007 will push existing home sales in Alberta toward last year's record, totalling 74,000 transactions. In the summer, a surge in listings has slowed the rate of price growth considerably and buyers have become increasingly resistant to the recent run up in prices. Consequently, sales are now on a downward trend. In the face of weaker migration, this trend will continue in 2008 with sales falling five per cent to 70,000 units. Following a 24 per cent gain in average price in 2007, a flurry of listings and weaker sales will limit price growth in Alberta to seven per cent in 2008, the weakest annual gain in four years.

CMHC appears to use a downward sloping supply curve in their models where higher prices will lead to less supply:

In Alberta, weaker migration, higher resale selection, and rapid price growth will lead to a slower rate of new home construction this year and next.

Note that the CMHC had the same price appreciation forecast for Alberta in the forth quarter in 2005. Up to $235,000 in 2006! This is with "oil price at nearly $70 US a barrel" and "$70
billion in oil sands spending is planned in the Wood Buffalo-Athabasca region over the next decade" factored in.

CMHC Q4 2005 Housing Market Outlook
2004 194,769 6.5%
2005(F) 220,00 13.0%
2006(F) 235,000 6.8%

CMHC Q4 2006 Housing Market Outlook
2005 218,266 12.1%
2006(F) 282,500 29.4%
2007(F) 318,000 12.6%

CMHC Q4 2007 Housing Market Outlook (Prairies)
2006 285,383 30.7%
2007(F) 355,000 24.4%
2008(F) 379,000 6.8%