Hey Guys!
I think Calgary’s Real Estate market is in an interesting place for several reasons …
- Our main economic driver—oil and gas—is rather profitable relative to years past. Our local economy went through a genuine cleansing for 5-7 years, and we have been off that bottom for sometime now.
- Calgary still remains a hot destination for all Canadians. We are seeing net positive inter-provincial migration. These new people require shelter. Housing arbitrage (selling high, buying low) is still happening as part of this re-shuffling of home equity in Canada.
- The Bank of Canada came out last week and said we have essentially topped out on interest rates. Simultaneously, fixed interest rates are grinding lower. This bodes well for stability when considering a large purchase. To be clear, both of these interest rate directions can change, but for right now, this is the trend.
Let’s look at some simple yet telling data points related to detached and apartment housing in Calgary.
Detached Housing:
Sales To New Listings Ratio:
This percentage tells us the ratio of net new inventory, which is a near term indicator of supply. A ratio of 100% means for every new listing, there is a home exiting the market (sale).
January 2023 has a rather seasonal ratio of just over 60% so there is some accumulation of listing inventory—but the numbers are small relative to our City’s population (1.33M people).
January 2023 sales: 561
January 2023 new listings: 897
For context, the lowest January sales data I have is from 2019 when sales slipped below 500. Here’s a shocker …January 2022 detached home sales spiked to 1,146!!
For January detached sales to new listings data, I think this is within reasonable historic norms.
Absorption Rate:
The absorption rate tells us in months how long it would take to sell-out all detached homes, at the pace of the current months sales.
A traditional “balanced” market range is between 2-4 months. Lower absorption rates indicate a combination of high sales, and low overall inventory.
We can see how undersupplied Calgary’s detached market is at 2 months absorption. This is spurring competitive bids, but from my purview, a lot of the competition is not blowing the listing price out of the water like last year.
Listing inventory percolates up over the Spring-Summer months, as does buyer demand. Let’s see if a trend moving toward balance develops. Like in any of Calgary’s past Spring markets, great properties are likely to draw eager buyers willing to compete, with peripheral properties purchased at what the market will bear.
Average Price:
We had a big jump in month-over-month and year-over-year average price. I find the average price useful as a general trend indicator because Real Estate is very local. Each property type, price range, quadrant, neighborhood etc etc influences what a buyer is willing to pay. That said, values are way up from 2019 averages.
Apartment Condos:
Sales To New Listings Ratio:
For three months in a row, there has been a depletion of apartment inventory in Calgary—wow!!
The sales to new listings ratio came in over 100% again for January. Condo’s are back—maybe not back to peak pricing of previous cycles, but hope is on the horizon.
Sales January 2023: 318
New listings January 2023: 545
Absorption Rate:
Calgary’s apartment absorption rate is the lowest I have record of since January 2014 (2.2 months). January 2023 absorption is 1.4 months!
Buy why? Supply and demand forces colliding for reasons of, a) with higher interest rates affordability has been eroded so the price point of a condo is appealing, b) investors from other parts of Canada have experienced City centre condo prices at 2-3 times as high—so our prices are a “bargain” and c) Calgary has been improving amenities in the core to make lifestyle improvements which increases demand.
Median Price:
Relative to the past 4 years the median price of a condo apartment has drastically improved.
Let me know if you plan on selling your apartment, and moving up!
Conclusion:
In the face of the highest interests we have seen in a generation, Calgary Real Estate remains stoic.
Detached housing supply is low, with continued demand from local and national buyers. Apartment condos are hot right now for factors outlined above.
The common belief I hear from buyers interested in Calgary Real Estate is the belief of “value”. I define value in Real Estate as [short and long term utility of the property multiplied by the perceived likelihood of appreciation] divided by the certainty and amount of income to service the debt multiplied by other eligible Mortgage qualifying criteria.
If I find a home I can see myself living in that provides me utility over the short and long term, and I think there is an above average possibility of price appreciation, and I can reasonably anticipate servicing the cost of the property while qualifying for the Mortgage—I can judge that home to be of good value.
The opposite of judging a home to be good value would be I may or may not see short and long term utility of the property multiplied by the fact I think prices will decrease divided by my uncertain and lower income to service to debt multiplied by my inability to qualify for the Mortgage.
I’ll flush this value equation out further, as this is new thinking for me.
I hope this content is helpful for you. Thank you for reading! Reach out if you have any questions about Mortgage financing.
Cheers,
Chad Moore
P.S.
Are you keeping your NY resolutions going strong? If so, tell me about it!
