Calgary’s real estate market is the most “normal” market in Canada but it’s still dealing with the aftermath of a dramatic rise in home prices up to 2013, the 2015 drop in oil prices, and a more recent (hopefully temporary) drop in oil prices. As a result, the current balanced market conditions are leading to consistently downward drifting prices.
Today both the house and condo markets are balanced, economic growth is still above the national average, but the price of oil is still a drag the long-term outlook.
Sales are down from last year but Calgary isn’t experiencing anything near the sales drops seen in Vancouver and Toronto. Assuming oil prices recover soon, it is possible that activity will rise to the levels seen in 2018.
For house sales, which make up the bulk of the Calgary market there are more houses for sale than previous years.
But whereas Calgarians were buying consistently in previous years, 2019 has kicked-off with less interest from buyers. If this continues into April it will be a a notable trend that will puch prices lower.
The condo market has started off 2019 much slower than previous years.
For Calgary, current market conditions appear to be deteriorating. 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, is balanced and this indicates a healthy level of supply and demand. It’s not clear that any gains are needed for a healthy real estate market.
The benchmark price has drifted steadily downward and when looking at the chart below, keep in mind that 88% of homes sold in Calgary in 2018 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 $252,000 and that is well within the reach of most working Calgarians.
If this is the new normal, people shouldn’t bank on huge house 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).
Despite claims to the contrary from the Calgary Real Estate Board (CREB), the Calgary house market is balanced. Analysis of how many months it would take to sell the homes for sale in a given month shows that the house market has only recently moved to a balanced market from a seller’s market. Condos have been in a balanced market for some time and recently dipped into buyer’s market territory. Condos are less than 20% of homes sold in Calgary, so they are not a major market driver.
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 more than 14 months of inventory for sale.
At present, there is a lot of uncertainty in Canadian real estate markets. Current house market conditions are balanced which is a healthy sign.
Sellers should consider that by the end of 2019 banks expect one or two more interest rate hikes that will put additional downward pressure on prices. There is broad consensus that Calgary home prices will be lower in 2020 than they are today.
As a buyer, you could try to time the market, but nobody knows the best time to buy. If buyers wait, rising interest rates will erode their home buying budget, yet further price reductions would allow them to buy more home for less money. Based on the steady sales and price declines seen in the past 3 years, it appears prospective buyers can take their time. This is a welcome change from the imbalanced market seen from 2000 through 2013. From a seller’s perspective, if you were planning to sell within the next 3 years, then now may be an opportune time. Most economists are anticipating three interest rate increases in 2019.
If your family is growing and you need a larger space, simply a place to call your own, or you believe timing the market is pointless, then take advantage of these tips to reduce your risk.
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