Calgary home sales after two weeks in December were up by a meager 9 sales, only 1.4% year-over-year growth. Sales could fall below year ago levels. Falling sales is a precursor to falling prices.
The 646 sales MTD is the best pace the month has seen since 2007 and just above the 10-year historical average. Even if sales falter, one or two months does not make a trend. Sales were also down on an annual basis in February & March 2013 before going 20 consecutive months with y/y gains.
New listings have spiked 35% and active listings are up nearly 30% y/y. The sales-to-new-listing ratio for Calgary MTD has plummeted to 81.77% from 109.08% during the same period a year ago. Single family from 108.4% to 84.84%, condo-apt from 92.91% to 72.41% and townhomes from 145.31% to 83.18%. If sales drop off in 2015 as many expect, inventory will continue to grow and result in depressed prices.
At this juncture, increased supply is a welcome development in a market that’s been tilted in favor of sellers for so long. Annual price gains in the double-digits isn’t sustainable. A sales-to-new-listings ratio of 81% will result in comparatively muted price growth, but still growth. A balanced market has a ratio of 40-60%. Anything above that is regarded as a seller’s market, anything below, a buyer’s.
TD Economics: The recent plunge in oil prices is likely to temper activity in housing next year. On a regional basis, the drop in oil prices is expected to hamper employment and income growth in commodity driven markets such as Calgary and Edmonton. Prior to the slide in oil prices, these markets were considered front-runners in Canada’s housing market but are now expected to soften over the near-term as the low oil price environment persists (Read full bank commentary here )
BMO Economics: The slide in oil prices is going to take some, if not all, of the steam out of Calgary and Edmonton—and it may be doing so already. As Alberta-wide economic growth slows below the national average next year, inward migration will likely weaken as well, and flows from other provinces have been adding roughly a full percentage point to population growth in recent years …Canada’s housing market continues to look balanced on a national basis, with strong price growth still coming from 3 select cities—and suffice it so say that Calgary can be soon crossed off that list. (Read full bank commentary here )
Granted, oil prices are the unknown variable for 2015. How low for how long? In the near-term, potential home buyers may choose to wait on the sidelines to see how events transpire. If oil prices recover a few months down the road, we could see a bit of pent-up demand released for the spring/summer market once confidence is regained.
If oil recovers that quickly. It won’t.