Calgary
June 2008
At the end of May we guesstimated that numbers of inventory would soon peak and with inventory down slightly at end of June, this appears to be the case. The fact that listings fell slightly in June is significant because the normal trend is toward increased # of listings in the summer months. Perhaps we've just seen inventory peak for the year.
Demand remains relatively low, but very stable and is showing signs of increase.
Price is much better than last year at this time when what you got for your dollars was at an all time low.
Projecting... expect a Buyer's market, but stabilized prices and with nicer property than in 2007. The big picture looks relatively strong, as much of the impact of the financial sub-prime crisis has worked its way through. While Canada's economy will apparently take a hit in manufacturing sectors and there is still a question with oil producers concerning the new Alberta Royalty Scheme and possible Federal Carbon Tax, the fundamentals of secure and available oil will underpin the Western, Alberta, and Calgary economies. Also, as Canadian cities go, Calgary is affordable and the demand for workers is still high.
Frank N. McCullough, BBA, MEng. (Click here to contact agent)
Coldwell Banker Lifestyle Realty Ltd.
April 2008
Supply Analysis: Supply continues to break records this year, continuing the upward slope from the previous two months, albeit not quite as steep. Inventory is 2x the normal for April and provides good choice in all sectors.
Demand
Analysis:
Demand,
measured by sales in April, shows a flattening
curve with sales essentially the same in March
and April. Demand is 68% of last year's record
demand, and 79% of the
5- year average for April (3,004 sales).
Price Analysis: Average Selling price shows strength in affordability, as the price curve remains relatively flat. Buyers continue to spend the same amount of money to pay for a home. Average sale price is the same as April 2007. Affordability has become better as a result of continually reducing interest rates, a trend that has been very positive for those buying. On the individual property, the price has dropped. Some segments are more steady than others. As in all real estate, the individual case is unique and actual value change can only be determined from a study of the individual property in context. However, overall the average buyer might now pay in the order of 10% less for the same property in mid-2007.
Analysis
and Conclusions
The
steady increase in supply has been remarkable, but
is unlikely to increase much longer. The
unusually high inventory indicates a transition
period. The last turn of the market
occurred in July 2007, and it was no small
coincidence that this was the time when the US
sub-prime crisis became part of our consciousness.
Currently there is over
5 months (5.36) of inventory,
compared with less than half a month only 2 years
ago (record low inventory 0.49 months April '06).
However, this does
not compare to what media indicates in some
US cities, where inventories are over 12 months.
Secondly, the
economy remains strong. While net migration
to Alberta has slowed, it has not stopped. There
is less in-migration but considerable pent-up
demand from those who wish to make lifestyle
trades (up or down), and a large number of
first-time buyers who are unaware of the
opportunities in this market, and who have been
scared off by thoughts of buying too high.
Speculators and fix-and-flip are mostly
gone, but Investors (those who hold for longer
term, and income, rather than solely capital
gains) are returning to the market.
This market is challenging and requires vigilance,
patience and ingenuity of agents in deal making,
not because of any inherent lack of demand, but
because of differences
of opinion of value. Negotiations can be
lengthy, and in the case of trades, re-negotiation
is sometimes needed in order to make both ends
complete.
However, the
prognosis is good: The financial crisis
created by the US sub-prime fiasco will be a year
old in a few months, and most risk and
losses will have been recognized. Alberta's
economy is strong, affordability
is up, problems with inventory solved, and
the past two years' excesses of the market created
by record demand coupled with record low
inventories are over. For many this provides an
opportunity to step up to a preferred
accommodation they either couldn't afford or find
last year. Those
seeking good value in the market can start
looking, and are likely to find what they are
looking for.
Information provided by
Frank N. McCullough, BBA, MEng. (Click here to contact agent)
Coldwell Banker Lifestyle Realty Ltd.
From RBC's Special Report on Housing Affordability across Canada published March 2008:
Calgary & Edmonton - rapid slowdown underway?
The pendulum has swung quite rapidly from a red-hot seller's market to one that is decelerating at a remarkable pace. All home segments witnessed sizeable improvements to affordability conditions in the final quarter of 2007 with momentum expected to continue this year. Sales-to-new listings ratios in both cities continue to decline and still remain in the soft end of a balanced market. Year-over-year house price gains continue to slow sharply dropping in January to 8% in Calgary and 11% in Edmonton. The softness is also evident in the new home market. Housing starts in Calgary have slowed dramatically dropping 33% year-over-year in the final quarter of last year and a further 11% in January. The rapid run-up in house prices has triggered automatic stabilizers to kick-in by aggressively pricing prospective homeowners out of the market. As more supply gradually makes its way to market, the pace of price gains are expected to continue to fall closer in line with income growth and underlying market conditions.
