July 2016 Calgary Real Estate Market Report

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Download CREB®’s July 2016:

CREB® commentary: Demand down with net migration. In step with City census data on declining net migration levels, housing sales activity totaled 1,741 units in July, a 12.6 per cent decrease over last year and the 20th consecutive month of year-over-year sales declines.

“Continued pullback of sales activity is a sign of economic conditions,” said CREB® chief economist Ann-Marie Lurie. “The number of unemployed workers keeps rising and when you combine job losses with declining net migration, the result is going to be weaker housing demand.”

Slower sales were accompanied by declining new listings in July. This helped prevent further inventory gains and minimize the downward pressure on benchmark prices. By months end, the residential benchmark price was $440,000, similar to last month, but 4.2 per cent below July figures from the previous year.

While detached prices seem to be leveling, this is not the case for all property types. With over six months of inventory in the apartment sector, oversupply continues to create steep price declines.

The apartment benchmark price totaled $277,000 in July, a 0.4 per cent decline over the previous month and 6.6 per cent below last year’s levels.

City-wide benchmark prices for detached product totaled $502,300 in July, which is similar to last month, but 3.4 per cent lower than last year’s levels. Meanwhile, semi and row attached product recorded a year-over-year decline of 3.1 and 5.5 per cent for July prices of $385,200 and $310,300.

“To buyers and sellers that have been paying attention to the housing market in Calgary and surrounding areas, it should come as no surprise that we continue to see a slowdown in sales activity,” said CREB® president Cliff Stevenson. “Buyers are expecting further declines in sold prices, and sellers are adjusting to softer demand with price decreases. When these expectations intersect, we’re seeing sales activity in the market, but not at the level realized over the last several years.”

June 2016 Calgary Real Estate Market Report

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Download CREB®’s June 2016:

CREB® commentary:  Calgary home prices continue to slide in most areas of the market, but not at the rate that many might expect. This is partly due to June’s resiliency in the detached and semi-detached sectors of the market, where sales compared to new listings and standing inventory started returning to more balanced levels.

“The detached market has been gradually moving towards more balanced conditions, helping to prevent price levels from declining at the faster rates we saw in the previous two quarters,” said CREB® chief economist Ann-Marie Lurie. “While this is welcomed news for sellers, it’s very likely that pricing challenges will persist in the housing market until economic conditions start to improve.”

Detached benchmark prices totaled $502,400, which is 0.4 per cent higher than last month, but 3.4 per cent lower than last year’s levels. This is the first time in eight months that detached prices recorded a monthly gain, helping ease the quarterly decline from 2.2 per cent in the first quarter to 0.7 per cent in the second quarter.

Overall sales activity remained relatively weak in June, falling by seven per cent to 2,028 units. Inventory levels went in the other direction and continued to climb in June to 5,973 units, 16 per cent higher than last year. Both the attached and apartment segments of the market have recorded inventory gains around 30 per cent, far greater than the year-over-year increase of five per cent in the detached sector.

Higher inventories and weaker demand continue to have a larger impact on pricing in the apartment and row sectors. June apartment prices slid by another 0.1 per cent over last month, pushing the average year-to-date benchmark price down 5.3 per cent below last year. Attached product experienced a monthly slide of 0.3 per cent, mostly due to steeper price declines in row style product.

“The price adjustments that we’ve seen in the past year have allowed some buyers to get into homes that were previously unattainable,” said CREB® president Cliff Stevenson. “This is especially true for homeowners with financial stability and a good amount of equity in their home. With so much choice out there, it’s giving consumers an opportunity to find their ideal home at a price they can afford.”

May 2016 Calgary Real Estate Market Report

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Download CREB®’s May 2016:

CREB® commentary: Housing supply swells in cool spring market. Calgary’s housing inventory was on the rise once again in May as new listings climbed and sales slowed to 1,923 units. in Calgary’’s residential resale housing market continued to weigh on citywide prices in April.

“While recent oil price gains may have some feeling optimistic, weakness in the labour market continues to impact housing demand,” said CREB® chief economist Ann-Marie Lurie. “Job losses are spreading into other sectors, wages are declining and unemployment levels remain high. At the same time, we’re seeing housing supply levels rise in the rental, new home and resale markets.”

