Chad Moore Calgary Mortgage Broker

Calgary Real Estate Market Report

By: Chad Moore

January 2022

Calgary’s Real Estate market continues to be white hot based on CREB data for the month of December.  Why?  Well, the supply and demand factors are indicative of upward price pressure. 

Let’s chat about:

1. Local & national demand.
2. Detached home supply indicators.
3. Apartment supply indicators.
4. Conclusion.

I wrote my subscribers last week about Canadian immigration numbers and net provincial migration numbers into Alberta.  This is one factor that helps fuel demand for housing.  Other demand factors are also at play, which is the short-term credit cycle, wages/employment, and belief.  I’m creating more content for you on these factors in the future.

Additional demand for housing, specifically detached housing, is the “use of home” dynamic is changing.  Use of home has expanded from dwelling, into office, school, home gym and more!

Nationally, demand for housing has spiked well above the 15-year average.   With incredibly low inventory – nationally – pressure on home values is forecast to continue.  I think it is possible people priced out of certain markets, and or for other reasons, come to Calgary for opportunity!  Let’s keep our winter deep freeze a secret for now J.

Alberta is also facing very low inventory, which is an indicator of upward pressure on price.   Fun fact: the average Canadian home appreciated $21,000 – in November!  This kind of net-worth acceleration leads to other benefits in the economy.

Calgary Detached Home Market:

Sales to new listings ratio:

This ratio helps us understand near term housing inventory changes.  This ratio combines listings that exit the market with new inventory.  Increasing sales to new listing numbers forecast fewer listings available.

We can see a significant rise in the sales to new listings ratio in December 2021.  For context, last spring saw incredible buyer competition, multiple bids, over list sales, and many frustrated buyers who couldn’t “get in”.  Should demand remain constant, this spring is set up to be even more competitive for home purchases.

Absorption rate:

This data point tells us in months, how long it would take to liquidate ALL of Calgary’s detached home inventory, based on the current month of sales volume. 

We are seeing historically low absorption rate numbers, both locally and nationally.  A seemingly insatiable thirst to acquire Real Estate has gobbled up inventory at a pace significantly greater than new construction can match. 

Sales: December 2020 = 717.  December 2021 = 1,007.

New listings: December 2020 = 600.  December 2021 = 646.

Inventory: December 2020 = 1,566.  December 2021 = 898.

Detached average price:

Despite Calgary’s sales volume and short supply, our detached home average price is only up a modest 10.26% year over year.  Other parts of Canada have seen even greater price appreciation!  Considering the current/projected Mortgage lending environment, combined with a serious lack of inventory, detached home values continue to face upward pressure on pricing. 

What might slow Canada’s housing momentum?  I think one certain factor is the Bank of Canada beginning their interest rate hike cycle.   A growing percentage of Canada’s national income (GDP) if from Real Estate, so I can see how policy makers might be hesitant to really stymie this sector of our economy.  In fact, federal politicians campaigned on various housing assistance programs.  

Calgary Apartment Market:

Sales to new listings ratio:

My subscribers might remember some of the preceding months data being able to anticipate where we are now?  Apartment sales are up, listings are down and total inventory is down.  What does this equal …?  Upward pressure on pricing!

For those apartment owners who “hung on” during the recent pricing down turn, things are coming back for you!

Calgary apartment sales to new listing ratio skyrocketed in December.  This indicates less future units for sale, which has been the anchor tied around this segments neck for years.

I know clients who are missing out on apartments due to multiple offers and same day listing-to-sales.  Crazy hey!

Absorption rate:

Unsurprisingly, Calgary’s apartment absorption rate broke below the 4 months level for the first time in half a decade. 

Here is a summary of December numbers:

Sales: December 2020 = 185.  December 2021 = 307.

New listings: December 2020 = 287.  December 2021 = 294

Total inventory: December 2020 = 1,169.  December 2021 = 1,056.

Median price:

I use median price for apartment condos to smooth out any large variance the average numbers might cause.

Despite indicators of tightening supply, median price is still within historical range.  There is mounting evidence that price appreciation should start to be reflecting in the data soon.

Conclusion:

For many, many reasons demand for Calgary Real Estate is strong.  As I reported recently to my subscribers, net provincial migration is one demand factor that is supportive of Calgary’s housing market.

It seems like various large, and very influential sectors of Canada’s economy are circling around Canada’s housing market unsure of what to do. 

The Bank of Canada cannot come out and hike rates, as that would be the equivalent to using a sledgehammer vs. a scalpel throughout the entire Canadian economy.

Federal politicians are implementing, and campaigning on housing assistance programs.  One example is the possibility of increasing the minimum insured home purchase price above $1M.  To be fair, I think we are likely to see restrictions targeting Real Estate investors.

Commercial banks (RBC, CIBC etc) are heavily invested in Canadian Real Estate.  Understand that my Mortgage is a personal liability on my balance sheet.  My Mortgage is an asset on my banks balance sheet.  Banks do not want to damage (missed payments, defaults, foreclosure etc) their assets.

Finally we have OSFI (office of the superintendent of financial institutions – they basically regulate commercial banks).  OSFI is unwilling to implement any sudden and damaging Mortgage regulations.  In fact, OSFI officials, like many others, are calling for more supply to solve this “issue”. 

Internally, as a nation, I think status quo prevails related to Real Estate.  It is possible some financial event, outside of our borders, could change Real Estate price trajectory.  Honestly though, like you, I do the best I can with the circumstances I’m in.  I’m just calling how I see it. 

I hope this is helpful for you folks.  Please share this report and invite others to subscribe to my reports.

Talk soon,

Chad Moore

403-809-5447

chad@canadamortgagedirect.com