Chad Moore Calgary Mortgage Broker

Hey Guys!

Calgary’s Real Estate market is holding up, in spite of multi-decade high interest rates. But what do the leading indicators say?  Let’s find out …

Below is a breakdown of detached and apartment data from the Calgary Real Estate Board (CREB).  With this, we look at several data points to help make sense of recent trends—and dare I say forecasts—in our market. 

Let’s get to it!

Detached Homes

Sales To New Listings Ratio:

This ratio combines new listings with sales.  This is one of the only ratios that didn’t go bat-shit-crazy in April 2020.  Why?  New listings AND sales simultaneously plummeted so the ratio remained close to historical norms.

Remember, a ratio of 100% means for every new listing there is a sale.  So higher ratios are a leading indicator of less near term inventory.  

February 2023 shows a slight uptick of this ratio, but is clustered closely with the previous two years of data at ~70%.   

Inventory across Canada has been missing-in-action for a couple suspected reasons, 

1) Rates are higher.  People might not want to be selling and moving up as their blended rate would be higher.  

2) Prices are off peak.  People might be waiting to sell in a higher market. 

3) It’s still early in the year.  It’s possible Calgary sellers are holding off listing with market/rate uncertainty playing out.  

February 2023 data:
Sales: 794
New listings: 1,138

Absorption Rate:

Absorption rate tells us in months how long it would take to liquidate all inventory, based on that current months data. 

If there was only ONE data point to assess the general health of a Real Estate market—this would be one to consider. 

Low absorption (1, 2 or 3 months) indicate a tight market that favors sellers.  This is also indicative of price support, or upward price pressure.  Higher absorption rates favor buyers, with prices being supportive or trending lower. 

Calgary’s detached absorption rates are off the alarmingly low bottom of last Winter—thank goodness!  But are still very low relative to pre-pandemic years.  

I think a lot of folks were planning on more of a buying opportunity as a result of a 4.25% rate hike in 12 months from the Bank of Canada, and fixed rates rising about 67% in the same time frame. 

Higher rates are a headwind for purchase demand, but supply continues to be very tight.  For now, this combination is balancing our market.  One indicator to watch is the sales to new listings ratio …if this ratio lowers that is indicative of more supply for buyers. 

Average Price:

Calgary detached prices have seen a big lift in values hey—wow. 

If the current mix of supply and demand remain in tact, I anticipate prices remain rather flat for this calendar year. 

Apartment Data:

Sales To New Listings:

For three months (Nov, Dec, Jan) the sales to new listings ratio was over 100%.  This was depleting current apartment listings, which in and of itself is upward pressure on pricing.

Finally, listings out paced sales in February.  However, a 70% sale to new listing ratio is still rather high for this time of year. 

A combination of higher borrowing costs, lower price point, upward trending rents and out of province investor interest all point to demand for apartments.

Calgary apartments continue to perform well in this market.

Absorption Rate:

If I announced I thought Calgary apartments would have an absorption rate of less than 2 months back in 2019—men in white coats would have come looking to lock me up!

Yet, here we are. 

Median Price:

Median price data is supportive of high sales to new listings ratios and low absorption rates. 

The dynamic of demand noted above, without a flood of listing inventory, will continue to help prices appreciate.  

Do you have a condo?  This might be an opportunity to sell at a break-even (relative to the past 5+ years) and purchase a detached home off peak pricing.  This is a possible opportunity I see in the current market.  

Conclusion:

We are witness to the classic laws of supply and demand in Real Estate price discovery.  

The dead and beaten horse of rising Mortgage interest rates, is well documented.  This is a natural headwind to Real Estate demand because affordability is eroded.  

Calgary, more so than other cities in Canada, has other demand tail winds …1) Confidence in our oil and gas sector (I.E., no layoffs, stable wages, bonus income certainty, trickle down economic prosperity), 2) Out of province in-migration and 3) Investor interest.  

We are also experiencing how low supply balances out any headwinds of demand.  Again, the laws of supply and demand are universal truths. 

I hope this data and commentary is helpful to you.  If you think someone else might find this article helpful, pass it along.  

Reach out if you have any Mortgage or Real Estate plans on your horizon. 

Talk soon,

Chad Moore

P.S.

Random update …I bought a Sonicare tooth brush, thanks to my dental hygienist scaring me in to it.  I have to say, I like the results so far!

P.P.S. 

What are some of your favorite sources of protein?   Let me know.