Chad Moore Calgary Mortgage Broker

Hey Guys!

Are you curious how higher fixed and variable interest rates are influencing Calgary’s housing prices? See below.

A general rule of thumb is a 1% rise of interest rates is about a 10% headwind for Real Estate values. Let’s continue watching if this plays out to be true.

I like to focus in on three Calgary Real Estate Board (CREB) statistics to help simplify and make sense of pricing trends:

1. Sales to new listings. 

2.  Absorption rate. 

3.  Average/Median price. 

Real Estate transacts like most other commodities—influenced by supply and demand fundamentals.  Let’s take a look at supply, and keep in mind some demand data too. 

Detached Housing Data:

Sales To New Listings:

This ratio combines homes exiting the market (sold/expired listings) with new listing inventory.  A rising ratio indicates less new homes entering the market and or rising sales.  

The build up or depletion of listing inventory is a indicator of near term price direction (demand remaining constant).

Below, we can see Calgary’s detached sales to new listing ratio is clustering seasonally.  Nothing particularly exciting to report. 

The tell tale signs for the 2023 Spring market will start to show up in the final months of 2022—like last year. 

Here are some additional data points:

Sales July 2021: 1,409
Sales July 2022: 1,136
(down 19.38% y/y)

Sales June 2022: 1,483
Sales July 2022: 1,136
(down 2.34% m/m)

Inventory July 2021: 3,112
Inventory July 2022: 2,596
(down 16.58% y/y)

Inventory June 2022: 2,667
Inventory July 2022: 2,596
(down 2.65% m/m)

Absorption Rate:

The absorption rate tells us in months how long it would take to liquidate all current inventory at the pace of the current months sales.  This is a very quick and telling statistic on the direction of the market. 

We can see below Calgary’s detached absorption rate is off crisis level lows from earlier this year.  We are steadily heading toward a more “balanced” absorption rate—between 2-4 months. 

We saw the absorption rate nosedive in the later part of 2021 which lead to the Spring ’22 fever.  As anticipated by many, and following historical trends, summer months are slower for sales and new listing inventory.  Let’s continue to watch September-December numbers to anticipate the spring ’23 price direction. 

Average/Median Price:

We can see a big step lower in Calgary detached average price.  In my previous CREB update, I noted the big drop off in detached median home prices.  Calgary detached pricing seems to be retracing some of the blow off top gains earlier this year. 

Let’s all note that Real Estate is very local.  Some listings are still seeing competitive bids, over list price.  Other listings are not. 

Apartment Data:

Sales To New Listings:

The apartment sales to new listings ratio has bee-lined it for the top end of historical trends.  It seems this years data set should fall within that range. 

Absorption Rate:

Apartment absorption rate is also edging higher—heading toward a more historical range.  That said, today’s apartment absorption rate is still below several of the past years, and is offering sellers more negotiating leverage.

Median Price:

Apartment median price is grinding lower, off peak Spring pricing. Apartment median price is seemingly stabilizing at the upper end of prices compared to the past 5 years. 

Conclusion:

This Real Estate report is noting data points definitely off peak pricing, but Calgary’s data is not nearly as bad as some other areas of Canada.  

The cost of borrowing is increasing and is a headwind to asset values.  Just like when borrowing costs dropped, we saw a big increase in asset values. 

Here’s an example of how a monthly payment has changed on a $400,000 Mortgage:

Monthly payment in February 2022: $1,870

Monthly payment in August 2022: $ 2,233

(difference of $363/mo)

Fixed rates are off their recent peak, and facing an erratic near term future!  Bond yields were down and then shot back higher recently (chart below).  

These higher borrowing costs shift the aggregate market maximum purchase price lower, leading to lower values.  

With this, our market is turning back to Real Estate transactions due to life needs vs investor speculation.  Several of my last files are families moving up, couples separating, and first time buyers entering the market.  I am seeing much less interest from investor purchase speculation.

Variable rate Mortgage holders: let’s not get too excited here, but rate cuts could be the talk of the town again in 2023?  That said, plan for the Bank of Canada to be hiking rates again in September.   

If this current interest rate hike cycle has solidified that a variable interest rate is not wanted—please reach out to understand your options of locking in.  I am not making a blanket “lock-in” recommendation.  I’m just saying reach out to understand YOUR lock-in options!

If you’re planning to purchase, sell, refinance or renew your Mortgage—call/email me. 

Talk soon,

Chad Moore

P.S.

Ok, my girlfriend and I survived a three day canoe trip this past weekend.  We paddled from Rocky Mountain House to Drayton Valley on the North Saskatchewan river.  

We prepped great food and made space for a couple beers each.  If you like backcountry camping, I highly recommend you try overnight canoe tripping.  I get the experience of secluded camping, without having to carry all belongings.  Let me know if you’re considering this!

P.P.S.

Mosquitos.  They’re bad this year.  If you have not experienced this yet, you’ve been warned.  I camped at the birth place of all mosquitoes and have seen some things, LOL.