Where is the real estate market going in 2015?

Every day there seems to be more doom and gloom reported for the economy and the real estate market in Calgary and beyond. What can we expect over the next year, will we boom or bust?

There are many factors that will contribute to the impending market in 2015. The first, of course, is how long oil prices will stay low and how that will affect the resource industry in our province. Without a doubt, oil and gas are important factors in how we fare in Calgary and Alberta. Many oil and gas giants have already decided to pull back the reins on spending and have cut costs and budgets. Aside from impending layoffs, what I find even more troublesome is the fact that many projects and future expansion have been put on the backburner in anticipation of the oil price recovery. This will mean a decline in "employment growth" within this sector.

One of the major contributing factors in real estate growth is a steady influx of "in migration" from other parts of Canada, and the rest of the world. If employment growth is hindered, will that slow the population growth in Calgary and the rest of the province? It could very well mean we will have less folks moving to our neck of the woods. It can take quite some time for a slumping market to affect the new home industry, I would suggest we will start to see some of that affect happening over the next few months with a slowing in the new build aspect of the market.

Over the past year we have seen outstanding growth in our luxury home market (see previous Blog) that was a major contributor to our average and median price growth. I suspect that this portion of the market has a finite pool of potential buyers, and I would suggest that many that may potentially be in this pool this year may very well decide to hold off on purchasing a home and take a "wait and see" stance moving forward due to the uncertainty of the economy. If we see a significant decrease in this sector of the market, it will adversely affect the average and median prices right across the board.

This week saw a drop in the Bank of Canada lending rate. "This decision is in response to the recent sharp drop in oil prices, which will be negative for growth and underlying inflation in Canada." (Bank of Canada) This drop in lending rates, in combination with a lower Canadian dollar and lower costs of gas at the pump may very well trigger economic growth in the manufacturing sectors, mostly based out of Ontario. Will that further pull people from our province to Central Canada is search of employment?

Perhaps the most concerning news over the past while for the real estate market is the fact that sales are significantly lower for the first three weeks of the year, as a matter of fact, the second worst in 15 years! (Check out my Tweet earlier today!) That, in combination with a large increase in new listings may be a harbinger for the months to come. Customarily, the first two months of the year are seasonally slower than the rest of the year, however, it would seem that many potential sellers are trying to get in front of the curve with the turbulent media reporting's of the economy and where we are headed. I would further suggest that many that would typically wait until spring to list their property may be listing early.

We will need to keep a close eye on the inventory to sales ratios in the weeks and the months to come. If potential sellers see a glut of inventory, many may very well decide not to list. Others may find themselves in a position where they have to sell their homes, whether it be due to finance, layoffs, relocation or perhaps they have been building a new home over the past few months.  We also need to pay special attention to buyer confidence over the next few weeks. As I mentioned above, many may decide to wait to see how things work themselves out in anticipation of "getting a better deal" if the market retreats. What is important is to retain a certain sense of urgency so that we don't have a huge amount of "fence sitters" as we did in late 2008 and 2009.

This year it will be more important than ever to be sure a house is priced aggressively. Overpriced homes will sit on the market longer, and may very well become stigmatized the longer they sit around. Due to many economic factors, there will most probably be a "price correction" early in the year, so we must be very aware of previous sales and competitive listings. If a home is priced correctly right off the bat, they will be less likely to have to catch up with a potential falling market.

A listing will also have to set itself apart from other similar listings. Aside from appropriate pricing, staging, presentation and marketing will be paramount when competing for a buyer. A buyer will expect more for their investment.

If you would like to discuss the market further, I would be happy to sit with you to go over your specific needs. It will be an interesting year ahead!

Real Estate July Statistics in Calgary

The Calgary Real Estate Board has released the latest statistics and the news is not good, but it is nothing we were not expecting. Last year, July saw 2,853 sales in Calgary and the surrounding area, which was actually quite high. July 2008 had 2,336 sales, July 2007 had 2,677 sales, July 2006 had 2,710 sales and in July 2005 - prior to our huge escalation in pricing - there were 2,723 sales. Regardless of how we look at it, we are extremely and dangerously low this year with only 1,683 sales in July. May and June also saw the lowest sales figures in comparison to May and June sales in the past five years.

Historically, August sees lower sales figures than May, June and July. We should also anticipate that sales will typically decrease the last third of the year due to the change in seasons. As a Seller, we need to pay very close attention to the sales figures over the next few months. The real estate market is one of the most pure forms of supply and demand, and as we see demand drop further, prices may also adjust suddenly and dramatically. Average sale prices have dropped 4% in the past month, which is quite concerning. Some economists have been predicting dramatic changes in pricing (see my blog) by the end of the year.

