Oil driven housing markets like Calgary & Edmonton are likely to correct over the next two years according to TD’s latest regional housing outlook.
“A significant softening in job markets will set the stage for a second major housing correction in Calgary and Edmonton since 2008,” states the report.
“While results in the upcoming spring market will be helpful in estimating the magnitude of the likely correction in these two markets, our early reading points to a decline in average prices of roughly 10% over the next 4-6 quarters from their peak levels late last year, with stability returning to the market by mid-2016.”
TD predicts the average price of a Calgary home will fall from $459,500 to $439,500 in 2015 (-4.4%) and then to $424,500 in 2016 (-3.4%). Sales are expected to plummet by -47% this year and -1.9% next year.
The report goes on to say: “Calgary and Edmonton have already experienced a sudden and abrupt turn, and by January, existing home sales had already slumped by 45% and 30% from peak levels reached last year, respectively. Meanwhile, annual average existing home price growth slid into negative territory.”
It’s too bad TD is focusing entirely on the average price which is a volatile and misleading measure in the context of the following facts:
- Median price was up 1.08% y/y in January
- Benchmark price was up 7.69% y/y in January
- Teranet HPI which tracks repeat home sales was up 7.1% y/y in January
- Luxury sales ($1M+) in January were down -42% y/y
If the Calgary real estate market continues on this path, price declines are obviously expected. However, I think TD is jumping the gun by stating that prices have already slid into negative annual growth by referencing only the average price.
To download and read the entire report: click here