March 1-7, 2015 Calgary Real Estate Market Update

The supply-side of the equation looked bleak in December & January as new listings spiked 42% & 37% respectively on an annual basis.  In February, new listings growth eased to just 9%.   A week into March and new listings are only up 3% year-over-year, inline with the 5-year average and below the 10-year average for the month.

Calgary new listings - March 7 2015

Calgary new listings – March 7 2015

New listings have pulled back so far that the sales-to-new-listings ratio has climbed to a balanced 45%.

Sales to New Listings Ratio - March 7 2015

Sales to New Listings Ratio – March 1-7 2015

Unfortunately, there has been no such improvement on the demand side of things.  A total of 365 homes have sold month-to-date, down -30% year-over-year.  For those pointing out that 2014 was an exceptionally strong year thereby invalidating annual comparisons, sales this month are also off -18% from the 5 year average and -21% below the 10 year average.  It’s slow, alright?

The hope is that buyers are cautiously circling the market in a holding pattern until they are confident about their finances and job security.   It’ll be some time before we know the full economic impact of low oil prices in our province; job loss figures have barely started trickling through to Statistics Canada’s LFS results.

In the meantime, although new listings levels have found normalcy, inventory will keep climbing until buyers make a return.

Calgary home sales - March 7 2015

Calgary home sales – March 7 2015

Luxury home sales continue to wither, falling by nearly half from the same period a year ago.   On a positive note, a Britannia home sold  for $5,200,000 making it the most expensive Calgary MLS® sale since June 2013.

Calgary luxury home sales - March 7 2015

Calgary luxury home sales – March 7 2015

Early in the month, the average price is down -1% y/y, and the median by -4%.

Please note that the statistics currently showing on the homepage of CREB.com are inaccurate and have been glitchy for most of the month.  Below are the correct figures for the City of Calgary overall:

Calgary real estate stats - March 1-7 2015

Calgary real estate stats, March 1-7, Y/Y comparison

5 responses to “March 1-7, 2015 Calgary Real Estate Market Update

  1. Hi Mike, the tone of this article perplexes me. Statements such as :

    “The supply-side of the equation looked bleak in December & January as new listings spiked 42% & 37% respectively on an annual basis”

    “Unfortunately, there has been no such improvement on the demand side of things.”

    “The hope is that buyers are cautiously circling the market in a holding pattern until they are confident about their finances and job security.”

    Bleak to who? Unfortunate to who? Hopeful to who? People who view their (already purchased) homes as an unrealistic investment, and the brokers who derive their incomes from that fantasy? The last time I checked, Real Estate agents were supposed to represent both sellers AND buyers. For each dollar a seller loses in the depreciation of their house, that’s a dollar a prospective buyer saves/earns when making the purchase. The (presumably) half of your clients who stand to lose money on a sale are transferring that wealth to buyers, and vice versa when the market goes up – yet the overall tone of the article (and perhaps this blog in general) seem to subscribe more to a feeling of ‘real estate as an investment’ rather than real estate changing hands for its own purposes such as .. oh my God … a place to live.

    Dwelling ownership is not a long term investment, and never has been. Without getting into the whole invest your money argument, data from numerous markets around the world (including a study tracking 400 years worth of prices in Holland) have shown houses track with inflation over the long term, and this must be the case for anyone to actually live in these places. If a house were an ‘investment’ inasmuch as its worth tracked fundamentally higher than inflation (think IBM stock over 100 years), then within a few generations, houses would be out of reach for purchase for any new generation entering the market; but because market increases are driven by *new* buyers rather than existing ones, squeezing out these buyers has the eventual effect of bringing prices back down to what base inflation would provide. Generally speaking, housing as a long term investment is a statistical impossibility.

    As a real estate agent, you claim to represent the interests of both buyers and sellers, but your income is derived from # sales x the commission charged as a function of price – which heavily (if not absolutely) favours representation of sellers through the exploitation of buyers on the promise (to the buyers) that the asset they are purchasing will someday be worth more than the purchase price – which you cannot guarantee in the short term, and which is proven statistically false in the long. It’s because human beings are fairly short lived (with shorter memories), they believe short term “signal noise” in the price of homes translates into a larger trend, but for anyone who’s lived in Alberta for more than a few years (or bothers to look at the data) can testify, this is definitely not the case – yet this Buzz Lightyear view is how the market is presented to new buyers by real estate agents (“trust me on this one Mr. Johnson, the value of this place is ONLY going to increase to INFINITY and BEYOND!!”), because the commission you charge is a function of the sale price. So, because your income scales with higher transaction costs and not the number of transactions per se, it’s in your best interest for every buyer to be as highly leveraged as possible when engaging into a purchase agreement – to their likely detriment but clouded by the promise the underlying asset will increase in value. Yet, as their ‘agent’, it is your claim to represent their best interests. I find this, at best, horribly disingenuous, and at worst, an outright con. Or maybe I’ve got it all wrong and this is just an investment blog.

    I’m very curious as to what you tell prospective buyers today when there is a significant chance (if not absolutely guaranteed at this point) the prices of Calgary homes will be significantly lower in a year’s time, if not sooner, than it is today. Is this a conversation that ever takes place, or is the subject avoided in much the same way a guilty looking dog lowers its head hoping his master doesn’t notice the steaming turd in the middle of the floor? (Can we goto the dog park now, I RUV ROO!)

