Chad Moore Calgary Mortgage Broker

Check out this breakdown of Calgary Real Estate Board (CREB) housing data for Calgary, October 2020.

Supply and demand. The overarching fundamental balance that drive price change in commodity markets. Here are three data points that I think help make sense of Calgary’s price changes and forecast what might be coming:

1. Sales to new listing ratio.
2. Absorption rate.
3. Average/Median price.

Let’s break down detached housing and apartment housing to help anticipate price movements, based on supply side data.

Detached Housing:

Sales To New Listings:

This ratio helps answer the question “what percent of housing inventory exited the market combined with new housing entering the market”?

An increasing sales to new listing ratio indicates less future housing inventory. Less new houses for sale, assuming equal housing demand, is supportive of prices.

October detached sales to new listings ratio saw a increase month-over-month (m/m) and year-over-year (y/y). It is possible this is beginning to set the stage for a relativley stable Winter Real Estate market, leading into a busy Spring market 2021.

There is likely a continued release of pent up pandemic demand due to the Spring lockdown. Artificially low borrowing rates are also fueling consumer demand for Real Estate. This momentum could continue to pull more buyers out of the woodwork in 2021.

Absorption Rate:

Absorption rate tells us in months how long it would take to liquidate all of Calgary’s detached homes for sale, based on that months sales numbers. Low absorption rates favour home sellers in negotiation.

Calgary’s detached absorption rate is also down m/m and slightly down y/y. This indicates a combination of lower total inventory for sale and increased sales numbers.

Key numbers of interest in October 2020:

Homes sold: 2019 – 846. 2020 – 1,139
New listings added: 2019 – 1,322. 2020 – 1,328
Sales to list ratio: 2019 – 96.2%. 2020 – 96.8%
Days on market: 2019 – 52. 2020 – 47.

Average Price:

I think averages in Real Estate are ok for high level general context. I think price numbers in Real Estate are better suited when more narrowly focused on certain price points, areas, and neighbourhoods etc.

That said, here is a look at the average price movements of detached houses in Calgary. We see a nice uptrend since April 2020.

Apartment Housing:

Sales To New Listing:

Calgary apartment sales to new listings ratio is fairly flat for the past three months which is starting to diverge from recent historical trends. Condo inventory might be starting to accumulate?

Absorption Rate:

Apartment absorption rate is very close to previous years which is a positive sign for current price levels. Let’s keep in mind, the absorption rate is 7 months which is historically very high. Condo buyers continue to have negotiating leverage.

Median Price:

Who can tell me the difference between median and average price? Median price is the middle point of price numbers. Imagine all condo sale prices were laid out in order from lowest to highest. The middle sale price number is the median price. With lower apartment sales volume, average price can swing wildly. I think median price smooths this trend out.

We can see below the median price of Calgary apartments has been below recent prices. That said, perhaps 2020 has created a pricing floor?

Conclusion:

I think there is building evidence detached homes are forming a “bottom pattern” for future price support. Values have been facing down pressure for years, but an end might be in sight? Tightening supply and government stimulus to increase demand might be enough to flatten pricing.

Condos still face elevated supply numbers that make price flooring more challenging. I think pandemic dynamics have sucked buyer demand from Calgary’s city centre further pressuring prices.

A family income of $100,000 with 5% down payment and a simple auto payment can afford to purchase a detached home valued at $450,000. Calgary’s diversifying economy, with a population of about 1.5M people, makes this an achievable goal for many families.

With more evidence of price support as the general narrative in Calgary, more buyers might be willing to step out and purchase a home?

What are your thoughts on Calgary’s Real Estate market? What are you seeing in your area?

Talk soon,
Chad Moore