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?
As a couple trying to get into the Market it holds promise , however we still can not afford to buy at these prices anything thats worth buying. We have decided just to move on with life for a year or so and maybe look at things then. We have found it very stressful to follow the market.
We do believe there are a lot of people like us , we make good money but not enough to sell our soul to the bank! We will continue to rent and have also said that if rent gets too high then we are moving out of Calgary to someplace thats more affordable.
Darn we hate being fence sitters !
OneOfAKind
We’re also potential first-time Calgary home buyers with a bit above average combined incomes.
However, we’ve decided to save our money instead. Our rent is 1175 a month for a 3 bedroom, 1.5 bath, 1200 sq ft bungalow, (not including the undeveloped basement ). We would need a $400,000 mortgage to purchase a similar property. I’ve crunched the numbers and this is just not do-able.
Sure, we could try for the $270,000 2-bedroom 800 sq ft condo on the edge of town. However, it comes down to quality of life and sanity. Why pay twice the money for a lot less space, and lower quality of life?
We like Calgary and hope the housing market becomes affordable. But if not, we will take our savings and move on.
Respond to comments above. I am working as a Toronto real estate agent so I should tell you “don’t wait and buy something” but it is not what I am about. Prices are stagnating now, that is true, also Bank of Canada lower key rates so it should make mortgages cheaper soon. But all this is because of the panic about forthcoming crisis and you should be prepared that prices will start growing up if anticipated crisis will not be confirmed soon.
I don’t think there will be any panic at all, in reality it has all come down to what people can afford . This is the main issue even if the rates go done to 2 or 3 % it really does not change things. Prices at 400,000 or more are just way out of the range for most average buyers period.
This boom accross the country in house prices has really changed a lot of things and people are now just waking up to inflation so this should drive prices down further.
Wheres my crystal ball !
Mike:
Where would the # of listings go? Given everything will reach a ceiling sooner or later, when will the # of listings in Calgary reach a ceiling and what can you predict the height of the ceiling?
Analyzer
Hello Analyzer,
I wish I could help you predict the ceiling of inventory. Earlier this month, SFH inventory dropped for 3 consecutive days and then I started thinking maybe…
However, inventory keeps climbing. We’re almost 1000 listings higher than we were at March month-end, and that’s even with over 1100 sales MTD.
Great work on the charts Mike!
We are feeling the pain from increased inventory and slower sales here in Vancouver as well.
I hope you have a busy spring!
For those that are wondering, the reason the Active SFH/Condo Listings dropped overnight is that many listings expire on the last/first day of the month. You can be sure most will be relisted again in the next few days.
Curious what May might look like? Here’s the Pending Sales stats so far for Calgary:
SFH
Pending Sales: 347
Average: $492,279
Median: $424,900
Condos
Pending Sales: 140
Average: $322,591
Median: $292,450
Remember to apply the average 97% LP/SP ratio for a more accurate picture.
I heard on the news that 2/3 of all active listings are currently over-priced! To me that translates to only 1/3 of all active listings representing “serious” sellers, which means true supply is not as high as it seems.
So I doubt we will see a significant drop in housing prices.
I think there is always 2/3 of the listings over priced in any market. That’s why 1/3 of the lsitings gets sold. Or more precisely, if the current # of listings consists of 5 months of supply, there is only 1/5 listings that are fair priced.
Over priced or not is a comparable thing. 400K for a single house is very very attractive last year, but not so this year any more.
Mike, am I right?
Hello J.S, do you remember where you saw that in the news? (Source? I’d like to add it to the News section)
Analyzer, it really depends on the location and type of house. But there are definitely more homes to choose from under $400,000.
As of the time of this posting, there are 1614 detached SFH’s for sale under $400,000 out of 6031.
For all SFH’s, there are currently 1928 out of 6730 that are under $400,000.
Here’s the breakdown for allSFH’s in metro Calgary:
Under $200k = 7
$200k-$300k = 210
$300k-$400k = 1712
$400k-$500k = 1908
$500k-$600k = 1107
$600k-$700k = 619
$700k+ = 1185
The post kind of helped me. Well How you get ideas for such posts. sorry if it’s out of topic.