‘Tis the Seasonality

The myth that Calgary real estate slows down during the Stampede was busted this past summer.  When it comes to the winter holidays, however, there is definitely a marked drop off in activity.

Not only is December historically the slowest month of the year, but the majority of sales occur in the first two weeks of the month.

December is the slowest month in Calgary real estate

December is the slowest month in Calgary real estate

In the past decade, overall home sales between December 1-14 have been 16% higher than sales made from December 15-31 despite three fewer days in comparison.

Some sellers withdraw their home from the market around the holidays so as not to be disturbed.  Home shopping takes a back seat for many buyers.  The kids are on winter break.  Many real estate, lawyer and mortgage offices are closed for a couple days at least.

That’s the great thing about seasonality – it’s for the most part, predictable.  For example, there were 646 sales in the first two weeks of this month.  Seasonality dictates that at the end of the month, sales will likely be under 1200 – and that’s not accounting for outside forces such as the negativity around oil prices.

I’ll check back and update this post on January 1st :)

December sales are front-loaded

December 1-14, 2014 Calgary Real Estate Market Update

bearCalgary home sales after two weeks in December were up by a meager 9 sales, only 1.4% year-over-year growth. Sales could fall below year ago levels.  Falling sales is a precursor to falling prices.

bullThe 646 sales MTD is the best pace the month has seen since 2007 and just above the 10-year historical average.  Even if sales falter, one or two months does not make a trend. Sales were also down on an annual basis in February & March 2013 before going 20 consecutive months with y/y gains.

bear New listings have spiked 35% and active listings are up nearly 30% y/y. The sales-to-new-listing ratio for Calgary MTD has plummeted to 81.77% from 109.08% during the same period a year ago.  Single family from 108.4% to 84.84%, condo-apt from 92.91% to 72.41% and townhomes from 145.31% to 83.18%.  If sales drop off in 2015 as many expect, inventory will continue to grow and result in depressed prices.

bull At this juncture, increased supply is a welcome development in a market that’s been tilted in favor of sellers for so long.  Annual price gains in the double-digits isn’t sustainable. A sales-to-new-listings ratio of 81% will result in comparatively muted price growth, but still growth.  A balanced market has a ratio of 40-60%.  Anything above that is regarded as a seller’s market, anything below, a buyer’s.

bear Oil prices.

TD Economics:  The recent plunge in oil prices is likely to temper activity in housing next year. On a regional basis, the drop in oil prices is expected to hamper employment and income growth in commodity driven markets such as Calgary and Edmonton. Prior to the slide in oil prices, these markets were considered front-runners in Canada’s housing market but are now expected to soften over the near-term as the low oil price environment persists (Read full bank commentary here pdf )

BMO Economics: The slide in oil prices is going to take some, if not all, of the steam out of Calgary and Edmonton—and it may be doing so already.  As Alberta-wide economic growth slows below the national average next year, inward migration will likely weaken as well, and flows from other provinces have been adding roughly a full percentage point to population growth in recent years …Canada’s housing market continues to look balanced on a national basis, with strong price growth still coming from 3 select cities—and suffice it so say that Calgary can be soon crossed off that list. (Read full bank commentary here  pdf)

bull Granted, oil prices are the unknown variable for 2015.  How low for how long?  In the near-term, potential home buyers may choose to wait on the sidelines to see how events transpire.  If oil prices recover a few months down the road, we could see a bit of pent-up demand released for the spring/summer market once confidence is regained.

bear  If oil recovers that quickly.  It won’t.

 

sales-to-new-listings - Dec 14 2014

Calgary sales Dec 14 2014

Calgary home sales, Dec 1-14, Y/Y comparison

Calgary luxury sales Dec 14 2014

Calgary luxury homes sales ($1M+), Dec 1-14, Y/Y comparison

Calgary real estate stats summary, Y/Y comparison

Calgary real estate stats summary, Y/Y comparison

Canadian Housing Market Report: November 2014

Download the full CREA statistics report for November 2014: click here

November 2014 Report Highlights

house•National home sales were unchanged from October to November.
• Actual (not seasonally adjusted) activity stood 2.7% above November 2013 levels.
• The number of newly listed homes edged down 0.4% from October to November.
• The Canadian housing market remains balanced.
• The MLS® Home Price Index (HPI) rose 5.2% year-over-year in November.
• The national average sale price rose 5.7% on a year-over-year basis in November.

Bank Commentary

TD Economics:  The recent plunge in oil prices is likely to temper activity in housing next year. On a regional basis, the drop in oil prices is expected to hamper employment and income growth in commodity driven markets such as Calgary and Edmonton. Prior to the slide in oil prices, these markets were considered front-runners in Canada’s housing market but are now expected to soften over the near-term as the low oil price environment persists.

