Chad Moore Calgary Mortgage Broker

Calgary’s Real Estate market is primed for prices to rise. Here’s why …

For new readers, these posts might be helpful for background understanding:

December 8th: http://www.chadmoore.co/prices-set-to-rise/

December 7th: http://www.chadmoore.co/government-money-explained/

Let’s take a look at three key data points to help us make sense of what is happening in Calgary’s Real Estate market:

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

With this information my hope is to help make sense of today’s data and how it relates to near/medium term price movements.

The data from Calgary’s Real Estate board relates to supply side metrics. In other blog posts I try and help you folks understand macro-economic happenings that relate to buyer demand. Ultimately, supply and demand influences any commodity market.

Let’s look at detached and apartment data for Calgary:

Detached Housing Data.

Sales to new listings ratio:

This ratio combines listings exiting the market (sales or expired) with new listings being added to the market.

A ratio of 1.0 would mean that for every new listing added to the market, a listing exited the market. There would be no build up of inventory in future months.

December’s ratio of 120% sales to new listing ratio means there was a depletion of total inventory of homes on the market.

We can see a steady rise in Calgary’s detached sales to new listings ratio month over month and year over year. The new numbers for this ratio are very strong.

Absorption Rate:

The absorption rate tells us in months, how long it would take to liquidate ALL of Calgary’s detached homes for sale, at the current pace of this months sales activity.

The lower the absorption rate, the more favourable negotiations are for home sellers. Traditionally, absorption rates between 2-4 months are “balanced”.

Looking through April’s absorption rate, the overall trend is lower for 2020 with the data steepening during the final months of the year. Considering our sales to new listings ratio was at or over 100% in November and December, plan for absorption to remain at or below 2 months.

Other key data:

December Sales: 503 units 2019. 717 units 2020.
December Listings: 555 units 2019. 600 units 2020.
December Days On Market: 65 days 2019. 53 days 2020
December Sale To List Price Ratio: 94.37% 2019. 96.56% 2020.

Average Price:

Despite the encouraging data above, Calgary’s detached prices have been relatively flat for the last three years. (I’m trying to envision these plot lines strung out on one long line, instead of layered on top of each other). More recently, the average price has been falling.

As with every average, take this data with a grain of salt. Real Estate prices are very local and determined on many factors.

Apartment Data:

Sales to new listings ratio:

Close match of seasonal trends indicates fewer Winter/Spring listings entering the market.

Absorption Rate:

Apartment absorption rate is the lowest number in several years. Six months absorption is still high.

Median Price:

The long term trend of apartment prices continues to be lower.

Conclusion:

When the Bank of Canada increase or decrease interest rates, the timeline for these changes to take effect and flow into our economy is about 9 months. The Spring 2020 stimulus from the federal government and rate cuts from the Bank of Canada, is entering our economy in spades.

The stimulus, in combination with low housing supply, is a leading indicator of upward pressure on detached home prices. In dealing with my clients’ Mortgage files, and speaking with some Realtors, various segments of Calgary’s detached home market are in fact experiencing upward price pressure.

Whoa, I’m not trying to incite a stampede to purchase. But, let’s note what is happening in our market.

If you’re planning to purchase, let’s have your Mortgage approval all polished up and ready. Besure to connect with me.

403-809-5447 or chad@canadamortgagedirect.com

Talk soon,

Chad Moore