Hey Everyone,
Let’s consider the very recent past of Canadian economic happenings, that relate to Calgary Real Estate:
- Two Mortgage rule changes that suppress home buyer demand. #stresstest
- Increasing fixed and variable interest rates.
- Oil shock affecting Alberta’s provincial budget, higher unemployment rate, flat to lower wage growth, migration of people out of AB and overall sentiment.
That ain’t nothing!!
The ONE saving grace to Calgary’s Real Estate market, thus far, has been the relatively LOW supply of inventory in the face of these headwinds. I think a major contributor to the lack of Single Family Detached home supply has come from the lack of new home inventory. Could that be changing?
Continue reading for data driven leading economic indicators of Calgary Real Estate supply and how this, along with other home buyer demand driven data, may influence near term home prices.
There are two distinct Real Estate markets in Calgary: single family detached homes and condo apartments.
Single Family Detached Homes:
Sales To Listings Ratio:
This ratio considers new listings coming onto the market combined with listings leaving the market (sold/expired). A decreasing ratio indicates more listing inventory, which is an indicator of down pressure on pricing (assuming relatively flat/stable demand). A increasing ratio indicates less future inventory which is an indicator of up pressure on pricing, again assuming stable/flat demand.
I’m seeing a decreasing ratio indicating more listing inventory looming.
Absorption Rate:
The absorption rate tells us in months how long it would take to liquidate ALL of the current listing inventory, at the pace of the current months sales volume. This gives us an indication of sales volume and listing inventory combined. Traditionally, 2-4 months is a “balanced” market. Higher absorption favours the buyer in negotiation, and lower absorption favours the seller in negotiation.
The absorption rate is up year over year and down slightly month over month. Persistently higher absorption rates afford home buyers more selection and is favourable to their negotiating position. I think sellers with a well presented home, with an initial list price that reflects the market conditions, are seeing many qualified buyers line up.
Average Price:
For context, we have average price month-over-month and year-over-year comparisons. The average can be skewed with exceptional sales numbers/volume at the higher and lower ends of the market. Note that each quadrant of Calgary behaves differently than the overall average. Please contact me for a full time, professional Real Estate agent to help you assess the market for your specific desire.
Seasonally, Calgary’s average price is holding.
New Home Builder Data:
For my regular readers, this is new!
ATB emailed some data on new home construction for Calgary and Edmonton. I think relatively low builder inventory has helped prop up Calgary’s Single Family Detached housing market since the start of the oil shock (August 2014). If this building inventory continues, this will cause increasing supply and continued down pressure on pricing.
However, I think building times lag Real Estate market cycles. It’s possible, this building inventory could be in creation to the relativley strong Real Estate market we saw from January – July 2017?
Apartment Style Condos:
Sales To New Listings Ratio:
Upward trending sales to new listing ratio is positive. However, the number is slightly down year over year. More condo inventory is coming and continues to influence values in the market.
Absorption Rate:
Calgary’s apartment absorption rate is at peak heights relative to the last four years. That said, the trend is down, which is favourable to sellers. Condo apartments are still a buyers market, with growing value.
Median Sale Price:
The median sale price is seasonally trending higher y-o-y and m-o-m.
Conclusion:
As expected, the pressure on home buyer demand (Mortgage qualifying rule changes, lack of wage growth, fewer high paying jobs, weaker migration to AB and Calgary, higher interest rates etc) are supporting an environment of less home sales. Calgary detached listings are coming onto the market at a relatively “normal” pace but are not being offset with an uptick in buyer demand. If builder inventory continues to enter the market, I think it’s reasonable to plan for more of the same.
Continue to visit my blog for more content on anticipated interest rate movements (fixed and variable) and how our National and local economy might change reflecting home price movements.
Thank you!
Chad Moore
