The future of Calgary’s Real Estate Market (the meat and potatoes).
If you are like me, you like to push all the fluff to the side & get straight to the point. Although the statistical nerd in me also likes to dive into stats which can be a long and winding road taking forever to get to your destination. So in an effort to save you loads of time, I’m going to venture to extract from the many forecasts and stats I’ve read and offer you a bulleted list of deets which will give you good insight into where our Calgary Real Estate Market is heading in the next few years. At the end I’ll include the various sources.
Here we go:
Covid and the Real Estate Market
→ Reductions in employment were evident before Covid.
20K jobs lost in Feb
40K jobs lost in March
Immediate impact was very significant
Professional & scientific sectors reflected the oil industry in job loses
→ Sales in April dropped 63% compared to April of 2019
Listings also dropped at the same time which helped curtail over-inflated inventories
Months of supply did push up to 10 months
Benchmark price declined by 1.56% in April compared to April of 2019
→ Sales in May dropped 43% compared to May of 2019
Listings also dropped 29%
Months of supply retracted back to 5.4 months
Benchmark price declined by 2.67% in May compared to May of 2019
→ Differentials seen btw average and median points out variances of impact in different sectors although the benchmark is better when looking at the over-all market and long-term trends.
→ Most sales are occurring in lower price ranges
→ Higher price range absorption rates have increased substantially
→ Far steeper price declines in the higher range rather than the lower ranges
→ Deepest recession in AB history expected
→ RBC states Canada economy will retract by 8% and AB will have the greatest impact due to Covid & Energy
→ We still haven’t recovered from the 2015 recession. Argh!
How does this compare to past recessions?
High interest rates
Another recession happened in 1986 due to decline in oil prices
Decreased migration levels due to job losses
50K jobs lost with a provincial population of about 2 million
1981 to 1985 average price dropped 22% with a slow decline of 3% in the first year with gradual increases per year.
Prices didn’t recover until 1989
NOTE: price decline trends take time to get traction and tend to take a long time to recover.
→ 2008 Financial crisis:
Huge impact but strong / quick rebound
Decreased migration levels but far lower than the 80’s
28K jobs lost so unemployment rates not as high as the 80s
Prices declined btw 2007 and 2009 by 4.6% prices recovered in 2012.
37K jobs lost with unemployment rates up over 8%
The jobs replaced were not in the energy sector. Most in the government, education, healthcare sectors
Prices declined from 2014 to 2019 by 5.8% and still have not recovered.
Now and moving forward:
→ Some of the programs that the Government put in place will help moving forward
→ This recession will take much longer to recover than past recessions
→ Bank of Canada has responded with Prime Lending Rate of 0.25%
→ Migration levels should be relatively stable in 2020 with some rebound in 2021. Most migration is international, not inter-provincial.
→ 250K job losses expected with unemployment rates highest in recorded history
→ Job growth will rise in 2021 but unemployment rates in 2021 expected to be in the double digits
→ This recession is expected to persist for several years due to a delayed recovery in the energy sector.
→ Sales activity in the 2nd quarter expected to drop by 50% but pick up in the 3rd quarter
→ As social distancing measures ease, this drop will level off but will still remain low
→ Price declines expected in 2020 by 3% Benchmark price city wide with higher drops in the higher price ranges.
→ Further price declines expected in 2021.
→ Prices expected to remain low for several years
→ Western Canadian Select prices are in negative territory for several months
→ WTI will likely not recover for the next 2 years or more.
→ As Social distancing measures ease, demand for oil will increase
→ Storage is full so it will take time to absorb current supplies
→ Energy job losses will persist
→ Federal Government financial programs are not focused to assist the energy sector
→ Energy reflects 42% of our GDP and 25% of our work force
→ GDP is expected to drop 6% in 2020
→ 9% drop in employment in the energy sector
→ All other sectors of GDP expect to see declines with the exception of healthcare and education
→ Employment decline of 6% with no improvement until 2022.
→ Energy sector will cont. to struggle
→ 2nd wave of Covid?
→ How many companies will survive?
→ If jobs do not return in 2021, mortgage defaults will increase putting downward pressure on prices due to low precedents set within each sector.
→ Can large companies like airlines survive through this? If so, inflation may occur due to limited competition
→ Government programs to ease the pain ie deferred mortgage payments (for now)
→ Potentially lower mortgage rates
→ Real Estate has been and will continue to be an essential service.