Outside of these markets, a stable unemployment rate and still low interest rates will remain supportive of housing. That said, a change in sentiment regarding Canada’s economic prospects given the recent drop in oil prices may push some homebuyers onto the sidelines. (Read full bank commentary here pdf )

BMO Economics: The slide in oil prices is going to take some, if not all, of the steam out of Calgary and Edmonton—and it may be doing so already. Sales in Calgary grew a tame 5.5% y/y in November, while new listings jumped 15% y/y. Early-December results from the city are more glaring, with sales flat and new listings popping more than 35% y/y. True, December is a slow month with a small sample, but that, combined with November’s result, is a decent hint that Calgary’s market could be rolling over.

As Alberta-wide economic growth slows below the national average next year, inward migration will likely weaken as well, and flows from other provinces have been adding roughly a full percentage point to population growth in recent years …Canada’s housing market continues to look balanced on a national
basis, with strong price growth still coming from 3 select cities—and suffice it so say that Calgary can be soon crossed off that list. (Read full bank commentary here  pdf)

Royal Bank:  In Calgary, strong back-to-back increases in new listings may have been early signs of a rush to the exit by sellers in light of the sharp drop in oil prices. At this stage, greater supply helps bringing better balance in the very tight Calgary market and should be seen as a positive factor.

Looking ahead, we continue to expect that the next stage of the housing
cycle will be a transition to lower resale levels—closer to the long term average—and that the rate of price increases will moderate. (Read full bank commentary here  pdf)

CREA Revises 2015 Forecast Upwards

CREA News Release

The Canadian Real Estate Association (CREA) has updated its forecast for home sales activity via the Multiple Listing Service® (MLS®) Systems of Canadian real estate Boards and Associations for 2014 and 2015.

With mortgage rates remaining at historic lows since the summer, activity has remained stronger for longer than previously expected and has yet to show clear signs of fading.

As a result, the forecast for annual sales in 2014 and 2015 has been upwardly revised. Almost all of the upward revision to national activity in both years stems from the current strength and momentum of sales across most of British Columbia and much of Ontario, particularly in the Greater Golden Horseshoe region.

In 2015, Canadian exports, job growth and incomes are expected to improve with mortgage interest rates edging only slightly higher. These opposing factors should benefit sales activity in housing markets where demand has been softer and prices have remained more affordable. Sales in relatively less affordable
housing markets are expected to be more sensitive to higher mortgage interest rates.

National activity is now forecast to reach 485,200 units in 2015, representing a year-over-year increase of 0.8 per cent. While sales nationally are still expected to peak this year and trend lower throughout 2015, they are not expected to return to weakened levels recorded in the first quarter of 2014.

To download the entire media release, click here

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Sales were revised slightly higher for Alberta, from 71,900 to 72,300 which would represent only a 0.1% y/y increase using projected 2014 year-end figures.

Alberta average prices are expected to rise 1.9% y/y to $407,900, just below the previous estimate of $408,000 made back in September.

Forecast Comparison, current vs September's

Forecast Comparison, current vs September’s

Home Price Recovery Varies Across Calgary

It was only this past June that saw overall Calgary condo-apartment prices finally recover from previous highs.  However, there are still communities with benchmark prices below 2007 levels.

Year-to-date, eight communities have had at least 100 condo-apartment sales on MLS®:

  1. Connaught: 447
  2. Victoria Park: 267
  3. McKenzie Towne: 144
  4. Mission: 122
  5. Lower Mount Royal: 121
  6. Spruce Cliff: 116
  7. Panorama Hills: 108
  8. Downtown: 107

Together, they make up 32% of the apartments sold from January through November.

Of those eight communities, three still have benchmark prices that were well below their 2007 peak as of last month.

All eight communities reached their 2007 high within a four month span. The apartments located right downtown began their price recovery roughly two years sooner than the rest and have surpassed their 2007 prices.

Benchmark Prices Still Below 2007 Peak

McKenzie Towne
Peak: June 2007, $287,400
Trough: February 2011, $207,500 (-27.8%)
Current: November 2014, $258,400 (+24.5%)
% below peak: -10.1%

Spruce Cliff
Peak: June 2007, $420,700
Trough: December 2011, $257,200 (-38.9%)
Current: November 2014, $333,300 (+29.6%)
% below peak: -20.8%

Panorama Hills
Peak: September 2007, $295,100
Trough: January 2012:  $217,200 (-26.4%)
Current: November 2014: $272,200  (+25.3%)
% below peak: -7.8%

Benchmark Prices Above 2007 Peak

Connaught
2007 Peak: June 2007, $289,200
Trough: March 2009, $229,500 (-20.6%)
Current: November 2014, $314,000 (+36.8)
% above 2007 peak: +8.6%

Victoria Park
2007 Peak: July 2007, $293,300
Trough: January 2009, $229,700 (-21.7%)
Current: November 2014, $351,400 (+53%)
% above 2007 peak: +19.8%

Mission
2007 Peak: July 2007, $263,200
Trough: February 2009, $201,900 (-23.3%)
Current: November 2014, $265,900 (+31.7%)
% above 2007 peak: +1%

Lower Mount Royal
2007 Peak: July 2007, $311,400
Trough: July 2009, $239,600  (-23.1%)
Current: November 2014, $321,000 (+34%)
% above 2007 peak: +3.1%

Downtown
2007 Peak: August 2007, $251,200
Trough: February 2009, $181,300 (-27.8%)
Current: November 2014, $272,200 (+50.1%)
% above 2007 peak: +8.4%

Calgary statistics are general and mask varying community trends.  Interested in how the real estate market in your community is doing?  Leave a comment below with the type of housing (single, apartment or townhome) and your neighborhood.

