Is Calgary’s Real Estate Market Overheating?

A few months back, a reporter from a business magazine contacted me asking for my opinion on what the key risks were for the Calgary real estate market.  In short, my response was the greatest risk facing Calgary in the immediate future was of the market overheating.

Apparently, that wasn’t the answer the journalist was looking for; instead the angle they opted to go with in the article was  ‘what if inflation takes off and your interest rate rises to 10% and your mortgage payment doubles.’

Rising rates isn’t a new concern.  For example, here’s what one pundit wrote back in 2009 when 5 year fixed rates were still above 5%:

You should assume there’ll be another 1% a year added to the prime for the next two or three [years], which will get us back to a rate of about 8% or so by 2014 renewal time.”

Instead of facing rates around 8%, homeowners today are renewing at rates near historic lows and far lower than what they were paying years ago.

That’s not to say you should naïvely ignore warnings of rates rising in the future.  There’s no doubt they will go higher – eventually. I advise my clients to make sure they leave enough buffer to absorb an increase of a few percentage points and avoid buying at the absolute max they qualified for.  Play it safe and stay comfortably within your budget.  But the point is that no one has any idea where interest rates will be a few years down the road…

What we have a better idea of is how the real estate market is performing now and the uneasiness I felt of an overheating Calgary market remains.

I have an inkling that I’m not the only one with those worries.    Here’s a quote from CREB’s president in the October report:

Some people have noticed that properties are selling quicker, and at times above list. But, in spite of very positive signs, we are not seeing a repeat of 2006.”

And from CREB’s economist:

While upward price pressure is expected to persist in the near term, it is unlikely we will face the same spike seen in 2006. That’s because economic conditions are quite different today than they were in that time period.

The fact references to 2006 are being made is telling, and market activity in the first week of November won’t do much to assuage my concerns.

Check back tomorrow for the November 1-7 market update that will contain some eyebrow raising statistics.  If what we’re seeing in Calgary is mirrored  in other cities, it’s only a matter of time before Mr. Flaherty attempts to cool the market with more rule changes.

2 responses to “Is Calgary’s Real Estate Market Overheating?

  1. Pingback: Is The Calgary Real Estate Market Overheating?

  2. I don’t think Creb is worried…in fact your quote even says they view this as “positive signs”. I guess I wonder.. Is it better to buy now, at these spiking prices, or wait and see what rates do? I just don’t think rates are ever going to have an effect on the market again. I can’t see them ever being even 6% much less 7,10, or 15% +.


    Y/Y price growth of 10%+ is neither healthy or sustainable and interests rates won’t stay at these historic lows forever.
    -Mike Fotiou

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