Inventory levels rose by 14 per cent in May to a total of 6,148 units. Every product type is experiencing these gains, but the largest inventory growth has occurred in the apartment and attached categories. Together, these sectors represent half of all resale inventories in Calgary.

“The resale apartment market has been the most difficult for sellers,” said CREB® president Cliff Stevenson. “They are competing with improved selection in the lower price ranges of the detached and attached markets, and facing increased competition from the new home sector, where builders are offering incentives to attract potential buyers.”

While apartment resale supply remains 22 per cent below the May high of 2,055 units in 2008, the combination of rising supply in the apartment sector and steep declines in sales activity has elevated months of supply to nearly six months.

The apartment sector of the market has experienced buyers’ conditions for more than 10 months, so the impact on pricing is more dramatic, compared to the detached and attached sectors.

In May, the apartment benchmark price totaled $278,500, a monthly and year-over-year decline of 0.7 and 5.6 per cent. In the detached and attached markets, home prices totaled $500,500 and $332,100, a year-over-year decline of 3.4 and 4.3 per cent.

HOUSING MARKET FACTS

  • Total residential inventories increased across each district. However, detached inventory levels are trending down in the city centre, west and east area of the city.
  • Year-to-date detached sales declined by seven per cent. The decrease was caused by slower sales in the North East, North, South and South East areas of the city.
  • Year-to-date apartment sales totaled 1,101 a 20 per cent decline from last year. Unlike the detached, semidetached and row sectors, each district recorded a pullback in apartment sales.
  • Year-to-date, city centre benchmark prices have recorded some of the steepest declines across the city for detached, semidetached, row and apartment style product.

April 2016 Calgary Real Estate Market Report

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CREB® will have two public housing reports starting this month: one for Calgary & a second that includes housing statistics for surrounding areas such as Airdrie, Chestermere, Okotoks and Cochrane.

Download CREB®’s April 2016:

CREB® commentary: Sellers continue to adjust pricing expectation.  Market imbalance in Calgary’’s residential resale housing market continued to weigh on citywide prices in April.

Much like the previous month, year-over-year sales fell while new listings increased, resulting in inventory gains across all sectors of the market.

As a result, benchmark prices in the city declined by 0.4 per cent from last month, and 3.4 per cent from last year, to $441,000.

For sellers, the reality of seven consecutive months of price declines has started to sink in, said CREB® president Cliff Stevenson.

“From re-considering the listing of their home to lowering expectations on price, sellers are beginning to adjust to the current market reality,” he said. “However, some buyers in the market are still not willing to pull the trigger because they expect even bigger discounts. And so that gap between buyers’ and sellers’ expectations still persists across many product types and locations.”

Despite this, the detached sector fared better relative to the other sectors of the market. While detached sales activity has fallen by over four per cent so far in 2016 compared to last year, the sales to new listings ratio improved in April. This prevented sharper inventory gains and caused months of supply to move toward more balanced levels.

The same cannot be said of other market sectors. Year-to-date apartment and attached sales declined by a respective 19 and 13 per cent compared to last year. Slower sales, combined with rising inventories, ensured that market conditions continued to favour buyers in these segments.

“While the weak economic climate is influencing demand, the apartment and attached sectors are further impacted by increased supply in the competing new home sector and rental markets,” said CREB® chief economist Ann-Marie Lurie. “This is one of the contributing factors to the steeper price declines recorded in the apartment sector.”

Since the start of the price declines, monthly unadjusted benchmark apartment prices have declined by 7.6 per cent, while semi, row and detached have declined by a respective 5.9, 4.6 and 4.1 per cent.

Average Prices & Real Estate

Are CREB® statistics to be trusted when the average and median price show annual gains while the market is clearly in a downturn?

Let’s take a look at the oil industry before answering the above question.

The price of oil is a commodity measured in a standard, uniform fashion: by barrel. If the price of oil is $45 bbl today but was $105 bbl 2 years ago, it’s simple to calculate that the price per barrel has fallen $60 or -57%.   Easy-peasy with no confusion.

With oil, you know that each barrel is equivalent to 42 gallons and that’s that.   It doesn’t change from one year to the next.

