By Tom Bradley

As Canadians, we’re all intently watching to see what happens with the Alberta housing market. The province is being stress tested right now. Layoffs and capital budget cuts are as regular a news item as the weather.

It’s too early to tell what oil prices are going to do, but government and corporate behaviour would suggest that decision-makers are preparing for the worst.

Having visited Calgary the other week, I was impressed by how cool people are about this economic shock. They are worried, but from the small sample of people I talked to, there’s an acceptance that boom and bust is part of living in wild rose country.

Nonetheless, there have been a few news items in the last couple of weeks that demonstrate how a housing tailwind can turn into a headwind. As I’ve written previously, it doesn’t take much for a virtuous circle to turn into a downward spiral.

• House sales have slowed significantly.
  
• At the same time, listings have increased significantly. 
• And mortgage insurer Genworth said it’s increasing reserves against loan losses and scrutinizing new applications more closely.

Genworth’s reserve adjustment isn’t particularly noteworthy, but the ‘increased scrutiny’ could be the tip of the iceberg. Free and easy money has been a key driver of the real estate market. If credit conditions get tighter, this factor could fuel a downturn. Typically, when homeowners need accommodating lenders the most, the screws get tightened.

We’re all watching Alberta, but it’s still early days. If the oil price bounces back in the next few months, this could be a non-event. If the CEOs and government ministers are reading it correctly, however, it could be the beginning of the next, less enjoyable stage in the housing cycle.

Needless to say, I’m staying in touch with my Alberta relatives.