Media release: COVID-19's impact on Calgary housing market continues
City of Calgary, June 1, 2020 –
Housing market activity in May remained slow, but sales exceeded the lows from April, which saw less than 600 sales in Calgary.
May sales totalled 1,080 units, a 44 per cent decline from last year's figures.
"The initial shock of COVID-19 and social distancing measure is starting to ease. This is bringing some buyers and sellers back to the market. However, this market continues to remain far from normal and prices are trending down," said CREB® chief economist Ann-Marie Lurie.
"Activity has also shifted toward more affordable product, which is likely causing differing trends depending on product type and price range."
Sales are down in all price ranges, but a greater share of sales are priced below $500,000.
In the higher price ranges the drop in inventory has not been enough compared to the drop in sales. Additionally, the months of supply is far higher than the already elevated levels seen during the past five years.
The shift in sales toward lower-priced product is contributing to steep average price declines in the Calgary market.
Benchmark pricing, which reflects comparisons of the same type of home, has eased by over two per cent compared to last year and 0.4 per cent compared to last month. This does not come as a surprise as the market continues to struggle with more supply than demand.
COVID-19 and social distancing measures have contributed to rising unemployment rates and job losses throughout many economic sectors. This is weighing on consumer confidence and the housing market. Some of this job loss is temporary, but the energy sector remains the largest concern.
Significant job loss throughout the typically higher-paid professional and technical services sector points to a longer adjustment period in the housing market, particularly in the higher end of the market.
HOUSING MARKET FACTS
REGIONAL MARKET FACTS
Robson Fletcher · CBC News · Posted: Jun 07, 2018 7:00 AM MT | Last Updated: June 7, 2018A sign advertising a home that has recently been listed for sale in Calgary. (Robson Fletcher/CBC)31 comments
Calgary's real-estate market hasn't exactly been hot for the past few years but it hasn't been a disaster, either, thanks in large part to the resilience of the single-family home.
Sales of condos were hit hardest during the recent recession, while demand for detached homes remained relatively strong.
But 2018 is off to a particularly slow start: Most single-family homes put on the market aren't selling.
Of the roughly 9,500 that have been listed this year, only 4,200 have sold, putting the sales-to-listings ratio at 44 per cent. It hasn't been this low, for this long, in nearly a decade.
Condo sales, by contrast, have been slow like this for years, and that's been reflected in the prices they fetch when they do sell. Condo values have dropped by 14 per cent in Calgary since the market peaked in late 2014. Single-family properties have, to date, held their value better, falling less than four per cent over the same period.
But analysts are watching closely as more and more people put their houses on the market, while fewer people seem to be buying.
Part of the slowdown is attributable to changes in federal mortgage rules that took effect in January and mortgage rates that edged upward later in the year. There has been some thought that the market would pick back up, as the spring selling season gets into swing. But summer is fast approaching and sales remain relatively tepid, even by the slow standard of the past few years.
Of course, what most Calgarians probably want to know is: What does this all mean for home values?
After all, for most of us, a home is the single biggest purchase we'll ever make. So price fluctuations matter — a lot — whether you're a longtime owner looking to cash out and retire, a recent buyer wondering whether you made the right investment or a renter looking for the right time to buy into the market.
The answer, unfortunately, is: It's complicated.
Market conditions like these have coincided with price declines in the past. But analysts also see indications that this particular lull in sales may be temporary. It's never a clear picture, when it comes to real estate.
So let's look at the details.
Calgary home prices have dipped sharply twice in the past decade — once in 2008 and again, less severely, in 2010.
In both cases, the sudden price declines came around the same time that the sales-to-new-listings ratio was stuck below 50 per cent for a period of at least six months.
We're now at five months and counting.
THIS WAS TAKEN FROM THE CBC ANALYSIS
HOW CAN YOU AND I MAKE SURE YOUR HOME IS ONE OF THE HOMES THAT SELLS?
Calgary home sales were expected to be slow this year — but not this slow.
"We didn't expect this much of a decline in sales activity," said Ann-Marie Lurie, chief economist with the Calgary Real Estate Board, taking stock of the first nine months of 2018.