Resale housing market conditions
Alberta on watch
Nationwide housing affordability deteriorated in every consecutive quarter throughout 2007 to end up at its most unaffordable level since the housing bubble peaked in 1990. Back then, soaring interest rates and a recession sparked much of the trouble. Today, however, a long upward trend in house prices driven by sounder macroeconomic fundamentals like job growth is primarily responsible. Adding more fuel to this housing cycle is mortgage product innovation that has expanded the market to more potential buyers since mortgage insurance liberalization began two years ago.
Only Alberta bucked the trend in the latest quarter. Outside of Alberta, affordability deteriorated in every single market and for each type of housing.
The lagged effects of higher fixed mortgage rates continue to be a significant part of deteriorating affordability, but our forecast sees the popular five year mortgage rate dropping by a further 75 basis points by year-end. Going forward, falling mortgage rates, cooler forecast house price gains and decent income growth should all lead to improved affordability across most markets.
It's premature to get too concerned, but Alberta's housing market is on watch for possible further negative developments. The average price of a standard twostorey home fell by 4.3% last quarter over the previous quarter. Bungalow prices fell by 7.3%, townhomes were off by 4% and condos fell by 5.3% in their second consecutive quarterly dip. The price of the benchmark two-storey home is still 63% higher than two years ago, and one quarter does not make a trend. However,
the year-over-year pace of price gains has gone from about 50% a year ago to only 11% today. Furthermore, the sales to listing ratios in Calgary and Edmonton remain at about 0.4, or about half the peak recorded over the past two years, which points to the risk of further price cooling in a market with more slack.
The arrival of slipping house prices in Alberta may well enhance a growing tendency to make comparisons between Canadian and U.S. household finances. Americans are still modestly richer, but much more heavily leveraged and further indebted with less liquidity (see table). That, in turn, makes them more vulnerable to ongoing credit market turmoil and risks to house prices than Canadians.
The sharp depreciation in the U.S. dollar over the past six years has made Canadians relatively much richer over time by raising the relative value of what their wealth will buy in world markets compared to Americans. The table uses figures in local currency terms and a C$ floating around parity makes for fairly direct comparisons. If, however, this were six years ago when the C$ bottomed out at 62 cents against the greenback, then Canadian household net worth would be over 40% lower than in the United States. Even if a long-run average C$ value say, 85 cents) were assumed, Canadian household net worth is still relatively much higher than years past.
Alberta's housing markets on watch
Affordability appears to have peaked about midway through last year. Conditions are now already on an improving track with more relief in the pipelines over the coming quarters. Healthy income gains (running at 5% year-over-year in the final quarter of 2007) combined with a decline in house prices led to overall affordability improvements for new homeowners trying to tap into the overvalued Alberta market. This marks the first time in over three years that the market has witnessed a broad-based affordability improvement across all home segments. This also marks the start of what we fear could become a trend. All of the key housing measures are in contraction mode right now including house prices, housing starts, and resale activity. The sales-to-new listings ratio has swung dramatically from deep seller's territory into a more balanced state and has remained in steady balance for the last six months. Further improvements are expected as the market continues unwinding and mortgage rate relief materializes.
March 2008
Graph 1 - Number of Available Listings at Month End
Supply Analysis:
Current inventory is at an all time high (11,291) surpassing the previous record in October 2007 (9,758). As we see from the slope, the increase is faster than normal--a 20% increase in the last month. To further put inventory levels into context, I've added a new distinction of Relative Inventory. This describes a relationship between Inventory and Sales and is measured in # of Months of Supply. In a nutshell, it's the number of months it would take to deplete the current supply at current rate of demand if no new listings were added. Relative Inventory at March end is 4.8 months. This is down from the record of 5.06 months supply in October 2007, but is rising from last month. As a comparison, Relative Inventory was at its lowest in April 06 at 0.49 months.
Special Note: In June 2007, the historic data set maintained by the Calgary Real Estate board was dropped in favour of a brand new set that was not a broad a statistic (only Calgary city limits). We decided to recreate and maintain the historic set so our clients could compare past years with current market performance. You will not find this information elsewhere.
