July 1-21, 2015 Calgary Real Estate Market Update

“Calgary’s resale housing market has experienced a whirlwind start to the year. And while oil price recovery has been slower than originally expected, there are positive signs of change on the horizon,” writes CREB® announcing a mid-year forecast update which will be released at the end of this month.

Back in January, the CREB® forecast was optimistic considering what the December data was signaling.  A sales decline of only -4% and an increase in home prices in 2015?  It seemed wishful, especially since no one had any idea of where oil prices were headed and for how long.

So where are we six months later?  Year-to-date sales are down -25% compared to the same period last year.  That forecast missed the mark and will unlikely make any ground in the second half of the year.  But prices have been holding up remarkably well with the YTD benchmark price still up 3.3% at the end of June.

In fact, the market outlook for Calgary has changed significantly enough from the beginning of the year when TD stated that the Calgary market was likely to correct,  that they released a revision this past Friday.

TD Economics is now expecting a -24.7% drop in sales this year before posting a slight uptick of 1.7% in 2016.   Originally, sales were forecast to fall -47.2% this year and a further -1.9% next year.

Average prices are projected to fall by only -1.7% this year instead of  the -4.4% predicted in February.   And rather than prices dropping a further -3.4% next year, prices will see a 0.4% bump instead.   If that’s how it transpires, then we’d be extremely fortunate to come through this downturn relatively unscathed.

July figures continue to point to a stabilizing market.  Sales are plodding along the 10-year average pace and are keeping new listings from adding any significant volume to overall inventory.   Prices are essentially flat with the median price up 2.37% MTD and the average down -0.71%.

After “the whirlwind start to the year”, this change of pace is welcome.

TD forecast

TD forecast comparison

Calgary home sale July 21 2015

Calgary home sale July 21 2015

Calgary New Listings July 21 2015

Calgary New Listings July 21 2015

Calgary luxury home sale July 21 2015

Calgary luxury home sale July 21 2015

Sales-to-new-listings ratio July 21 2015

Sales-to-new-listings ratio July 21 2015

Calgary Real Estate Stats Summary - July 21 2015

Calgary Real Estate Stats Summary – July 21 2015

6 responses to “July 1-21, 2015 Calgary Real Estate Market Update

  1. Joe Winnipeg

    0.4% bump next year? I love these predictions based on nothing. Oil touched 47 bucks today and Encana is laying off another 200. The pain in Alberta hasn’t even really started yet, and the cheerleaders are saying it’s over. House price increases are predominantly set by the number of net new buyers and interest rates. With no new inflow of Eastern kids looking for some place to park their $120,000 to shovel mule $%t up north, and with layoffs only mounting with every drop of excess oil that hits the market (now at 2 million barrels a day with Iran about to dump even more), and with interest rates so low now even the banks won’t drop their mortgage rates to follow the BOC’s lead, we’ve officially arrived at Flaherty’s bottom. Seriously, does CREB pay these guys to say this stuff?

    And even if you believe the house pumpers, a fall of “only” 1.7% translates into a loss of $8500 on a 500k house. An average market return of 8% (which most diversified portfolios return every year) would net you $40,000 without even a single dividend being paid out. That’s a $48,500 swing without going into property taxes, repairs, condo fees, and Jebus help you if you have to sell and fork out real estate fees. Did I mention Calgary real estate was a bad investment?

  2. The 8% return you stated wouldn’t be achieved in 2015 if the protfolios is dominated in Canadian names. I would only agree that Calgary real estate is not a good investment for the time being. However it is way better investment than the shares of energy companies, at least I live in the house and I enjoy it. For the past ten years, you lost average 35% of the capital if you invested in energy companies. The house prices here doubled since 2005. One could easily argue that “I invest in Enb, key, cp or Cnr and easily beat my return in Calgary real estate”. My point is that how many investors have this kind knowledge and can hold this long, as far as I know, very very few. The investment knowledge come with studying, trying and failing and doing again. For average people out there, real estate is still one of the best investment. Here is what the former CIBC chief economist Jeff Rubin said “my home in Toronto has probably been one of the best long term investments I’ve made”

  3. Anonymous…..the facts dont support your claim that housing is a good investment. Housing returns over the long run equal the rate of wage growth which generally equals the rate of inflation….for good reason. RE can only follow wage increases otherwise it quickly becomes uneconomical (ie Calgary). Investing in the stock market returns 8% historically and outperforms housing in the long run by a wide margin.
    I would agree that the average person has no idea about investing but claiming that most people are only invested in energy companies is kinda the same as you only being invested in Calgary RE…probably not a great idea if you want to maximize your returns. Diversity is the best way to win in the long run.

  4. Joe Winnipeg

    Oil down another 2% today to $47. I heard a rumor that TriCan slashed everyone’s salaries 20% recently, but can’t confirm. This is about to get really really ugly.

    No, I don’t invest in Canadian energy or gold companies.

  5. Joe, this is going to get very nasty in Q3 I think, with respect to layoffs. Once the refineries go on turn around there will be no physical buyers. Shorts are at all time records but will likely take profit around $43 before re-establishing positions is my guess. I simply cant see how Calgary RE holds up in this situation. I know a few people with houses for sale, they have slowly been lowering their price but its been sticky. I assume once the summer is over they might be more aggressive.

  6. Curt, the facts are that in order to achieve good returns in the real estate market, just like investing in the financial market, you require deep knowledge and desire to learn after set backs and never give up. In September of 1997, I bought a typical single house in Calgary at $148k with $40k downpayment. Rent on the house always covered the mortgage, insurance and property tax. Over the years with slowly increasing rent, the cash flow increased. I used these extra cash flow either to pay down the mortgage principle, or to use to improve the condition of the property (such as replaced an old furnace to HE furnace, rebuilt fence, replacd the hot water tank, repainted the whole house, added the attic insulation, replaced kitchen counter/backsplash, replaced all toilets, taps or faucets). In 2013, the mortgage had been completely paid off, completely by the rental income. According to the latest City assessment, the house is worth $455k. So my return from the house is 10 bags more. In addition, the house is currently rented for $2100/month. Let’s look at the financial market. In September of 1997, the TSX was trading at around 7000, S&P 500 around 900. As of today, TSX traded at 14077, S&P 500 at 2093. So the return from TSX or S&P 500 is 2 – 2.4 bags in the same time frame. Don’t forget, investors had to hold tight to get these returns during the roll coast rides of the two bear markets.
    I mentioned “investing in energy companies” in my previous post is that I found so many people I know are investing in them, either by themselves or by suggestions from their financial advisors and losing quite a lot.
    Admittedly, there are a handful of stocks which provided a great long term returns with below market beta, and grew their dividends annually. But how many investors know them and invested in them are very few. In terms of the 8% long term return, I would be very interested in knowing if you would like to elaborate it more in details(with number and names, I mean).

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