Fewer than 13,000 homes changed hands during that time, down 14 per cent from the same period in 2017, which was itself a slow year.
From a sales point of view, 2018 has been the slowest Calgary has seen in more than a decade. There was some thought, earlier this year, that the summer season might boost the pace of transactions, but that failed to materialize.
Sales have been below long-term averages for the past few years now.
Lurie said it's increasingly apparent that "the market has changed" and the near future probably won't look like the recent past.
"So that expectation of a quick rebound in the real estate market? It's really just not the case," she said.
"We just don't expect to see that happen."
In other words, the heady days of 2014 aren't coming back anytime soon.
Home sales from January to September, over the past decade. (Calgary Real Estate Board)
You can see how much things have changed in the graph above.
By September 2014, the number of home sales that year had already cracked 20,000. They would reach nearly 26,000 by the end of the year.
And prices followed.
If you bought a middle-of-the-road home in January 2014, you were $27,000 richer, on paper, by December.
Today, however, many homeowners are finding themselves in the opposite situation. Median prices are down $10,000 so far in 2018, compared with a year prior.
And there are indications the downward trend could continue.
The latest market outlook from Moody's Analytics sees more price declines in the near future.
"Alberta's housing market will be mixed, with prices flat in Edmonton but still falling in Calgary," the report reads.
For detached houses — traditionally seen as the strongest segment of Calgary's market — the report forecasts a 2.9-per-cent decline in median prices over the next year and a 3.6-per-cent decline the year after that.
Of course, these forecasts are just that — forecasts. Conditions can, and often do, change. And no one has a crystal ball.
But Emma May, co-founder of Charles Real Estate in Calgary, wouldn't be surprised if prices continue to fall in the coming months.
"It's still a very strong buyers' market," she said.
"There's lots of inventory and prices are starting to move downwards but they haven't really, quite yet."
That inventory reached nearly 8,000 homes in September, according to CREB data, up 15 per cent from the year before.
At the current pace of sales, it would take more than six months to sell all those homes.
The current conditions give prospective buyers the luxury of being choosy, and May said many are exercising that advantage.
Some of her clients who want to sell are even reluctant to list their homes, said said, for fear of being subjected to a "whole flood of people" coming to kick tires without being willing to put in offers anywhere near the price they're hoping to ask.
"They don't want to go through the hassle of it," she said.
"So there's lots of sort of off-market stuff happening. I've been showing some buyer clients properties that haven't been listed … because people are like, 'I don't feel like it's a great time to put my house up, but I would be interested in selling.'"
Snow partially covers a sign advertising a home for sale in Calgary in early October 2018. (Robson Fletcher/CBC)
Other would-be sellers who can't get the price they want are opting to rent their homes in the meantime, and wait for a rebound in sale prices.
But May doesn't expect that to come anytime soon.
"I think people need to wrap their minds around it," she said.
"These prices aren't going to be going up anytime soon and, if you want to sell, this is the new normal, for now."
THIS ARTICLE TAKEN FROM CBC NEWS
It’s a cold and snowy start to the fall season in Calgary. And July to August were kind of cold for Realtors in Calgary.
Calgary is a volatile market for energy companies and for housing. The picture changes according to prices and government opposition, something that extends back to the 1970s. Currently prices are suppressed through no fault of the people and companies in Alberta.
The latest Calgary region housing stats show prices continue downward (-8.6%) from September and (-15%) from October 2017. New listing have dropped 6% and overall inventory is down 8% yet days on market rose by 2 days.
Prices of single detached homes dropped .8% year over year. Apartment prices dropped by $1,000, and inventory was down by 8%.
In the city of Calgary, housing stats are more extreme. Sales dropped by 11%, inventory rose by 13.4%, while prices declined by 1.4%. DOM rose dramatically to 40, which means its a buyers market in Calgary. Some oil analysts believe oil will rebound after the current issue with Iran. In the meantime, Calgary, Edmonton and all of Alberta are seeing their housing stock severely devalued.
The most significant drops in prices were single detached homes in the northeast, apartments in the south, and semi-detached units in the south. I
For buyers and investors, the bottomed out Calgary housing market this fall represents a buying opportunity. The situation with the oil market is crippling the housing market.
