There is one relevant data point that broke away from an annual trend that is worthy to note.

Calgary’s detached absorption rate has a history of trending down throughout the Winter and Spring.  It then pauses nicely over the Summer and begins rising again in the Fall.  Basic clock work.  Until now.  Read more of my analysis below on why this is an opportunity for buyers and noteworthy for sellers.

This market data is from CREB and used to help you make sense of “what’s happening” in Calgary’s Real Estate market.  Inevitably this question comes up and I think it’s nice to have a broad, data driven, understanding of our market.

Use this data to help you understand the supply side of Calgary’s Real Estate.  If demand for Real Estate remains constant, housing supply will influence near term pricing direction which can be anticipated in the following statistics.

1.  Sales to new listings ratio.
2. Absorption rate.
3. Average price.

Let’s look at Calgary’s detached and apartment data sets.

Detached Housing Data:

Sales To New listings Ratio:

This looks at the number of new home listings coming onto the market for sale compared with homes leaving the market (expired, sold etc).  A decreasing trend line anticipates more listing inventory.  An increasing trend line anticipates less future home listing inventory.

As you can see, 2018’s data point is above 2015 & 2016 but below 2017.  It’s seasonally trending up, which bodes well for future inventory.  However, this data point is still posing flat to down pressure on pricing.  Frankly, the lack of housing supply has really helped prop up detached home values since the recent market peak of August 2014.

Absorption Rate:

The absorption rate considers sales volume, listing inventory and new listings into this data point.  The absorption rate tells us in months, how long it would take to liquidate all of Calgary’s detached listing inventory, at the pace of that months sales.  For context, 2-4 months is a balanced market.  A lower absorption rate indicates low inventory, high sales volume and upward pressure on pricing.  See 2014’s data.  The opposite is also true.

Here’s where the deviation is.  Seasonally, we’ve seen a nice trend line that decreases leading into the Spring market.  The depth and pitch of this trend line changes annually.  However, February 2018 data went flat.  I think this is due to a year-over-year 20% drop in sales.

I think there is a reasonable amount of uncertainty in the market due to recent interest rates hikes and new Mortgage rule changes.  In Real Estate, when there is either personal or market uncertainty, the default position many people take is “wait and see”.  Waiting and seeing is enough to create down pressure on pricing, regardless of other fundamentals.

If sales remain significantly lower, with the same amount of new listing inventory coming on line, total inventory will build creating over supply and down pressure on pricing.  The positive side of me thinks our February weather contributed to a couple families staying home versus going out in -30, buried in snow in the dark month of February to purchase a new home :-).

Average Price:

Despite the pessimistic data tone this month, average price saw a uptick month over month and year over year.  For additional context, the median price was also slightly up from $492,250 to $495,000 or up 0.56%.

Apartment Data:

Sales To New Listings Ratio:

This data point is trending up month over month but is down year over year.  Seasonally, this is moving in a similar direction.  Calgary’s condo apartment market would like to see this number be higher and remain high for a sustained period of time to absorb more listing inventory.  Many new condo projects continue to be constructed with new units coming online for sale.

Absorption Rate:

This absorption rate is still very high, but trending in a seasonal direction.  The context of how different the condo apartment market was in 2014 is a reminder of what use to be.  The past three years (15-17) are helping adjust the market to today’s new pricing and expectations.  Sellers might consider realistic and aggressive pricing.  Buyers might be looking for long-term value.

Median Price:

Again, the median price is trending similar to years past.  The volatility of this data point can be skewed quite drastically due to lower volumes of numbers.  A continued upward trend would be welcomed by existing condo apartment owners who are listed for sale or thinking of selling.

Conclusion:

I think market uncertainty, due to Mortgage rule changes and recent interest rate hikes, has contributed to some of CREB’s February data.  Other near term demand data points (unemployment rate, net migration to Calgary, wage growth etc) have been relatively stable.  Perhaps, the Government created changes were just enough to have people enter the “wait and see” mindset that was so prevalent in 2015 and 2016?  Does this mean buyer demand is pent up for the Spring market?  How did February’s weather contribute, if at all, to buyer demand?  Is the market mindset “wait and see” enough, in-and-of-itself to put down pressure on home prices, regardless of fundamentals?  If this is true, could there be good value purchases in the market?

One of the Mortgage rule changes in effect is increasing the Mortgage qualifying interest rate.  This decreases buyer demand by reducing a buyers maximum purchase price.  If the buyers were looking to purchase at their maximum, their affordability is reduced.  However, many people are purchasing below their maximum affordability.  Perhaps it’s this segment that is waiting to see the movement of prices before they purchase?

Continue to visit my blog for more updates on Calgary’s Real Estate data, macro economic updates related to interest rates and buyer demand.  Please like and share this article. Thank you.

Talk soon,

Chad Moore