Updated November 3, 2019
Prices in Metro Calgary are continuing their downward path with some seasonal variation. At this point, moderate year-over-year price declines are part of a long-term trend in Calgary.
Some people blame higher interest rates and tighter mortgage rules for the weaker market, but these arguments don’t hold much weight because mortgage rates are still at rock-bottom lows. The market weakness began when oil prices bottomed and layoffs hit the oil patch. Since then it would appear foreign direct investment has shifted from Calgary to Toronto and Ottawa.
This article covers:
Where are Metro Calgary prices headed?
What are Purchase and Listing Trends ?
Should investors sell?
Is this a good time to buy?
The good news (for buyers) is that prices are still trending downward in Calgary. Home prices had a run-up this Spring that didn’t reach the 2018 high. With the slow fall and winter months ahead, prices will likely slip further downward. At the same time, condo prices have been consistently dropping and this will likely accelerate in the Winter.
Since the peak in 2014, Metro Calgary house prices have dropped about $50,000 (10%).
Over the past five years, the benchmark price has drifted steadily downward. Each Spring usually sees a run-up in prices but this subsides in the Fall and Winter. Although the benchmark house price was higher, last year 88% of homes sold in Calgary were priced at $450,000 or less.
The downward price drift is likely a result of prices overshooting in past years. Rising interest rates and mortgage stress tests are less of a factor in Calgary because houses are much cheaper than Toronto and Vancouver while incomes are higher on average than elsewhere in Canada. If Vancouver and Toronto could support million dollar home prices with less household income than Calgary then surely current conditions are simply a result of Calgary’s abundance of available housing.
Condo prices have seen more consistent declines over the past few years. The benchmark condo price is well within the reach of most working Calgarians.
If this is the new normal, people shouldn’t bank on huge home price increases but instead should focus on buying the home that gives them the lifestyle they want.
At Mortgage Sandbox, we would like to see developers building more 4 and 5 bedroom condos. Not everyone can afford to put their family in a house, and for many parents work related travel makes it difficult to stay on top of basic upkeep (i.e., mowing lawns, clearing eaves, shoveling sidewalks).
Although Calgary home prices have dropped significantly they are still not very affordable. To put this into perspective, a first-time home buyer household earning $104,000 (the median Metro Calgary household before tax income) can only get a $345,000 mortgage. This means that to buy an entry level $490,000 house, a first-time home buyer needs to save a $135,000 cash down payment or receive a very generous gift from mom and dad. For most people, that’s just not on the cards.
Looking forward to 2019, we see most forecasters expect prices to drop and the brunt of price drops will likely be felt by higher priced properties (i.e., more expensive neighbourhoods and detached single family homes).
Given the forecasts, the current market weakness, and the increased downward price pressure, prices will likely remain flat or drop for the next few months. As well, homebuyers and homeowners shouldn’t expect much price appreciation between now and the end of 2020.
What does this mean exactly? Well, the market for all homes (detached, townhome, condo) are all trending toward a position where buyers and sellers have equal negotiating power. This leaves room for lively price negotiations - sellers can’t simply name their price. The positive outcomes for buyers are more selection, fewer bidding wars, and ultimately a little less stress.
Except for the condo market, all markets have not officially made it to full-blown balanced territory. Houses are experiencing a weak seller’s market (sellers have slightly more negotiating power) but it is trending toward a balanced market.
Despite claims to the contrary from the Calgary Real Estate Board (CREB), the Calgary house market is biased in favour of sellers. The Calgary Real Estate Board (CREB) keeps advocating for less supply but less supply would push the market back out of balance, handing sellers an advantage over buyers in negotiations.
At Mortgage Sandbox, we believe that government should steer the market toward balanced market conditions and let buyers and sellers figure out a fair price with equal negotiating power.
Calgary stands in stark contrast to Metro Vancouver where the detached home market has much more than 5 months of inventory for sale.
Purchases are consistent with previous years but Calgary isn’t experiencing anything near the house sales drops seen in Vancouver.
For houses, which make up the bulk of the Calgary market, we’ve had fewer purchases and fewer houses for sale than in 2018.
Condo purchases also started 2019 slower than previous years but have since matched previous years. Purchases in the past few months were consistently stronger than previous years.
For Calgary, current market conditions appear to be moderating. The Calgary real estate board says that the market is struggling to make gains, others lay blame on stress tests, but perhaps the market is still digesting the dramatic price gains seen in 2013 when the price of a home jumped over one hundred thousand dollars in a single year.
As well, the house market, which makes up most of the activity, has almost been balanced in recent months and this indicates a healthy level of supply and demand. It’s not clear that any changes are needed for a healthy real estate market.
At Mortgage Sandbox, we break down our market analysis to five key factors: affordability, capital flows, government policy, supply and popular sentiment. Read the full report to understand how these factors are affecting prices in Alberta.
From a seller’s perspective, now is a better time to sell than in two years because forecasts predict that Calgary house prices will be flat or drop for the next two years.
To benefit from the best-case scenario, a home buyer should talk to their mortgage broker about prioritizing flexible loan conditions and mitigating risk. Find out more about the benefits of a mortgage broker.
There’s potential for an overwhelming oversupply highlighted by CMHC and this would bring more downward pressure on prices.
With buyer negotiating power and dropping prices, 2019 will be a good time to buy. However, 2020 may be even better. However, given the long term trend of reducing prices in Calgary, A.B. if you’re going to buy then buy the home that suits the lifestyle you want rather than as an investment.
If you are thinking of buying just be sure to drive a hard bargain, and cover your bases with smart and educated decisions. Don’t bite off more than you can chew.
Buying a home is a big decision, so check out Mortgage Sandbox’s Canadian Home Buyer Guide so we can walk you through the end-to-end process and get you ready to buy your new home!
Here are some recent headlines you may be interested in:
Stability settling Calgary's residential real estate market (Calgary Herald)
Calgary's resale housing market showed positive signs in August (London Free Press)
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