Chad Moore Calgary Mortgage Broker

If I go back to previous months market updates (December, January, February) this kind of data we’re seeing today can be somewhat anticipated.

Below are some leading indicators of Real Estate supply levels in Calgary.  I also write about macroeconomics (here and here) that help make sense of data that affect interest rates, the job market and other near term demand indicators.

Putting all of this content together (supply & demand) helps me see the big machine of our economy.  With that, I can layer Calgary’s actual Real Estate market data and make sense of and understand why I am seeing certain things.

(this is me selling you on reading my content below and in the future :-))

That said, here is what you can read below:

1.  Sales to new listing.  This anticipates future home listing inventory.
2. Absorption rate.  This helps anticipate sales and inventory trends.
3. Ave/Median price.  Previous year and monthly trend lines help anticipate the near term future price movements.

Let’s take a look at the data published from the Calgary Real Estate Board’s March 2018 report for Detached homes and Apartment condos.  Full report here.

Single Family Detached Homes:

Sales To New Listings Ratio:

This data point considers new homes added to the market for sale (new listings) compared with homes leaving the market (either expired listings or homes sold).  For context, a decreasing trend line signals more future listing inventory.  An increasing trend line signals less future inventory.

It seems that a relatively stable and seasonal amount of new inventory (new listings) is coming onto the market.  This, combined with less and less sales, is resulting in building inventory levels.  I anticipate more of the same based on this ratio below.

Unless the market is balanced with an equal increase in demand to stimulate more home buyer (wage growth, new jobs, in migration to Calgary etc) there is weighing pressure on home prices.

Absorption Rate:

The absorption rate combines sales numbers with inventory.  This data point tells us in months, how long would it take to liquidate all of Calgary’s detached home inventory based on the current pace of sales for this particular month.

For context, a decreasing absorption trend line indicates low inventory and higher sales volume.  This is a sellers market.  A increasing trend line indicates growing inventory and lower sales volume.  This is a buyers market.  Whoever market it is usually has the stronger negotiation position.  2-4 months absorption rate is traditionally thought of as a “balanced market”.

Calgary detached home sales are down 24% year-over-year (March ’17 vs March ’18).  Year-to-date Real Estate sales are down 19%.  Other regions in Canada are experiencing larger home sale percentage declines which I think lessens the shock of our reality by comparison.

Calgary’s absorption rate is slightly trending down month-over-month but up year-over-year.  March 2018’s absorption rate is the highest March absorption rate in 4 years (possibly longer).

Average Price:

The average price of detached homes in Calgary seems seasonally erratic in February & March.  With any trend line, I take the up and down movement of a data curve and smooth it out in a general trend line direction over the long term.

Persistent supply pressure and upward pressure on interest rates (or threats of upward interest rate pressure) might weight on Calgary detached home prices?

Apartment Data:

Sales To New Listings:

This data point is trending upward nicely, matching previous seasonal directions.  This is positive for future condo supply.  However, major condo projects were planned and scheduled to be built during significantly different Real Estate markets of the past (2014).  These projects are in motion LONG before anyone could anticipate our current Real Estate market.  Long-term, condo supply is very high.

Absorption Rate:

The absorption rate for Calgary apartment condos is seasonally trending down month-over-month and year-over-year which is again, pleasing for condo sellers.  I continually hear and read from Realtors about realistic and tactical initial pricing strategies IF selling a apartment condo.  I know apartment condo buyers I work with are offering well below list price and are quite firm, willing to walk away from negotiations.  Just FYI.

At some point, the market will begin to see “value” in purchasing apartment condos again.  Value might mean, positive cash flow if purchased as a rental property, or strong upside potential for future equity gain (purchased under market value) etc.  There will eventually be signals, in my future data releases, when we can expect the market to bottom.

Median Price:

For your context on month-over-month and year-over-year trend lines.  Apartment condo data is more sparatic than detached housing data due to lower sales volume.

Canadian Bond Market Update:

The Canadian bond market determine fixed interest rates in Canada.  Macroeconomic movements determine the trend of the Canadian bond market.  I write about these happenings here.

Below is a snapshot of the Canadian bond market rising over the past 6 months.  Continue to remain connected to my content for future updates on interest rate movement.  More recent bond activity is flat indicating a leveling of fixed interest rate pricing.  As key market data is released (quarterly GDP and monthly inflation data) the bond market reacts accordingly.  Stay close.

Conclusion:

I think Canadian policy makers have successfully achieved their agenda of dampening Canadian Real Estate demand.  Various headlines from Vancouver and Toronto suggest their sales numbers are down further than Calgary’s.  Qualifying for a home is more difficult.  Fixed and variable interest rates are higher; equalling higher Mortgage payments.  There have been SIX Mortgage rule changes in Canada, all strangling home buyer purchasing power.

So what is the opportunity?  Consider this.  Taking a calculated risk of doing the opposite of the market can pay off.  People seem very happy to buy in “peak” markets and fearful to buy in market “troughs”.  Please don’t take this to mean I suggest purchasing a home now.  I am suggesting to critically look at data, trends and open your mind to the possibility of doing the opposite of the masses.

Thank you for reading!

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Please consider my Mortgage services for matrimonial spousal buyouts, home purchasing, rental property purchasing/refinancing, high interest debt consolidation, requesting lower Mortgage payments, early or on-time Mortgage renewals.

Thank you in advance for your consideration.

Chad Moore

chad@canadamortgagedirect.com
403-809-5447