Here is another analysis of Calgary Real Estate statistics that help you anticipate near term price movements.
I think it’s important to understand Real Estate is traded as a commodity. Like any commodity (oil, gold, diamonds etc) price is primarily created based on supply and demand metrics.
The info we’ll consider below will help you understand and anticipate Calgary’s housing supply.
For Calgary detached housing AND condo apartments, let’s look at the following data from the Calgary Real Estate Board (CREB):
1. Sales to new listings.
2. Absorption rate.
3. Average/Median price.
Detached Housing Data
Sales To New Listings Ratio:
This data helps us anticipate near term housing supply direction.
A decreasing sales to new listings ratio indicates more net new home listings entering the market for sale.
A increasing sales to new listing ratio indicates less housing supply entering the market for sale.
I’m seeing this data point seasonally trend down. It is lower month over month and year over year.
Calgary home builders are adding more new homes to the market. Additionally, re-sale home inventory continues to enter the market. See absorption rate information below for more data …
Absorption Rate:
The absorption rate is a combination of sales, new inventory and existing inventory which tell us in months, how long it would take to liquidate ALL of Calgary’s detached homes for sale.
In general, a higher absorption rate is a “buyers” market (they have negotiating leverage). A lower absorption rate is a “sellers” market (they have negotiating leverage). A market between 2-4 months is considered “balanced”.
You can see below, Calgary’s detached home absorption rate is distinctly different than previous years. I think the primary culprit is that sales are down 15.78% year-to-date.
I think sales are down for many “demand” based reasons …employment rate in Calgary/AB, Mortgage qualifying rules are stricter, interest rates are higher, and overall market sentiment.
We have a massive year-over-year build up of detached housing inventory, up 36.62%. There is only a year-over-year increase in new listings entering the market of 5.98%. Inventory seems to be coming on-line at a reasonable pace, but is not being absorbed with high enough sales volume.
Stacking these variables on top of each other creates increasing supply. Without an equal and off-setting increase of demand, I think it’s reasonable to anticipate down pressure on pricing for detached homes.
Average Price:
I think any “average” statistic needs to be taken with a grain-of-salt. I think Real Estate is very sensitive to factors such as price range, style of home, area, quadrant, neighbourhood within Calgary (etc). At a high level, I think noting the average price direction in Calgary is useful.
Apartment Housing Statistics:
Sales To New Listings Ratio:
Seasonally, this number is trending lower indicating more inventory to be entering the market.
What’s positive is this data point is higher year-over-year meaning less new inventory is coming on the market relative to last year.
Absorption Rate:
The apartment absorption rate is higher month over month, matching seasonal trends of the previous two years.
There is a lower absorption rate number year over year, offering a glimmer of hope to the apartment market in Calgary.
Median Price:
The median price of a apartment condo in Calgary is down month over month but up slightly year over year.
Buyer Demand Summary:
I’ll be expanding on these topics in coming emails. For now, here are some big cogs in our economic machine that I am watching as leading indicators for home buyer demand in Calgary:
- Bank of Canada Interest Rates. I think rate hikes are looming. More and more data is coming in to support economic growth in Canada.
- USMCA Agreement. Business profit has been positive in Canada for some time. Uncertainty around international trade has created an environment of hesitation for continued business investment in Canada. This seems to be settling which is helpful for Canada’s economy.
- U.S Interest Rates & U.S Economy. The U.S economy is on a sugar high right now with record low unemployment (below 4%) and red hot Gross Domestic Product (GDP). There is anticipated wage growth and upward pressure on inflation in the U.S that Canada is sure to “import”.
- Canada’s GDP. It might not feel like it here in Calgary, but Canada’s economy is moving forward in a positive direction (so are other Cities Real Estate markets). I was recently in Winnipeg MB, and told their economy was “booming”.
- Calgary & Alberta’s Employment Rate. This remains a challenge as we find our footing related to our all important O&G industry and economic diversification.
These are some of the pieces of the economic machine that contribute to home buyer demand here in Calgary. These things either effect interest rates and or Calgary’s economy with jobs or wage growth.
Conclusion:
Sales of single family detached homes are significantly down this year. This segment of the market has provided much needed stability to Calgary’s overall housing market since the oil shock of 2014.
With sales slumping, new home inventory increasing and home buyer Mortgage qualifying tightening – what is the OPPORTUNITY in all of this?
Here are some things to consider:
- Investment rental properties. People still need places to live and I think Calgary is a very desirable City to reside. Like we established, qualifying to purchase a home is more difficult so I think there are very qualified people as potential rental tenants.Ask me about setting up your current home as a rental property and purchasing in a “down” market with as little at 5% down payment.
- Air BnB properties. Think out-side-the box here …Consider purchasing a condo in a desirable area of Calgary as a non-traditional rental property. I think Air BnB rental revenue is significantly higher that traditional rental revenue, albeit with less certainty. Be sure to work with an experienced Realtor who will confirm the condo board is on-board with Air BnB rentals. I do think there is an opportunity here.
I really appreciate everyone’s time reading my content! Please forward this email to those who might find it interesting. But please, let’s not spam our friends, family and co-workers, lol.
Talk soon,
Chad Moore
P.S
Okay, I’ve got a 30 day challenge happening that I’m excited to tell you about!!
Here’s my challenge:
- I’m removing any “screen-time” while in bed before sleeping for 30 days. I’ve noticed I waste 15-30 minutes doing this each night. My challenge is getting in bed and going to sleep. No iPhone or iPad.
- I’m adding in one very sincere referral request per day. Believe it or not, this is a challenge I’m over coming.
A part of my challenge is having a “carrot” and a “stick”. My carrot is buying a new pair of shoes when I complete my challenge. My stick is growing my hair out for 30 days. You see my picture below, which is a couple years old now. My hair line is very thin and growing my hair long would be an absolute nightmare, lol.
Have you done a recent 30 day challenge before? Reply and let me know.
Thanks again for reading everyone!!