Alberta’s WCS discount is artificially suppressing Calgary home and multifamily property value. These issues likely will be rectified in 2 years, so it’s an opportunity, especially for Millennial buyers to check out some amazing Calgary homes at a good price. Don’t wait till home prices jump back up at higher mortgage rates.
The real estate market in Calgary has been in the dumps for several years and the latest report has a lot of negative numbers.
All month to month numbers were down slightly, and overall sales in dollars was down $100 million.
Screenshot courtesy of CREB September report
In the City of Calgary, prices are falling and inventory is rising.
Graphic courtesy of CREB
Although WTI oil prices are high ($65 currently) although not as high as they could be, Alberta’s WCS prices are low resulting in reduced revenue. Calgary hasn’t cashed on the WIT price bonanza due to this discount. There are no solutions for this in the next few years, so industry and Alberta government frustration will continue.
Chart screen capture courtesy of Statista
Oil production in Alberta is growing, however profit isn’t rising as much as people believe as this chart below reveals. The net effect is that there is growing revenue and it will lead to more activity in the Calgary housing market.
Chart courtesy of economicdashboard.alberta.ca
This forecast below from CREB doesn’t take into account the resurgence of the Alberta economy. With price stability, and a booming US economy, the picture for Calgary looks rosy.
Yes, in 2019, we likely will see increased construction and manufacturing with the USAMC deal done and oil prices remaining high. This chart courtesy of CREB’s forecast report reveals some strength in the jobs market in 2018 and this should support home sales this fall. However, the shutting in of oil is drawing home prices down.
Screen Capture courtesy of TREB
Currently the US has applied an embargo on Iranian oil, however they issued passes for some nations, which means Iran oil gets to flow.
Russia and Saudi Arabia desperately need higher prices. Photo courtesy of oilindustryinsight.com
OPEC is driving prices especially with Iranian supply out of the picture. And there’s no reason why US shale oil producers would want to plummet the price anymore than Alberta Tar Sand producers would.
Does oil have a future in the overhyped world of green energy and high tech? Let’s take a look at how has fared during the last 11 months against the NASDAQ.
From $42 to $71 per barrel, leaving the flatlining NASDAQ in the dust, Calgary’s oil patch is producing more and is more lean and profitable. Screen capture courtesy of bnnbloomberg.com
The growth in the US oil wealth is obvious with Texas post hurricane development. And western shale oil producers are ramping up oil production which means they feel positive about demand and price. If the democrats gain increasing power, that could darken the picture for Alberta. They stopped pipelines before and would do again for powerful lobby groups in Washington.
Where were the hot properties in Calgary last spring? It had to be semi-detached homes in the east, northeast and east districts (+6% to 10% YoY).
Chart Courtesy of CREB.com
Recent improvements: Unemployment has dropped in the last 2 years and many believe the recovery is well underway — powered up by rising oil prices in US dollars x rising production numbers. Calgary’s economic growth lead Canada at 6.9% and that’s when oil prices were lower.
The Conference Board of Canada predicted Calgary will lead the nation at 2.4% growth in 2019 however given recent developments, it’s unlikely. If Alberta oil is shut in, the CAD loonie should stay low. Some are still predicting a 70 cent loonie by the end of 2019. Toronto, Vancouver and Montreal are doing well, but not enough to raise the loonie.
Yes, Calgary is more than oil, but oil money is hard to ignore. Alberta needs the investment funds that flow in when Oil prices rise.
With OPEC cutting oil production output, and oil prices jumped past $71 a barrel (WTI) it awakened the oil patch. Since then investment money is almost non-existent. Alberta can’t get its product to market and surrounding neighbors won’t let its products across their borders.
Some are still forecasting very high oil prices, yet Alberta may not get to enjoy the bounty until 2020. If prices fall, less political pressure and effort by oil producers in the province means the pipelines could be delayed indefinitely. At this point, we’d have to say house prices could fall much further. The carbon taxes are more nails in the coffin.
