At least, that’s what some people (see: sellers) are hoping will happen to all the inventory that has been recently listed. Month-to-date, SFH inventory has been growing at an average of 40+ homes per day, and that’s even with subtracting the homes that sold.

For example on April 18th, there were 88 SFH’s that sold. Those are some solid sales numbers. Yet the inventory still jumped from 6685 on the 17th to 6741 at the time of writing this post today.

Year-over-year, the SFH average is down about $5k, the median down $7k. For Condos the average is up a few hundred dollars, and the median is up $3k.

A few people I’ve spoken to bought last summer, and decided to hold off selling their old home until the spring, expecting higher prices as has usually happened in the recent past. Others have purchased a home on the condition that theirs sells. How many sellers are in this situation?

There’s no denying that the amount of inventory on the market coupled with softer sales numbers will have the largest impact on prices here in the short term. Simplifying this scenario to basic supply-demand laws, this increased supply of homes with reduced sales volume should cause downward pressure on prices. How much pressure, and how soon… ?

Speaking about the Canadian real estate market as a whole, Douglas Porter, deputy chief economist for BMO Capital market says: “The real test will be how sales and prices fare in the crucial spring season. Sales will likely remain down from year-ago levels, as buyers show increasing caution in the face of the U.S. downturn and reduced affordability. Even so, average home prices are still likely to post moderate gains this year.” (Source)

It’s true that sales are down dramatically in Calgary and demand has diminished, but the sales numbers have to be kept in perspective considering the high level of sales experienced during the first quarter of 2007, said Lai Sing Louie, senior market analyst in Calgary for the Canada Mortgage and Housing Corp.

“(For) the first quarter 2007, the Calgary housing market was in seller’s market conditions and we were experiencing a record level of sales,” said Louie. “With the market softening and it coming down, we’re comparing this year’s production off a very, very extraordinary level.”

On one hand, it’s not reasonable to think that Calgary could have sustained price gains that were experienced in 2006-2007. On the other hand, can it be expected that those prices will retreat back to pre-boom levels?

The TD Bank Financial Group predicts the sale of existing homes will drop 18.2% this year, and 4.6% in 2009. Re-sale home prices, meanwhile, are forecast to rise 5% this year, compared to last year’s price gains of almost 25%. In 2009, prices are expected to increase 3.5%. (Source)

What’s interesting with this report is how reduced sales + higher inventory = rise in prices? Barely above inflation, mind you, but a rise nonetheless. How do you think they came to this conclusion?

As optimistic as it would be to think that Alberta won’t be affected (or isn’t already affected) by our friends in turmoil to the south, Alberta is admittedly on good footing.

• Unemployment rate, 2008 Average: 3.4% (lowest in the Country)
• Average weekly earnings (SA) is the highest in the country at $851.20
• Annual growth rate (over past 12 months) : 1.97% which is highest in the country. Net migration however, was -880 between October 1 and December 31 2007. (Ontario -3224, Quebec -2110, BC +2499, Sask +2155) (Source for all above stats)

Canada’s inflation rate was also lower than expected which will cause a further round of interest rate cuts by the BoC.

“There are no inflationary pressures in Canada, despite all the great deal of attention to commodity prices and energy prices,” said Carlos Leitao, chief economist at Laurentian Bank Securities Inc. in Montreal. “That guarantees we are going to have a 50 basis point” reduction next week.

The Bank of Canada last month reduced the benchmark rate by 50 basis points to 3.5 percent and economists expect it will cut another 75 basis points over decisions on April 22 and June 10 (Source)

With banks usually following suit with their lending rate shortly thereafter, this will make it even more attractive for buyers.

Fundamentally, nothing has changed recently except that the Calgary area market has a record number of inventory. More inventory, means longer days on market, usually resulting in more motivated sellers. To what extent though? What are your thoughts?