One of the downside risks mentioned in CREB®’s housing outlook released on July 29th was that low energy prices could have a deeper than expected impact on employment. The very next day, Cenovus announced up to 400 more Calgary jobs were being axed in the second half of the year. I’m expecting more jobs will be lost as oil prices remain low and companies are forced to cut costs.
Overall prices have held up remarkably well this year as the pullback in new listings after the initial surge that started the year has helped offset low sales. However, I see little in the way of factors providing upward price pressure. Year-over-year price growth has been steadily shrinking and I expect prices will slowly grind below year ago levels in short order.
If layoffs continue & employment prospects dim, this will impact migration, consumer confidence & spending. Inventory would climb as buyers are unwilling or unable to make large financial commitments and some owners might be forced to sell. The end result, again, would be further downward pressure on prices. The weak energy sector has impacted the real estate market more noticeably in the higher price points thus far, but if the downturn creeps into other sectors of Alberta’s economy, we’ll see a more widespread real estate decline.
It’s been an ordinary August so far with sales just below the 5 & 10 year average. New listings have increased a touch, trending just above the 5 year average but nothing alarming at this point.
The weakest segment at the moment are Apartments. At the end of last month, there were 3.77 months of supply indicating market conditions favored buyers.
Overall, the market appears balanced but will be facing headwinds throughout the second half of this year