If you’re considering moving to Calgary to work this year, be forewarned that Calgary is rated worst for affordability for lower income earners. Be prepared!
As of February 2018, average rent for an apartment in Calgary wass $1129 which is a 12% decrease from last year when the average rent was $1264 , and a 3.72% increase from last month when the average rent was $1087. — from RentJungle Report
As you’ll note sales are down from 18 months ago, and those were recession numbers. Most of the buying and selling were in the first half of the year, and there was a burst of buying due to the Fed mortgage rule changes.
CREB suggests a steady path to recover and a market very similar to 2017. They suggested rising interest rates, tougher mortgage rules, and stagnating wages should calm the hot market in 2018. Financial people are always citing microeconomic factors and mortgage rates as housing market factors, however people buy when the economy is good and is promising.
Calgary Monthly Housing StatsFebruary 2018January 2018October 2017October 2016September 2017Total Homes Sales6575839101031919New Listings1,2931,2881,4831,3261,873Active Listings2,4562,1993,2502,5743,479Median Price495,000474,000474,250464,000482,000Average Price575,407575,407544,984529,378556,372Pending Sales58102Days on Market4555444242
Above stats courtesy of CREB
South Calgary was the hot spot with 249 homes sold in February. The south has 799 homes listed for sale. 275 apartments were sold in downtown Calgary in February and there are 730 units available. CREB expects sales of apartments to fall slightly in 2018, so buyers might have the upper hand this spring.
The Globe and Mail reports that 30% of Alberta’s new inventory remains unsold. This has to be one of the best buyers markets ever for investors, as long as you don’t mind waiting for the payoff.
And with housing prices predominantly in the $300k to $500k range, Calgary is still considered affordable, especially compared to Toronto and Vancouver where life is painful for renters, mortgage holders, and buyers in waiting.
Chart courtesy of CREB. Timeline of Calgary home prices
Even the experts are voicing caution, probably because they’re not sure themselves who has control of oil prices, and whether the BC pipeline issue will be solved. And BC doesn’t seem to be batting an eye, as gas prices there rose above $1.50 a litre.
Rachel Notley pointed out the BC premier’s ironic and hypocritical stance on Alberta oil with his new subsidies for LNG projects in BC.
Gas Price shock – Photo Courtesy of CTV.ca
And besides the BC carbon tax, and the investment killing removal of the corporate tax rate cut, there’s also the matter of how much Vancouver’s housing market and economy can take as interest rates rise too.
This is a text book test of the merit and wisdom of government regulation. BC’s government run auto insurance sector for instance, is already in deep trouble, rumoured to be on the verge of bankruptcy.
Not only does Alberta ease the prices BC drivers pay for gasoline, the Federal taxes on oil production are steep and distributed to the other provinces. Everyone benefits when Alberta’s energy sector thrives. It’s vital for Canada.
The WTI WCS price differential is a painful loss for Alberta Oil producers and of late it’s gotten worse due to pipeline bottlenecks. Will it get worse this year?
Alberta’s production capacity is impressive and has recovered by 7,000 m3 from 2 years ago. The issue is getting it to world markets.
With the US and global economies looking good (the recent tariff issue with China should be resolved), demand for energy and oil is forecast to be strong. BP forecasts a strong demand from developing countries.
International investors with a long term investment strategy should compare what you can buy in Calgary for $400,000 vs what you’ll get in the Vancouver market or Toronto market or Montreal housing market and you can see the long term investment advantages. Calgary is a much easier place to do business and buy real estate.
Calgary’s spectacular Peace Bridge for pedestrians and cyclists spans the Bow River
As a long time resident, I can tell you there are many excellent neighbourhoods, with great schools, shopping, and recreation. All of it is accessible.
If you enjoy exercise, you may find the communities along the Bow River best. There is a cycling/walking trail on both sides and the mountain biking park at Canada Olympic Park is on it too.
If you like beautiful views, Calgary has plenty. The northwest area of Calgary including those communities near Spy Hill, Coach Hill, and Nose Hill Park offer amazing views, some of the Rockies and foothills. Be ready for matching prices. The neighbourhoods on the northwest outskirts of the city offer unbelievable panoramic views of the Rocky Mountains to the west. Expect million dollar prices here. Homes on Spy Hill and Coach Hill offer incredible views of almost all of Calgary and the spectacular downtown skyline.
