May 1 – 7, 2011 – Calgary Real Estate Market Update

A brief economic report from ATB Financial had this to say about the Calgary housing market on Friday:

Spring is the busiest time of year for housing activity and is therefore the best time to gauge the health of the housing market. According to data released by the Calgary Real Estate Board, the home market in Alberta’s largest city is not great, but not bad either.

The median sales price of a home in Calgary rose to $369,000 in April, up from $360,000 in March and the highest level since spring of last year (see graph). Despite the move higher in prices, sales activity was somewhat lacklustre with 2,176 MLS sales, down from 2,347 in March and 2,448 in April of last year.

The drop in sales and the rise in prices taken together indicate that Calgary’s housing market is on a solid footing, but is not strongly in favour of either buyers or sellers.

Moving forward, it is going to be very interesting to watch the Calgary and broader Alberta housing markets. Interest rates, which are expected to start rising over the next few months, will definitely put downward pressure on Canadian housing prices; however with solid economic fundamentals pervading in Alberta, it is hard to imagine that prices will slump too far.

While I agree the market is “not great, and not bad either“ (the only saving grace being lower supply to offset the meager sales),  I don`t agree with the conclusion that “drop in sales and the rise in prices taken together indicate that Calgary’s housing market is on a solid footing.“

For my thoughts on  2011 CREB`s forecast back in January I stated that, “I can see an average price increase for 2011, providing overall sales are weak and the luxury segment remains steady.“   That wasn`t my basis for suggesting that if that happened, the market was on solid footing.

Single family home sales in the first week of May were up 21% from the same time period in April but were down slightly from May of last year.   Condo sales were down month-over-month and from the previous year.

Sales (click to enlarge)

After a brief uptick to end the month of April, pending sales have settled back to 2010`s levels.   We`ll need to see pending figures trend consistently above last year if we are to expect an increase in sales YoY.

SFH Pending

Condo Pending (click to enlarge)

SFH weekly sales (click to enlarge)

In May of last year, buyers retreated en masse and sales dried up.  Can we expect the same of this year, or will activity slowly ramp up during the second half of the year?

Condo sales are keeping a steady (yet subdued) pace – if this continues we might see 2011`s sales levels gain some ground over last year in the coming weeks ahead.    It really all depends – will spring really be the busiest season this year for the Calgary real estate market?  If so, it`s going to be another slow year…

Condo weekly sales (click to enlarge)

6 responses to “May 1 – 7, 2011 – Calgary Real Estate Market Update

  1. “Despite the decline in sales, the amount sellers are getting for their homes has gone up.“

    That is how one naive writer reported it out of Regina.

    It`s a trend being seen across the country, including here in Calgary.

    Regina: Sales down, Prices Up
    Prices up, sales down in Greater Victoria housing market
    Brantford Home sales down but prices up
    GTA Prices Up, Sales Down

    Most amusing is how it`s on the front page of CREB News as though it`s a positive development.

    It`s not.

    What this means is the market is in serious need of entry-level, first-time buyers.

    For more information, read Bob`s new post: First Time Buyers Dwindling

    Also, on topic is this older post of mine: Is the Luxury Segment Reflective of True Market Conditions?

    In other news, CREA has revised their forecast again. I haven`t been bothering reporting on their monthly forecast changes anymore. I will say that they have revised their forecast upwards — in terms of price, while sales are still expected to fall below 2010`s levels. See a trend developing?

    To quote the Globe & Mail today:

    Forecasting has proven difficult for the association.

  2. Good news or bad news depending on how you look at it. Good news is that the builders are keeping their inventory in check, and won`t be adding more supply. Bad news is that new homes are experiencing a lull just like the resale market.

    Calgary Region Housing Starts Plunge
    Nearly 39% off last year`s pace in April

    Housing starts in the Calgary census metropolitan area plunged in April compared with a year ago, according to data released Monday by Canada Mortgage and Housing Corp.

    The agency said total starts in the Calgary CMA of 556 were 38.8 per cent lower than April 2010.

    “Home builders continue to hold back production until demand for new homes improves and active listings in the resale market move to more balanced levels,” said Richard Cho, senior market analyst for Calgary for the CMHC.

    (Note: Currently, SFH Inventory is down 15% from a year ago)

    Todd Hirsch, senior economist with ATB Financial in Calgary, said the housing market in Alberta is a bit of an enigma this year.

    “The lacklustre figure is puzzling on a few levels,” added Hirsch. “The provincial economy has been picking up over the past several months, and weekly earnings are rising. While employment did drop a bit in both March and April, overall job creation over the past 12 months has been steady. Also, mortgage rates remain favourable. This should point towards a rebound in the residential construction market.

    “However, as Statistics Canada reported last week, the value of residential building permits issued in April shot up by about 25 per cent month-over-month. This suggests that housing starts could still pick up, so hope remains for 2011.”

    You could look at the 25% month-over-month increase as a positive. Or you could say that it was still down 5.2% from April of last year. It all depends on your perspective. 🙂

    You can read the entire article here

  3. No New Mortgage Rule Changes

    There has already been “some softening” in the Canadian real-estate market so there is no need for further tightening of mortgage rules, Finance Minister Jim Flaherty said Tuesday.

    Flaherty said he’s already intervened to toughen mortgage rules three times in the last few years and there’s no need for further action as conditions in the market are finally moving in the right direction.

    Flaherty said he does not believe there were any unintended consequences in the housing market resulting from government intervention in the mortgage business during the financial crisis to keep banks lending money.

    Still, he said his government keeps a close eye on the housing market and subsequently stepped in three times with changes to mortgage rules when there were concerns about risk.

    Read the entire story here.

    Of course what Flaherty doesnt point out is that he is the one that relaxed the rules to 40 year amortizations, 0% down in the first place, far before the recession even occurred. The last 3 rules changes was him backpedaling after realizing what a monumental policy failure and complete lack of foresight it was to allow unqualified Canadians access to credit.

  4. My initial impression on the mortgage rules implemented a year ago was that speculative activity would decrease dramatically. Needing 20% down for a non-primary residence is a huge obstacle for many of the people that were attracted by the “fix it/flip it” movement. When there are suddenly multiple TV shows running on multiple stations about flipping properties, there is a lot of speculative activity. I don’t think it was as rampant up here as it was in the United States, but it certainly existed. I even remember the water cooler talk about whether the guy that was handy our floor should be flipping houses in his spare time.

    Back to the point of my post – I assume that the rule changes had a significant effect on speculative activity. As a result, all of these “speculative purchases” followed one to six months later as a “speculative sale” were removed from the system. This is going to make sales number comparisons with previous years difficult. If I’m right, we could see depressed sales numbers when compared to the peak even after the non-speculative portions of the market return to previous levels.

    Until we can re-establish a new baseline for monthly sales with the speculative activity removed, indicators like sales/new listing ratio and the absorption rate will be better indicators of market direction/health.

  5. OneofAKind

    I still think we are lucky with the way things turned out in Calgary , however the interest rates need to stay where they are . If the rates go up I think we will see more of a decline in sales as prices are high and it all comes down to those monthly payments and what the family can afford . With other real inflation numbers like gas and food eating away at the budget of those just starting out. Guess thats why we are seeing a post from Bob as too where are those newbies in the system. No newbies and the selling slows down with no move ups!

  6. WoW, so far, the average price is $506,282!!! Will it beat the one in 2007?!? This will be very interesting!

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