→ Governments (internationally) are willing to take on whatever debt is necessary to get through this difficult time.
→ New Home Builders have not scaled back (yet) on starts. Covid will ultimately affect their starts due to downward pressure on prices. If not, there will be an over-supply for new homes which will ultimately lower prices.
→ Mortgage Rates remain low. Although the relationship between the Bank of Canada rate and Mortgage rates is not cohesive. Mortgage rates may not see decreases that correlate with the BOC rate.
What to pay attention to moving forward?
→ The first indicators of a recovering economy are:– Employment Market, Job numbers & Unemployment Rates.
→ Easement on the financial stress-test for buyers to stimulate affordability – If the markets in Vancouver and TO begin to recover, then likely no change to the current stress test parameters. Unfortunately, TO and Vancouver markets are not as impacted as the AB markets. The Bank of Canada wants to ensure the Banks have enough liquidity.
→ The Political environment: Ottawa doesn’t have a lot of interest in boosting the energy sector in AB & not a lot of international investment into AB for energy as well. As far as diversification, there is nothing on the horizon to replace the 30% of AB’s GDP in energy. Pending on the US’s response to international energy market, the US may engage in importing Canadian oil South to the US at significantly discounted rates rather than the US introducing US oil to the international markets causing international tension.
→ US election: If the Democrats get elected, any oil moving South will come to a hault.
Figures 7 to 12 below indicate that the outlooks for housing indicators in Alberta and Saskatchewan are more heavily weighted to the downside compared with other provinces with no anticipated recoveries to current levels until sometime in 2023. For the complete CMHC report click here.
Those of you who know me know that I tend to be overly optimistic and try to see the silver lining in all circumstances. Although I want to be more optimistic about the next 2 years of Calgary’s / Alberta’s Real Estate Market. With the facts / insights given above from people much smarter than me, it would be misleading of me to be overly optimistic at this point. Times are tough at the moment, and it doesn’t appear to be getting better any time soon. But, Albertans are resilient and we always find a way to not just survive, but thrive by our strong work ethic, entrepreneurial spirit and determination!
Given that we’re in 2020, our vision for the future is far from perfect. With that said, we need to make the best decisions we can based upon our current circumstances and the factual information we have before us. There are so many variables that will affect the best time for our clients to either buy or sell. Each of you have entirely different circumstances that need to be taken into consideration separately. For consultation specific to your circumstances, give us a call, we are always happy to chat with you!
At RealPros we view part of our role as educators; providing our clients with excellent information to help them make good educated decisions.
I trust the above information gives you a good insight into Calgary's market. If you have any questions, please don't hesitate to contact us anytime.
RealPros Real Estate Consultants
Toll Free: 1-855-547-1222
GOING THE EXTRA MILE!
Sources: Calgary Real Estate Board - Canadian Mortgage & Housing – Canadian Real Estate Associations – Alberta Treasury Branch – Calgary Herald – Mortgage Sand Box
After a strong start to 2020, economic conditions have dramatically changed, as COVID-19 is impacting all aspects of society.
The economic impact is starting to be felt across many industries. This includes the housing market.
March sales activity started the month strong, but quickly changed, as concerns regarding the spread of COVID-19 brought about social distancing measures. This had a heavy impact on businesses and employment.
“This is an unprecedented time with a significant amount of uncertainty coming from both the wide impact of the pandemic and dramatic shift in the energy sector. It is not a surprise to see these concerns also weigh on the housing market,” said CREB® chief economist Ann-Marie Lurie.
By the end of March, sales activity had fallen 11 per cent compared to last year. This is 37 per cent lower than long-term averages. The drop in sales pushed March levels to the lowest recorded since 1995.
“The impact on the housing market will likely persist over the next several quarters,” said Lurie. “However, measures put in place by the government to help support homeowners through this time of job and income loss will help prevent more significant impacts in the housing market.”
New listings dropped by 19 per cent this month. This decline in new listings compared to sales caused supply levels to ease and helped prevent a larger increase in oversupply. Overall, the months of supply remain just below five months, similar to levels recorded last year.
Prices were already forecasted to ease this year due to oversupply in our market. In March, the citywide benchmark price was $417,400. This is nearly one per cent lower than last year’s levels. The reduction in both sales and new listings should help prevent significant price declines in our market.
However, price declines will likely be higher than originally expected due to the combined impact of the pandemic and energy sector crisis.