    To bring the wagon full circle, if the value of residential real estate that changed hands in Alberta in 2014 was $6 Billion (just a guess, but use whatever number you want), with – what? 85% of that financed?? – say 5.1 billion in outstanding mortgages @150% paid back over the course of those mortgages, say 25 years – that’s what?? – 8B paid to the banks for customers who purchased in 2014 alone over the course of those loans, assuming of course interest rates stay at near 0 levels for the next 25 years. And while we’re at it, multiply that number by each and every year houses remain inflated at these prices. So, ok, the party continues for another decade – that’ll be what? About 80 Billion taken from the pockets of Albertans for a decade’s worth of ‘good times’?

    Conversely, with houses down around the $150k level – say 1/3 of what they are now), and assuming the worst and nobody pays off their mortgages in a timely fashion – maybe they’re at the casino or something – and because I’m too lazy to do any real math, take the interest figure at 1/3rd (which it wouldn’t be because of the front end nature of mortgages, but I’m feeling statistically generous today), that would mean some 55 Billion returned to the pockets of Albertans over that same decade. So, yeah, again, why would lower housing prices be considered so ‘bleak’, beyond your own personal ability to dine at The Belvadere again?

    As an experiment, I’d like you to – in a year’s time – dig out the files and have a beer with every person you represented as a buyer between 2013 and now and ask them if they think you represented their best interests.

    KL

  2. Devon Gillard

    Kuato Lives,

    I have always understood that, over the long run, housing prices track to wage inflation, not core inflation. That is because housing prices are driven by competitive consumption.

    As an example, even during the nadir of the recent housing crash in the United States, housing prices were still above inflation adjusted prices back to 1970. Further, when you target key areas where wage inflation has been highest housing greatly outperforms core inflation. An investment in housing in an economic zone where wages are increasing above GDP growth or core inflation is usually a good investment (certainly not the best).

    Wages in Alberta will likely fall over the next 12 to 24 months and, I would expect, drag housing down with it.

    (For the record, I’m not a realtor, but I also don’t mind that realtors make money on housing transactions. I also find this blog very informative. The tone is looking at real estate like any other industry. When the media talk about the poor outlook for oil they are not talking about it from the consumer’s perspective. You seem too smart by half to not know this, so I assume you really dislike realtors.)

  3. Kuato,
    (quick background of myself, Engineer…not Realtor and would consider myself more informed of the housing market than most realtors. stats guys as well, Sold out in 07, and been enjoying renting since. So you can imagine my thoughts of this current housing Kool-aid drinking party).

    i am not sure how long you followed Mike’s Blog, but as a general rule, he has been the most impartial Housing information source in calgary. this is since about 2007 or 08, since i have followed his blog. This specific blog post is obviously written from his perspective, it should be, its his blog.
    if housing goes up 10% or down 10%, i don’t think that matters to realtors as much as the # of homes sold do. Sales tanking by 50% is simply a reduction of half the realtors incomes for that period. which would suck for them. price changes will be small, and not affect them as much.

    Obviously, in a perfect world, Realtors WOULD want price appreciation to follow Inflation. 2% gains per year keep every seller and potential buyer happy. seller makes money year over year. so does the buyer whom buys.

    Mike is actually my realtor (When i do tire kick and debate about getting back in the market or not). so can speak from direct experience.

    2008: almost bought a house in Varsity Estates. He didn’t necessarily talk us out of it. but did say that he thought the deal wasn’t great and would cost X to fix it up, etc. that was the only house i was interested in at the time. no transaction. No “Buy Buy Buy” push either.

    2009-2012: looked a few places, not many. NO buying push.

    2013: signed a deal for new house in West Hillhurst. everything was agreed upon except for home inspection. Inspection came back with a lot of issues. I expected a price reduction from the owner/builder given the report. he wanted to fix them instead. They fixed them poorly (as i hired the home inspector again). So i walked from the deal. Mike didn’t try and push me or pressure me to agree to the deal. He did try and get a price reduction to appease me. Obviously that missed commission cheque hurt for him, but he took the high road during that ordeal.

    Long story: I have had maybe experience with 6 realtors? not one have i had for longer than a year. mike i have used since 08.

    Obviously he wants to sell houses, and would prefer the market to be healthy. But he has tried to report his stats as unbiased, for a realtor, as possible from my perspective. yes, some wording is iffy, but this isn’t a book and the content isnt getting proof read like it.

    I don’t want to see sellers hurt, and people to losing they’re jobs, but this market is only going to sink deeper this year, as the job losses and fear mount. I didn’t want to get back in on a vulch, on someones pain.
    i was really expected the interest rates to normalize by now, and prevent people whom make $30K/year assuming Million dollar mortgage a thing of the past.

  4. KL, excellent post and it sums up my point of view perfectly. I find Mike to be a largely impartial judge of the data although he has taken me to task in the past for not buying. Hindsight is always perfect and its easy to say you should have bought when the market has gone up…lets see what the next 5 yrs brings. As i have pointed out in previous posts, this downturn feels a lot like the mid 80’s to me…if it plays out that way, at some point in the future there will be a great opportunity to buy RE in Calgary!
    curt

  5. I think sales-to-new-listing ratio is not a proper indicator of market condition. Sales-to-existing-listing will be a better measurement.

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