Graph 2 - Number of Sales per Month
Demand Analysis:
Demand this March falls within the lower range of normal. It's down from the exceptional high demand years of 2006 and 2007. Analysis shows that peak buying activity each year falls within either March, April or May. The last two years (2006 and 2007) were early springs, with strongest demand having been in March. The slope from Feb to March this year was lower than normal, and does not show the acceleration we expect at this time of year. Either April or May are expected be the peak sales months this year. Personally, I predict a more gradual April, with the peak demand this year being later (May or perhaps June).
Graph #3 - No. of Sales vs. Average Sale Price
Price Analysis:
Steady and strong, average prices seem to be increasing again. How does this statistic jive with the general sentiment that property prices are down? Sellers have had to reduce their expectations of what their house might be worth to compete in a well-supplied market. I believe that the stable average price statistic indicates that the buyers are still quite able to afford Calgary prices. This makes sense as affordability has not been negatively affected in Calgary. There is a strong job market with increasing wages, and the cost of borrowing has come down. So my answer is that Buyers are still spending what they can afford, but what we don't see in the average sales price statistic is that they are getting better houses for their money than a few months ago.
Analysis and Conclusions
- 4.8 months inventory is near the top of supply statistics
- Average price not yet unaffected by large inventory
- Affordability not an issue
- Demand lower than previous two years to a more normal demand
- Spring market yet to prove itself
Information provided by
Frank N. McCullough, BBA, MEng. (Click here to contact agent)
Coldwell Banker Lifestyle Realty Ltd.
February 2008
Graph 1 - Number of Available Listings at Month End
Supply Analysis:
January supply followed a usual slope upward from December. The end of the month shows a record number of actives for January. As in the previous few months, inventory remains about 1.5 times normal, indicating a good selection of property for buyers, and the need for sharp listing prices for those wanting to attract buyers.
Graph 2 - Number of Sales per Month
Demand Analysis:
Sales for the month of January have increased as would be expected according to the annual cycle, up to 1,799 from December's 1,443. Demand has retreated from the previous 2006 - 2007 exceptional demand years to the more normal levels of demand associated with 2002 - 2005. While there is a large contrast with the past two years, demand is still relatively strong, especially considering the uncertainty that has developed since the sub-prime crisis in July. This part of the story demonstrates Calgary real estate's comparative underlying strength.
Graph 3 - No. of Sales vs. Average Sale Price
Price Analysis:
While the Average Sale Price took a $10k drop in December, it has since climbed back to $410k, the same as November and February 2007. As mentioned in previous newsletters, the resilience in sale price is remarkable, given the larger than-normal inventory. We see prices fluctuating slightly over the next fews months and ultimately stabilizing for a time. On another note, the recent up and down average sale price has made it more difficult to do Comparative Market Analysis in individual property. We can normally adjust several comparable properties to arrive at a price variance of less than 5%. However, in the past 6 months, it has sometimes been closer to 10% variance after adjustment. This is the time where the the service of a professional Realtor (especially one who carefully builds statistics!) can help you determine where you fit in the market.
So what next?
Inventory will follow the normal curve upward for the 1st quarter. Demand will likewise follow the normal curve upward, and in my opinion relatively increase (greater than normal slope). The reasons are that affordability is still good and selling prices are showing resilience. Pent-up demand, renewed confidence in Calgary's real estate market (compared to other markets) and a new emerging sense of price stability, along with stable and lower interest rates will help buyers look to their futures. Sellers who continue to expect 20% annual gains will find this belief only hampers their plans to move, and asking prices will fall in line with the stabilized market.
Information provided by
Frank N. McCullough, BBA, MEng. (Click here to contact agent)
Coldwell Banker Lifestyle Realty Ltd.
2007 in Review
It's been a year! The highlights include:
Average Sale Price
: December 2006: $361,640
December 2007: $401,346
This year's return on your real estate investment:
11% increase
Average
Sale Price peaked at $438,118 in July, with the year ending down 8.4%
from the peak. Prices had been up 21% from the beginning of the year to
the peak in July. This month's news: Average Sale Price drops $10k
(2.6%) in December.
Graph 1 - Number of available listings at month end
Supply Analysis: December inventory shows the usual dropping off at year's end. We ended the year with a record number of listings (just under 7,000). The effects of the July sub-prime scare are still apparent, although we're now closing the gap to normality. The future of inventory isn't clear. Although it's receding, I believe it will continue toward normal. We are nearing the season when people tend to get ready to move and properties are listed for the spring market. I believe we'll have seen the end of over-inventory before the end of June 2008, by which time it will have been above normal for just under one year.