Residential real estate doesn’t have the luxury of a constant unit of measurement.    The same homes aren’t being sold month after month and year after year.

Do you compare the price of a barrel of oil one day against the price of a truck or tanker of oil the next and conclude the oil market has skyrocketed?  Or how about WTI crude versus the price of olive oil? Of course not.   And yet that’s essentially what many do when they only look at average and median prices of residential real estate.

There are a vast number of differentiating factors that change the overall makeup of how much a home sells for:

  • Property type (attached, detached, etc)
  • Ownership (freehold, leasehold, condominium)
  • Size (lot size and square footage of home)
  • Age (new, resale, infill)
  • Location (lakefront, inner-city, suburbs, cul-de-sac, etc)
  • Upgrades & renos (hardwood, granite, windows, shingles, etc)
  • Development (basement, landscaping)

A higher percentage of suburban condo sales one month could depress overall average prices, while more luxury sales would skew it higher.

The real estate industry has attempted to create some uniformity by using “benchmark” prices.  The same types of homes with the same attributes are used when comparing prices from one period to the next.  Other indices, like Teranet-National Bank Home Price Index uses sales pairs (homes that have sold at least twice) for a more apples-to-apples comparison.

The benchmark isn’t perfect – it only provides us with a more accurate reflection of which direction prices are trending.   Average and median prices, on the other hand, only reflect the sales mix during a specific period.

A good example that illustrates how impractical it is to only follow the average and median price is to look at the community statistics which magnifies the effect.

Upper Mount Royal

Did average prices and median prices really spike 285.1% y/y in January? Or do you think a 10.4% drop is the more accurate figure? (click to enlarge)

In January 2015, an apartment sold for $446,000.  A year later, a 3777 sq ft detached home sold for $1,717,500.   Did Upper Mount Royal real estate really experience a 285.1% annual increase as the average and median price suggests?  Or is it more likely that prices declined by -10.4% as shown by the benchmark price?

There is no magic number to look at when determining the health of the real estate market. Track inventory and sales levels to ascertain supply and demand.   Housing starts and building permits are a good leading indicator.  Keep an eye on immigration and employment levels.  Review the different price measurements and see if they complement each other.  If not, determine why that’s the case.

Finally, don’t put so much stock on the average price.  It can be 100% accurate and at the same conceal underlying market conditions.

The Alberta Economic Dashboard is a great resource to quickly see how Alberta's economy is performing

The Alberta Economic Dashboard is a great resource to see how Alberta’s economy is currently performing along with historical charting

Alberta Mortgages In Arrears Trend Higher To Start 2016

The number of Alberta residential mortgages behind in payments by three or more months climbed higher in January according to the latest data from the Canadian Bankers Association.

A total of 1,839 mortgages were in arrears to start the year, an increase of 152 from December and the highest monthly jump since 2009.   The mortgage arrears rate now sits at 0.32%.

Even with the upward trend over the past year, the level of mortgages in arrears is still less than half of the 4,245 peak established in January 2011 when the arrears rate reached 0.84%.

Alberta mortgage arrears

Alberta mortgage arrears (click to enlarge)

Alberta’s arrears rate was above the national level of 0.28% and higher than Ontario (0.15%), Manitoba (0.28%), and British Columbia (0.28%), but below Quebec (0.37%), Saskatchewan (0.54%) and the Atlantic provinces (0.64%)

Mortgage Arrears Rate (%) by Region

Mortgage Arrears Rate (%) by Region

In Calgary, there are 80 active judicial sale/foreclosure listings on MLS® at the time of this writing, compared to 70 in January.

Since January 1st, 70 judicial sale/foreclosures have sold ranging in price from $1,340,000 for a home in Wentworth Estates to $110,000 for an apartment in Highland Park.

A Forest Lawn judicial sale that was listed for $307,000 sold for $265,000 for the lowest sale price to list price ratio of 86%.

On the other end of the spectrum, a West Hillhurst home sold for 16% above asking.  The Court of Queen’s Bench had it listed for $360,000 and it ended up selling for $417,500.

Of the 70 that sold, 17 went above asking, 1 at list price, and 52 for less than asking.