Source for above condo-apartment statistics: CREB®
Download apartment-condo stats for the 8 communities here pdf

Overnight Rate Hike – When? (Prediction Roundup)

The last time we read: “Bank of Canada increases overnight rate target” was back in September 2010.   It has remained unchanged at 1% ever since.

Correctly predicting when the Bank of Canada will raise the rate has been elusive.  This previous roundup from 2011 shows just how difficult a task it has been.

Below is the most current predictions from the Big 5 and the OECD which range from this May to not anytime before 2016.

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OECD
Rate hike: May 2015 
Prediction date: November 25, 2014
“The timing and pace will depend on economic developments, but it is assumed in this projection that the first policy rate increase in late May of 2015 and that the rate rises steadily thereafter.” (Source)

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CIBC
Rate hike: Q3 2015
Prediction date: December 8, 2014
First 0.25% rate hike will be in the third quarter of 2015 and another 0.25% uptick the following quarter where it will pause at 1.5% into 2016. (Source)

CIBC rate outlook (click to enlarge image)

CIBC rate outlook (click to enlarge image)

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Royal Bank
Rate hike: Q3 2015
Prediction date: December 12, 2014
RBC is projecting no overnight rate hike until Q3 2015, afterwards 0.25% increase every QTR for the following year, and then a 0.5% jump in Q3 2016 (Source)

RBC interest rate outlook (click to enlarge)

RBC rate outlook (click to enlarge)

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TD Bank
Rate hike: Q4 2015
Prediction date: December 10, 2015
“In addition to focusing on these key risks, the FSR dedicated significant discussion to the negative impacts that higher long term rates could have in terms of causing the risks to be realized. This suggests that despite a string of recent positive economic data, the Bank of Canada is likely to be cautious in raising rates. As a result, we continue to expect the Bank of Canada to keep the policy rate unchanged until the final quarter of 2015.”  (Source)

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BMO
Rate hike: Q4 2015
Prediction date: December 12, 2014
BMO forecasts no hike in the overnight rate until Q4 2015, followed by 0.25% every QTR until at least Q3 2016 (Source)

BMO rate outlook (click to enlarge)

BMO rate outlook (click to enlarge)

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Scotiabank 
Rate hike: not before 2016
Prediction date: December 5, 2014
“[Poloz is] likely to take the message that, contrary to the OECD’s forecast, he is nowhere close to raising interest rates.  Our view remains that the central bank will be on hold throughout at least all of next year.” (Source)

Calgary Annual House Price Growth Accelerates In November

I tend to look over the charts for an overview before reading the actual report, so today’s Teranet-National Bank HPI release jolted me.   Bear in mind that in the previous month, Calgary’s annual price growth was 9.1%.  I was expecting something similar if not perhaps a little lower for November.

Yowza

Yowza!

Thankfully, the 1.4% is a data error. (Teranet’s chart was incorrect, figures in the report are accurate)

Calgary annual price inflation actually accelerated slightly from 9.1% in October to 9.2% in November.  Once again, it was the highest growth rate in the country.

Month-over-month, prices declined -0.2% (not the -0.3% the chart states) to end Calgary’s streak with no declines at 10 consecutive months.  The last time Calgary’s index dropped on a monthly basis? November and December 2013.

Exactly a year ago, I disagreed with Teranet-National Bank’s assessment that “there is no significant upside in prices at the national level in the upcoming months.”  To read why: click here

In the past year, prices across Canada ended up increasing over 5%.

Bank Commentary

TD Economics:  While home prices in Canada’s 11 major cities may have edged down slightly in November, they still remain quite elevated, hovering near record highs. Moreover, while the decline was fairly broad based, prices in several key cities are well up from year-ago levels. Going forward, solid momentum in the job market over the past few months, combined with an
ultra-low interest rate environment should continue to support the housing market in the near term. However, as interest rates creep up in the latter half of next year and into 2016, affordability will erode, resulting in a moderation in home price growth. (Read full commentary here pdf)

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The Teranet–National Bank House Price Index™ is estimated by tracking ob­served or registered home prices over time using data collected from public land registries. All dwellings that have been sold at least twice are considered in the calculation of the index