Graph 2 - Number of Sales per Month
Demand Analysis: Demand is Still Strong - The year started off with sales above last year's record demand and continued until May. Demand then softened towards more normal and then slightly below normal numbers of sales. It looks like there is a lot of latent demand and now that potential buyers are aware of the good inventory selection they have awakened to new possibilities. Also, there are still corporate moves happening, although seemingly without fanfare, as Calgary is still clear as a major city in Canada's future.
Graph 3 - No. of Sales vs. Average Sale Price
Price Analysis: Average Price as shown in the graph above is simply, remarkably, resilient. In spite of inventory well beyond normal in the second half, prices have dropped only 8.4%. Given the previous volatility of prices (38% increase from 2005 to 2006) and this year's 21% increase in the first half, it would be unfair to characterize the second half as a huge drop at 8.4%, especially in light of other markets. It's important however, to recognize that a peak has been reached in 2007. Since July, we've been in a normal cooling off period that's mainly the result of extraordinary events outside the Calgary real estate market. We expect those extraordinary events to play a smaller role in the future. What does the new year bring? Continued strength in demand. A settling of market prices with less volatility and greater choice. Greater opportunities for those with good credit and fewer for those without. Renewed opportunities for those previously too reluctant to move inside the market for a lifestyle change. Better opportunities for first-timers. Huge opportunities for those who are invested in Calgary and wish to retire in other real estate markets.
Information provided by
Frank N. McCullough, BBA, MEng. (Click here to contact agent)
Coldwell Banker Lifestyle Realty Ltd.
December 2007
Prices down slightly; Seasonal drop in supply
Our last newsletter showed supply levels had reached a new record of 9,758 at October's end and surmised several reasons. Now at the end of November we see the supply follow a normal cycle with listings reduced to 9,069.
Graph 1 - Number of Available Listings at Month End
Supply Analysis:
This supply is still high at 1.5 x the normal for this time period, and leaves one to predict two things: (1) Buying opportunity exists as long as the market demand remains strong, and (2) The current high inventory will reduce from the peak and we'll not likely see this many properties available for the foreseeable future.
As I write this on December 12, I'm reminded that it's been an exceptional November of me working with buyers. In December, the pace has only just slowed so that I can get the newsletter out to you. That said, a quick check shows that as of Dec 12, the supply has currently dropped to 8,092 listings.
Graph 2 - Number of Sales per Month
Demand Analysis:
A figure of 1,863 sales in November shows the steady level of demand for the past 3 months. This year, demand has dropped below the past two years, more to the level of 2004 and previous. The relative plateau in sales is expected annually from October to December.
Graph 3 - Number of Sales vs. Average Sale Price
Price Analysis:
Many readers will find this next statistic surprising if they've been listening to the media recently. Average prices have reduced by $3,400 (less than 1%) in the last three months from September to November. Overall average prices are up $50,000 (14%) from January 1st to end of November and down $26,000 (6%) from the peak in July to end of November.
- So What Does This All Tell? -
The market has dropped only 6% from the peak in July. Compared to other real estate markets and compared to potentially volatile financial markets, this is surprisingly steady investment. There's been an overall gain of 14% this year to date. And in spite of high inventory, the average price has remained steady in the past 3 months, indicating underlying strength of market price.
What next? Inventory will continue to drop to the end of the year as per the annual cycle. Indicators for this year point to interest rates remaining low . In Alberta, there will still be strong demand for labour and wages will continue to rise. Calgary area will continue to draw high paid talent, and move ever closer to being a top Canadian city. People will begin to realize that not all areas of North America will be as affected by the downturn created by the current financial crisis. There will be a renewed strength in demand numbers as is usual in the spring, and this will take out the excess inventory by end of June or sooner.
Information provided by
Frank N. McCullough, BBA, MEng. (Click here to contact agent)
Coldwell Banker Lifestyle Realty Ltd.
November 2007
~ Prices down slightly; record level of Supply ~
Last month we witnessed a great increase in supply with the Sept. 30
statistic of 9,447 listings available at month end. Supply remains the
major factor in the market at the end of October, with an increase to
9,758 residential listings in the Calgary region. Currently we have
about 50% more than the normal amount for this time of year.
