The Calgary Real Estate Market in June, 2015
The Calgary Real Estate board recently released their stats for May 2015 (attached). The headline indicated Calgary had moved back into a balanced market (balance being defined as a market favouring neither buyers nor sellers). I don’t agree with this statement, and as often the case when trying to examine the Calgary Real Estate market as a whole, over simplifies the matter and misses some key elements.
The reason the Real Estate board believes the market is balanced is that the number of new listings have dramatically declined, down 30% from last year. This is balancing out the number of sales, which are down about 25% from the same time last year. Therefore, if you compare # of new listings against # of sales, the market would be considered balanced. However, this ignores the total inventory build-up that occurred from November – April, which has resulted in the overall market still favouring buyers.
However, while it’s a buyer market, it’s still difficult for many home purchasers to find what they’re looking for. There’s multiple reasons for this. The first is that many buyers are still looking for a deal, whereas many sellers are refusing to budge significantly on price. Prices are down from the peak in November (3-5%), but have been flat the last 2 months. Also, it still remains relatively easy to rent a property out, meaning many sellers can still choose to do that and wait for the market to turn around. Finally, as previously mentioned, new listings are down dramatically, meaning buyers just don’t have the choices they did a year ago.
The one element I don’t see being discussed is the fundamental shift in the attitudes of many buyers. Last year, buyers were purchasing properties that were at the upper end of their affordability. This year, buyers are opting for a more conservative approach, and keeping a sharp eye on their budgets. This is especially true of couples, who are increasingly buying properties that they can afford based on only 1 partners income.
This shift has occurred rapidly, and developers currently aren’t building homes in the 450k range. Most new, single family homes in good areas are starting at over 500k, which is now more than most first time home buyers are willing to spend. Therefore, these first time home buyers are turning to the resale market in increasing numbers, and snatching up single family homes that are priced in the 450k range and condos that are priced in the mid to low 200s. Homes in this price range are balanced towards sellers.
The flip side is that single family homes priced over 600k and condos over 400k can often be a difficult sell. There’s heavy competition and a short of buyers, and this trend is going to continue until the economy is on better footing. Obviously then, homes in this price range favours buyers.
Developers will adjust to the market and start to produce more affordable homes as consumers demand them, but this will take some time. Therefore, I expect this imbalance in the market to continue and these price related buyer/seller markets to remain for at least the next couple of months.