This is an opinion article. The views expressed herein are strictly my own and do not express the view of my brokerage or other agents. I am not a financial planner or economist. For a completely unbiased look at the Calgary Real Estate market, visit my website at www.FindCalgary.ca where I update all the news, and MLS stats daily without the commentary.
Please remind me not to read the Homes section again whilst having coffee – it’s difficult to read the article clearly after having choked over it. 
Prices Decline as Sales Drop - January 24, 2009, Calgary Herald
Reasonable headline, it makes sense. It even starts out well, with stats as to how more condos under $200k have sold compared to last year. And then, bam! We get the quotes.
“Prices always follow supply and demand… “ (So far so good) “If the inventory remains lower, prices will start to edge up.” (Well, yes but inventory isn’t low-) We think prices have bottomed out.” (Arrgh. That “we” better have been a nosism because she isn’t speaking for all agents. At least she didn’t end with the common spiel of how it’s a great-) “Meanwhile, it’s a great time to buy.”
Blink. Blink.
Since October to December, “traffic has really picked up all over…People are getting ready to buy.”
Reminds me of that CBC news report last month.
Erm…let’s just flip back to the cover article , “Better for Buyers.”
“This will be a year in which Calgary’s resale housing industry begins a bit of a turnaround. The market will begin to stabilize and be balanced by the end of 2009… The time is now for buyers who have been waiting for the right time to buy.”
There are deals out there – just looking at some sales with an 80% SP/LP ratio means that some people are buying ahead of the curve (assuming of course the property was not 20% overpriced to begin with) But if we’re speaking generalities, now is not the right time for buyers. If they’ve been waiting to buy this long, they can wait it out a bit longer to see how the market unfolds. Inventory is growing daily – we’re approximately at 1 years worth of SFH Inventory (Absorption Rate)
It will be the struggling economies of other regions of Canada that will draw people to Calgary, she says. Because of the woes of the automobile industry, Ontario in particular will become a strong source of newcomers.
New construction jobs have all but disappeared in Calgary. According to CMHC, SFH starts are expected to drop to 3,800 this year – less than half than in 2007 and even less than the almost 4,400 starts last year. On the multi-family side, 1,700 units are expected to be started this year, 4000 less than were started in 2008. In 2007, work had started on 7,051 multi-family units. (Source)
A collapse in energy prices has also resulted in thousands of layoffs across many industries in the province as oil companies cancel or postpone billions of dollars in projects. (Source)
“Most of it has been since the New Year,” said Nair Bailey, a long-time Calgary recruiter who keeps a running tally and says engineers let go over the past two months number at least 2,200. (Source)
What type of job exactly is available in Alberta that will allow those Ontario workers to purchase homes here?
“I can see more people coming from the east, people who have been laid off, who will come here to find work–and they’ll need a place to live.”
They sure do, but with being laid off and all, it will be kind of difficult for the bank to qualify them for a mortgage, no? Which also means they would have to sell their homes in Ontario first - but since everyone is moving away from Ontario because there are no jobs, who will buy them? Maybe they were renting in Ontario…but then why do we expect them to buy when they move to Alberta?
There will be some movement in prices, she says, but it won’t be as dramatic as what happened in 2006 and 2007.
Ooh, sneaky! Reference the boom years of 2006 and 2007 where prices skyrocketed. Put a little fire under the feet of the buyers to get them moving. Let’s completely ignore 2008 where prices kept coming down.
Sales will go up this year for single-family homes,” she says matter-of-factly.
This statement (which is only conjecture) could be to serve a two-fold purpose. First, to tell consumers that the inventory will be chewed up this year and we will return to a balanced market, and in turn a stabilizing of prices.
Second, I think that statement is also directed at the 5,500 agents serving Calgary. Sales are down, and some realtors are leaving the field. Brokerages don’t want to lose anymore agents, especially since many pay hundreds of dollars a month just to be affiliated with the brokerage, regardless if they close any deals. Midway through this month, CREB had approximately 5510 members (5257 Realtors and 253 brokers) This past June that number was around 5755 members. You can be sure that number will continue dropping over the coming months.
Across Canada, CREA had approximately 100,000 members last year and is expecting 97,000 this year, but is contemplating a contingency plan to handle a decline of 5,000 to 15,000 members. While the full impact has not yet hit, the number of new licensees is starting to decline across the country.
“Particularly, western (real estate) boards that have been really heavily hit with price drops are budgeting in (lower) numbers,” says Beth Crosbie, who heads a Canadian Real Estate Association taskforce. (Source: Business Edge Magazine, January 23 2009)
“A door may be closing, but a window is opening. The window of opportunity couldn’t be better for buyers right now.”
Opportunity will open both front and back doors, all the windows, and perhaps the garage door as well for buyers who are patient. (Sorry, did I carry that analogy too far? 
) I believe there will be much better buying opportunities for buyers later on.
“There is no doubt we are seeing a significant slowdown as Greater Calgary transitions to a more stable and balanced housing market.”
As each month passes, the line on the Absorption Rate chart keeps climbing away from the Balanced Market zone. Extra numbers had to be added on the Y-axis representing months. (Last January, the Y-axis only went up to 6)
Are we heading towards a balanced market, or away?
One bright spot in the market today are mortgage rates. I’ve seen 5 year fixed hovering around 4.5%, and variable rates even lower. That really is awesome.
Just something to consider – what happens to house prices when interest rates go up? You need to figure out your long-term budget and see whether buying a house for more now with a lower interest rate will be better than buying a house for less with a higher interest rate later on. Price out some scenarios and see what works better for you in the price range of home you’re looking for and size of downpayment.
If you need to buy in the Calgary market now, then I will help you get the best deal possible. Otherwise, there is no rush. You might see sales and prices blip upwards in the spring, but I see them slowly continuing to trend downwards after that.
If you’re planning on selling, I will help you list and sell at a realistic price in today’s market. Otherwise, you might end up with the thousands of other homes that languish unsold month after month, reducing by $5k or $10k every 3 months, following the market down instead of jumping ahead of the curve.
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Mike Fotiou, First Place Realty, is a licensed Realtor, Certified Condominium Specialist, Accredited Buyer’s Representative and Commissioner for Oaths in the Province of Alberta.
