Micro Market Analysis Case Study

With the good news regarding growth in both pricing and activity in the Calgary area last year I think it is important that we be cautious on how we view these figures and statistics in making educated and informed decisions on how to move forward with our real estate direction, whether deciding to buy, sell or invest.

Without a doubt, real estate is an excellent strategy for long term financial growth. When deciding how to move forward with your real estate needs, it is imperative to have a professional real estate adviser and strategist on your team. I recently put together some information for clients to assist them with their future real estate goals and thought that this information was pertinent for anyone that is trying to get a grip on the media coverage on the significant growth we have seen over the past year. And more importantly, how it pertains to making sound real estate decisions.

Before I analyze these two communities, let’s have a look at how we fared for sales for single family sales in Calgary Metro. In 2011 the average sale price was $466,506 for the 13,120 sales throughout the City. We saw increases year by year in both sales figures, up 1,989 to 15,109 sales, an increase of 15%. And the average price also increased, up $14,730 to $481,236, an increase of 3%. It is also interesting to note that the average price in January 2012 was lower than any of the previous months in 2011 and 3% below the average price in January 2011 and sales volume was also down in comparison to the year prior. If we were to make predictions of how the year would iron out after that first dismal month, we would have probably been way off on our yearly forecast… hindsight is 20/20!

In looking at the activity of both Hidden Valley and Hanson Ranch in the same period, it is quite obvious that - although these figures above are showing significant growth generally speaking in our beautiful city – it is extremely important to understand that within the city there are huge variances in pricing and activity. Hidden Valley and Hanson Ranch are married as communities sharing the same community association and schools – they are definitely each other’s closest neighbours. You would expect that growth would be very similar in these attached communities, however, after careful analysis we can certainly see that is not the case.

Hidden Valley showed significant sales and equity growth from 2011 to 2012, outperforming the general statistics for the rest of Calgary. The average price increased from $360,260 in 2011 to $385,794 last year, a growth rate of 7%! The volume of sales also increased 25% from 120 sales in 2011 to 153 sales last year. One of the major contributors to this huge growth were higher priced homes within the community. In 2011 the highest sale price for a home was $551k, all other sales were below $450k. Last year there were 13 homes that sold over $450k, and five of those sales were above the ceiling reached the year before… and the real kicker… a sale for $710k (and one for $665k, and one for $630k!)

In contrast, Hanson Ranch saw a significant drop in their average price, whereas sales remained steady (22 in 2011 and 24 in 2012). The average price in 2011 was $541,079, significantly higher than the citywide average. Last year we saw a drop in value of the average sales price to $517,954, a decrease of 4%. There certainly are a variety of factors that have contributed to this detraction in value. The first is this single high sale in 2011 for $870k, the highest price last year was considerably lower at $650k. It is interesting to note that that “high” price in 2011 was actually purchased in 2007 for $962k. And the highest sale in 2012 ($650k) was also sold in 2011 ($568k) after some major renovations.

This is a great case study to point out the importance of taking into account the micro analysis of an area and a specific property as the trend of the entire area may not be a good indication of current values in a specific area. We are seeing more and more variance from one community to another, and even from one street to the next. Coming up with a value for a particular property takes a great deal of information gathering, analysis and strategic marketing in order to maximize the equity of that home. I do believe that in the coming weeks, months and years it will be essential to understand these various nuances in the market so that we can achieve sustainable growth throughout Calgary.