April 1-14, 2016 Calgary Real Estate Market Update

Calgary home sales between April 1-14 were down -7% year-over-year.  That’s not a big surprise as the pending stat we reviewed in our last update pointed towards a sales drop in the week to come.

Sales were more than -20% below the 5 & 10 year average and on the slowest April pace since 2000.

Calgary home sales April 14 2016

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

Average prices are up 2.16% and much can be attributed to the high-end market.   Twenty-two homes sold for $1M+ in the first two weeks, the second highest April month-to-date level.

Low overall sales + Near record luxury sales = skewed average price.

Calgary luxury home sales April 14 2016

Calgary luxury home sales, April Y/Y comparison

No upcoming inventory surge as new listings remain subdued.  While up 6.6% y/y, new listings remain below the 5 and 10 year average.

True, the sales-to-new-listings ratio is pointing towards balanced market conditions at 48%, but that ratio excludes how many homes were already listed, aka Active Listings or Inventory.

There are currently 6,340 homes for sale and 1640 have sold in the past 30 days.  That’s an inventory absorption rate of 3.9 months: a buyer’s market.

Calgary new listings April 14 2016

Calgary New Listings, April 1-14, Y/Y comparison

Bank Commentary Round-up

Today, CREA released Canada’s housing market report for March.  National home sales broke all previous monthly records as prices rose 9.1% year-over-year.

  • TD Bank: “Ontario and British Columbia housing markets continued to drive the national narrative. Almost all of the markets currently in seller’s territory (which make up just under half of Canadian activity) are found these two provinces… Regionally, the divergence among the Canadian housing markets is expected to become even more pronounced throughout 2016” (Read full report pdf)
  • BMO: “On the weak end of the spectrum, sales and prices continue to retrench in markets exposed to oil prices. Sales in Calgary fell a further 12% from a year ago and the benchmark price is down 3.7% y/y. While further declines are likely coming in 2016, keep in mind that those who purchased homes through mid-2013 are still sitting on a meaningful equity cushion” (Read full report pdf)
  • Scotiabank:  “Weakening employment and income prospects and reduced migration inflows are contributing to depressed activity levels in Canada’s oil producing provinces, though average prices to date have held up relatively well…we expect conditions to soften further in Calgary alongside mounting job losses and increased housing supply.” (Read full report pdf)
  • Royal Bank: “Every delivery of statistics on Canada’s housing market in the past year has told more or less the same story—Vancouver and Toronto are hot, markets sensitive to the energy sector are cold, and most other markets are somewhere in between… high levels of inventory relative to sales in markets within Alberta and Saskatchewan resulted in further price weakness in these provinces. The rate of decline in Calgary’s MLS HPI accelerated to -3.7% in March from -3.5% in February.” (Read full report pdf)

 

New Home Prices

The price for new homes in the Calgary CMA continued their downward slide according to latest data from Statistics Canada & the New Housing Price Index.

Calgary prices were down -0.5% in February from the previous month. Builders reported market conditions as the main reason for the decrease—the largest since July 2011.  Year-over-year, price were off by -1.3%.

New Housing Price Index, Calgary, Y/Y percent change

New Housing Price Index, Calgary, Y/Y percent change

NHPI for Canadian cities (click to enlarge)

NHPI for Canadian cities (click to enlarge)

Repeat Home Sale Prices (Teranet-National Bank)

For the 6th consecutive month, Calgary repeat home prices posted a loss according to the Teranet–National Bank House Price Index.

Calgary prices in March were down -0.3% from February and -3.7% from the year before.   Prices are now -5.7% off the peak established in October 2014.

Prices are -5.7% below peak

Prices are -5.7% below peak

Calgary repeat home sale prices continue to slide

Calgary repeat home sale prices continue to slide

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. This is known as the repeat sales method. All indices have a base value of 100 in June 2005. For example, an index value of 130 means that home prices have increased 30% since June 2005.

Teranet-National Bank House Price Index (Source: housepriceindex.ca)

Teranet-National Bank House Price Index (Source: housepriceindex.ca)

Calgary sales-to-new-listings ratio Apr 14 2016

Calgary Real Estate Stats Summary - April 14 2016

Calgary Real Estate Stats Summary – April 1-14, Y/Y comparison