If water sports like sailing and windsurfing are important to you, Calgary has a number of man made lakes in the south end. The South has the largest selection of homes, with the Northwest next in number.
If you like cosmopolitan, the neighborhoods near downtown Calgary will appeal to you with the shops and walkability. And downtown’s plus 15 walkway system is close by too. Downtown city centre is where the condos are and virtually everything you need is here on 7th, 8th and 9th Avenue . The Bow River pathway is adjacent and Calgary’s convenient light rail transit can wisk you away to shopping in the south end of the city.
With the recession now largely in the rear view mirror, and with the price of oil rising steadily, homebuyers and property investors will be looking at Calgary homes differently.
With house prices so low, the expectation for buying residential properties in 2018 will improve. For speculators, the Calgary market is tantalizing, given that home prices in Toronto, Vancouver, Los Angeles, Bay Area, New York, and Miami have peaked.
Inmigration to Calgary is rising and mortgage rates remain low. Although “made to depress” Canada housing policies will constrain the market, the outlook for Calgary real estate is for growth. The extent of that growth of course depends on the price of oil, incoming energy sector investment, and the value of the Canadian dollar vs the US dollar.
(This section written in winter 2018) Oil Prices were never expected to rise near $50 yet are above $55 now. The Saudis have proven they control the price of oil, not markets. Tough to predict what they’ll do however their recent actions show some resolve and purpose. The fact prices have reached $55, well above the limits predicted by all the experts has to indicate something.
The production of shale producers in the US however is changing the oil markets. The US is now the number producer of oil in the world at about 11 million barrels a day. This is something no one considered possible.
Screen Capture courtesy of Marketwatch.com
The World Bank may have posted the best forecast for oil prices through to 2020.
Screen capture courtesy of the IMF
You can check all the oil price predictions for yourself.
If oil continues to rise steadily in price, Alberta stands to recover economically. Businesses have pared down their costs and are better able to profit from growth. Although not officially a big component of the rosy Canadian economic forecast, Alberta and Calgary are keys to the future.
Alberta’s economy is much more diversified than it used to be however it is impossible to replace the revenue generation of the Canadian oil sands, the world’s largest pool of untapped oil reserves.
In the Calgary Real Estate Board’s most recent 2017 Calgary Economic Outlook and Regional Housing Market update, CREB believes the pace of economic recovery will be slow but stable. Stagnant employment, wages, slow immigration, tighter mortgage lending restrictions, and made for Vancouver/Toronto economic policies will weigh on the Calgary housing market.
The latest report does forecast for 2018. However, Alberta’s economic performance is expected to be well up at 4.3% for all of 2017. New construction housing starts will be well down this year at around 3500 units. Multifamily housing starts are down just slightly from 2016 levels.
Screen capture courtesy of CREB.com. Stats courtesy of CMHC.
Total house sales were precisely forecasted to be 600 higher in 2017 than 2016 with a price similar. Dead on accurate. New listings will total 32,731, 400 for the full year. Sales of apartment will rise slightly over last years numbers at about 2800 units.
The loonie remains around 78 cents CAD vs USD, maintaining an excellent premium on exports from Calgary, and exports of Alberta oil. Forex experts believe the US dollar forecast is upward, while the Canadian dollar forecast is downward.
If new construction starts are constrained, then the resale market may grow in the neighbourhood of 1% in 2018, 2% in 2019 and perhaps 3% in 2019. Of course, all predictions rest on the price of oil which as mentioned, the Saudis and OPEC control. And US shale production and drilling rig counts seem to moderate upward increases in oil prices.
The last word on Calgary and it’s oil-driven housing market is volatile. Statistical fundamentals are useless in predicting the movement of pricing and supply. Oil is a weapon, lever, and carrot used by politicians and sheiks, and they determine what prices will be.
Note: the preceding post is not meant as specific investment advice, but rather as a comparison of real estate investment or home buying opportunities. Please ensure you discuss all investments with a licensed professional.