Supply Analysis: We can speculate about the reasons for the relatively large inventory: (1) On the International scene we have had investors feeling shaky about Real Estate values declining in the US (discussed in previous editions). (2) Closer to home in the past two months, Albertans have been concerned about the Royalty Review in which Oil and Gas industries will be charged more for the use of the public assets from the land. Fortunately, it has been resolved this past week. (3) Finally, there's going to be a peak in the numbers of people moving to Calgary, and perhaps we've reached it. There has been incredible and unsustainable immigration to Calgary in the past two years. Prices have jumped to meet the demand and we are now in a new comparative range of cities, some of which, (Houston for example) are cheaper than Calgary. Can we continue to attract people to Calgary at these prices? Yes, because this is where the future is and we have the highest paying jobs, but going down the road is not as easy a decision to make as a couple of years ago.
Finally, let's not forget the impact a speculator will have on supply. When the City of Calgary comprises 420,000 houses and someone in the speculation market says the sky is falling, watch for lemmings trying to be the first to get out. Remember that while there is a 50% above normal number of listings at month's end, this represents only about 4000/420000 = 1/100 of the housing stock.
Demand Analysis: # of Sales remains unchanged from last month (1,935 vs. 1,928) and fits right in amongst average past Octobers, but down from last year's record 2,566. Projecting, Demand should normally fall at this time of year as a result of seasonal cycle. However, I find that buyers are starting to recognize that the market is not so rushed and are considering buying. That, along with the Royalty Review situation solved and new federal tax cuts means that some buyers who were holding out are now looking at the market with renewed interest.
Price Analysis: Average residential sales price peaked in July, and at the end of October have reduced by 6% overall. This is down $2,000 from September to October ($415,315 to $413,253).
~ Projections ~
It appears that the increase in inventory is slowing. The royalty review situation has been solved this past week with a compromise. The realization that prices have stopped increasing is becoming part of consciousness. A number of properties that are overpriced will not be re-offered. The recent tax cuts at the federal level announced this week The seasonal trend to fewer available listings as December, all mean that we can expect supply to drop over the next few months.
Information provided by
Frank N. McCullough, BBA, MEng. (Click here to contact agent)
Coldwell Banker Lifestyle Realty Ltd.
Information provided by
Susanita de Diego (Click here to contact agent)
Coldwell Banker Your Calgary Home Selling Team
October 2007
~ Long-term Buying Opportunity is Here ~
The market this last month has been long awaited for those wishing to move
to
Graph 1
Supply Analysis: Generally there are fewer moves in the fall, especially
after school starts. The Supply graph shows an unusual upward slope for this
time of year when we would expect it to be more flat. I wrote about the reasons
for this increase in inventory in last month's newsletter, but briefly there
was a financial markets fallout that started in July. Note that this year's
supply parallels last year's; however, this was a recovery from a record-low
inventory. I predict that inventory will begin to drop significantly after end
of October. High inventory indicates buying opportunity.
Graph 2
Demand, represented by the Number of Sales Graph above, has moved downward
as expected with the annual cycle. There is a drop of 13% over last year
(September 2006). The lower demand is likely a result of slowing numbers of
people coming to Calgary in comparison to the previous two years' rush.
Graph 3
Average Sale Price peaked in mid-June and now at the end of September we
have seen the average price come down about 5.2% overall, to the same level as
average prices in March this year.
Price is the quantity by which most people try to judge a market. Taken by
itself, this drop may seem ominous and some media will make it appear so.
However, note that the average price at this time last year was $369,928. The
change in one year to $415,315 is a 12% increase in your asset. To those who
have been watching the financial markets lately, this should contrast as very
solid compared to other investments.
SUMMARY: The fall and winter to the very early new year generally represent
the best selection of property, and a good time to buy within the annual market
cycle. Last year at the end of September I noted a buying opportunity as the
supply reached a normal level. This year I see the same timing opportunity only
with better selection. It is also now easier to transfer to a new home within
Thanksgiving gives us a time to reflect on what matters. In this, we have
only two assets: time and friends.
Information provided by
Frank N. McCullough, BBA, MEng. (Click here to
contact agent)
Coldwell Banker Lifestyle Realty Ltd.
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We presently have 5525 Single family homes listngs on the market and 2257
condos. The sales to listings is 39% in both categories. That is our most
recent stats as of late last week.
Information provided by
Christine Richard (Click here to
contact agent)
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Information provided by