What’s happening in Calgary Real Estate? A lot. And for many reasons. Let’s take a look at data from the Calgary Real Estate Board (CREB) to start drilling down into today’s market, anticipating what the near term future might hold.
Let’s break down single family detached and apartment data in Calgary. The statistics primarily focused on, in these two segments, is sales to new listings, absorption rate and average/median price.
Detached Housing:
Sales To New Listings:
Do you know what this ratio means? Once this ratio is understood, seeing trends can be helpful.
Rising sales to new listings ratios indicate fewer and fewer homes for sale will be available on the market in the very near term.
Look at the trend from Oct-Dec 2020. See it! This contributed to an early Spring market and, amongst other factors, a price lift for detached homes.
The last 5 months of sales to new listings data in Calgary has held relativley constant at ~70%. This ratio is elevated year over year, but moving along in a seasonal direction now. May’s data point indicates a slight dip leading into the Summer. I think similar seasonal movements will finish off our year, but above historical numbers.
Absorption Rate:
The absorption rate combines total inventory and total number of home sales to create a data point that tells us in months, how long it would take to liquidate all listing inventory for sale.
Lower absorption rates are caused by low inventory, high sales volume, or both.
With a pandemic induced demand surge for housing, sales volume is spiking. New home listings are being gobbled up as fast as they enter the market. With demand outstripping supply, we have a reduction of Calgary’s detached home absorption rate.
There is a small upward trend in absorption rate off the March low. Seasonally, absorption rates increase over the remainder of the year, only to be bled off the following Spring.
Let’s continue to keep an eye on listing inventory and buyer demand. Will listings start to outpace buyers? Will the feeding frenzy of Calgary detached homes continue throughout this entire year?
Demand: Pent Up & Pulled Forward?
Basically two categories for driving housing demand have formed: utility of housing has changed. Monetary policy is encouraging Real Estate debt.
I think we are seeing housing demand spike in Calgary, not only because of pent up demand from 2020, but there was also pent up demand from 2017, 2018, and 2019.
2017 – 2020 was an era that brought about new Mortgage stress tests and several Bank of Canada rate hikes (tightening monetary policy) ….all while Calgary’s unemployment rate was high, coupled with historically lower oil prices for a period of time.
I think the “herd mentality” was people waiting to see if prices would continue to fall. Enter the pandemic …home utility changed (currently is changing anyway) and extremely loose monetary policy assisted with home buying.
Look at the historical sales numbers for the month of May. And then BAM! 2021 Spring market hits and everyone is purchasing. This could be years of people waiting to purchase a home deciding now is the time. I think it’s likely we pulled forward some future home buyers into this housing market. What do you think May 2022 total sale numbers look like?
Average Home Price:
All signs are pointing to higher home values. With the current market mix continuing to exist, average home prices are set to continue to rise. I find it interesting how steep the average price rose. Look at December to March data, wow!
Apartment Condo Data:
Sales To New Listings:
Thus far in 2021 we have seen this ratio trend upward with higher highs and higher lows. This bodes well for a depletion of future inventory, which has been a lead weight on condo values for years.
Absorption Rate:
I was threatened to change my y-axis numbers last month to accomodate a lower absorption rate. Unfortunately, apartment absorption rate increased back up to 5 months. This is still very low absorption rate compared to past data. The pace of apartment listings outnumbered the number of units sold in the month of May.
Median Price:
Median apartment condo values remain in similar territory compared to previous years and have reversed a troubling trend since August 2020.
Conclusion:
Calgary housing demand is at a level unseen since 2014. Housing supply is keeping pace, but just barley.
How long will this surge in purchase demand last? I do not know. I am looking for leading indicators:
- Inflation data and leading indicators of persistent inflation.
- International monetary policy changes.
- Forward guidance from policy makers.
- Bond yields.
These same factors above may also result in a continued surge of demand!
Very interesting times for the housing market to say the least. If I were writing you this content in the 90’s I would be like a weatherman in Cabo, Mexco. Sunny, everyday. No changes. 90’s home values grew at 2% per year. Not much happening :-).
Let me know what you think.
Thank you for reading and sharing this article. Please send me an email, call directly or leave a comment below. Reach out if you are selling, purchasing, refinancing or renewing your Mortgage.
Talk soon,
Chad Moore