HOUSING MARKET FACTS
- Detached sales eased by 15 per cent this month, driven by pullbacks in all districts except the North, which remained flat compared to last year.
- The decline in sales was met with a larger decline in new listings, causing inventories to fall by 17 per cent and keeping the months of supply slightly lower than last year’s levels.
- Detached benchmark prices have remained relatively unchanged compared to last year at $480,800. Price declines this month continue to be the highest for the City Centre, North East and West districts.
- With 217 citywide apartment sales in March, this was the only category to record a year-over-year gain. Much of the gain was due to improving sales in the South, South East and North West districts.
- New listings this month did ease, helping support a small decline in inventory levels.
- Persistent oversupply has resulted in continued downward pressure on prices. In March, the citywide benchmark price eased by more than two per cent compared to last year for a total of $243,700.
- Both semi-detached and row sales declined this month compared to last year. Like the other property types, there was also a significant reduction in new listings.
- The decline in new listings helped push down inventory levels for both property types, but it was not enough to prevent a rise in the months of supply.
- However, this segment was oversupplied prior to the recent changes, impacting prices. As of March, prices remained nearly one per cent lower than last year’s levels for both semi-detached and row properties.
REGIONAL MARKET FACTS
- Like many other areas, Airdrie saw a decline in sales activity, along with a reduction in new listings and inventory. The reductions in supply and demand helped prevent any significant changes to the months of supply.
- While the full impact of the COVID-19 crisis has not yet played out in the housing market, March prices remained comparable to last year’s levels.
- Both sales and new listings fell this month compared to last year, causing inventories to fall to the lowest levels in five years. Like many other markets, Cochrane remains oversupplied, with easing prices.
- The March benchmark price was $398,700. This is nearly two per cent lower than the previous year.
- Trends changed this month, with flat sales and a decline in new listings. The decline in new listings was enough to cause a significant reduction in supply levels and the months of supply fell below five months.
- Prices are trending down on a monthly basis, but remain comparable to last year’s levels, with a March benchmark price of $405,000.
Click here to view the full City of Calgary monthly stats package.
Click here to view the full Calgary region monthly stats package.
RealPros is here to help you navigate through these uncertain times.
Contact us anytime with your Real Estate questions or needs.
RealPros Real Estate Consultants
Toll Free: 1-855-547-1222
GOING THE EXTRA MILE!
The Government of Alberta has deemed real estate agent services, and services that provide access to credit, stocks or other forms of liquidity or finance to individuals, groups or businesses to be essential services. This exempts licensed real estate and mortgage professionals from restrictions during the COVID-19 outbreak, as long as they follow all public health guidelines, including physical distancing measures.Below is a message from the Real Estate Council of AB:
“RECA’s mandate is first and foremost to protect the public, and it remains our highest priority,” said Duane Monea, Administrator of the Real Estate Council of Alberta. “By being deemed an essential service, real estate and mortgage professionals have been given a great responsibility in assisting Albertans during this crisis. I am confident the industry will meet the challenge, and adapt their business practices in order to protect the health and safety of the public.”
Firstly, professionals must ensure they explain to their clients the impacts of COVID-19 in their real estate or mortgage transaction, and discuss all options together with their advantages and disadvantages, so their clients can make informed decisions. Professionals can be a reliable source of information on minimizing any health risks involved in trading in real estate or dealing in mortgages at this time. Professionals should point clients to RECA’s COVID-19 for Real Estate Consumers website.
Secondly, professionals must also assess their own risk, and remain vigilant to their own health, the health of their clients, and the health of their colleagues. They must take steps to minimize their health risks and stop the spread of COVID-19.
We are here for you....
We are committed to the above and more to continue to serve our clients well throughout this unsettling time. It seems that there are updates hourly on how this pandemic is affecting the management of Real Estate transactions. We will continue to implement whatever is necessary to continue to meet the needs of our clients.
Although the market has slowed during this crisis, homes are still being listed, shown and sold. 346 new listings entered the market and 222 have sold in the past 7 days. We just sold a home in West Hillhurst with multiple offers for full-list price!
If you (or someone you know) have any Real Estate needs in the weeks / months to come, we can help you navigate through the process safely.
Contact us anytime with your questions or needs,
RealPros Real Estate Consultants
Toll Free: 1-855-547-1222
GOING THE EXTRA MILE!