The question is… when can we expect the market to level out and start to increase again? Typically our "spring" market picks up the pace from the winter doldrums, however, we need to keep a close watch on some worrisome trends that will certainly effect our market. Most specifically, Calgary has seen a dramatic change in its growth. The Calgary Herald reported that our growth has slowed to a 26 year low (see the July 23rd edition.) More people left the city than arrived for the first time since 1992. Without a doubt, the fact our population growth is the lowest since 1984 is having a huge impact on our market right now. We are certainly in for some interesting months ahead.

If you have any questions or would like further clarification on any of this information, please do not hesitate to drop me a line.
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News Release

Summer Cool Down Continues in Calgary Housing Market

Calgary, August 3, 2010 – The summer cool down in Calgary’s housing market continued in the month of July, according to figures released today by the Calgary Real Estate Board (CREB®).

The number of single family homes sold in July 2010 in the city of Calgary was down 42 per cent from the same time a year ago, and condominium sales saw a decrease of 44 per cent from the same time a year ago.

July 2010 saw 915 single family homes sold in the city of Calgary. This is a decrease of 14 per cent from 1,061 sales in June 2010. In July 2009, single family home sales totalled 1,585. The number of condominium sales for the month of July 2010 was 396. This was a decrease of 11 per cent from the 445 condominium transactions recorded in June 2010. In July 2009, condominium sales were 702.

“Calgary’s housing market is cooling off after its record-setting pace in the post-recession period. This slow-down is not all that surprising in the face of tighter mortgage regulations and rising interest rates. The post-recession rally we saw in the summer of 2009 was unique and that pace couldn’t be sustained,” says Sano Stante, president-elect of CREB®.

“The sense of urgency seen last summer, fall and winter in the lead-up to tighter mortgage-lending measures has diminished,” says Stante. “Rising mortgage rates and increased inventories will be the primary head-wind facing Calgary’s housing market, but improving job prospects will offer some tail winds in the latter half of 2010 and into 2011.”

The average price of a single family home in the city of Calgary in July 2010 was $464,655, showing a 4 per cent decrease from June 2010, when the average price was $481,964, and showing an increase of 6 per cent from July 2009, when the average price was $436,782. The average price of a condominium in the city of Calgary was $291,168, showing no significant change from June 2010, when the average price was $292,238 and a 2 per cent increase over last year, when the average price was $285,032. Average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighbourhoods, or account for price differentials between geographical areas.

“We are seeing relative stability in our average and median prices for the Calgary market,” says Stante. “A gradual return to moderate interest rates will not trigger any kind of steep decline in prices in our housing market. Prices may soften in select markets where inventory has bulked up, but for the most part they will remain relatively sticky as the economy improves.”

“Nonetheless with the combination of historically low interest rates and a large inventory of homes, there are some great buys out there—particularly in areas where comparable stock is ample such as the condominium and multi-family market. This presents a great opportunity to get into the market or to trade up,” adds Stante.

The median price of a single family home in the city of Calgary for July 2010 was $400,000, showing a 5 per cent decrease from June 2010, when the median price was $418,900, and a 3 per cent increase from July 2009, when the median price was $390,000. The median price of a condominium in July 2010 was $268,000, showing a 1 per cent decrease from June 2010, when the median was $269,900. That’s up 2 per cent from July 2009, when the median price was $263,000.

All city of Calgary MLS® statistics include properties listed and sold only within Calgary’s city limits. The median price is the price that is midway between the least expensive and most expensive home sold in an area during a given period of time. During that time, half the buyers bought homes that cost more than the median price and half bought homes for less than the median price.

There was a slowdown in the number of Calgarians putting homes up for sale in the month of July. Single family listings in the city of Calgary added for the month of July totalled 1,942, a decrease of 29 per cent from June 2010 when 2,733 new listings were added, and showing a decrease of 7 per cent from July 2009, when 2,089 new listings came to the market.

Condominium new listings in the city of Calgary added for July 2010 were 890, down 18 per cent from June 2010, when the MLS® saw 1,084 condo listings coming to the market. This is a decrease of 3 per cent from July 2009, when new condominium listings added were 918.

“Indeed Alberta and Calgary’s economic recovery is lagging behind the rest of the country right now. But on the bright side we see this trend reversing itself as we move into 2011. We expect Alberta to lead in economic growth and recovery—outperforming much of the country in 2011,” says Stante.

To view the CREB statistics page, please visit the media page here:
Calgary Real Estate Statistics