Mid-Year 2018 – Market Update

Mid-Year Housing Market Update: Still Sluggish Due to Economic Conditions

Higher interest rates, stricter lending requirements and a lagging economy have slowed demand throughout the first six months of 2018.

The result is fewer sales than originally forecasted.

Ann-Marie Lurie, CREB^® chief economist, said, “Soft sales along with increased inventories has resulted in an oversupply for all types of housing. This includes apartments and condominiums, detached and semi-detached homes, as well as row houses, which can’t help but affect prices.”

Prices overall are expected to go down by more than 1% across Calgary. Declines are likely to range from just under 1% for detached homes to 2.5% for apartments and condominiums.

“No one really expected prices to go up this year, however, the demand has been weaker than expected and the supply simply has not adjusted quickly enough. This has led us to revise our estimates down from what we had estimated earlier.”

We do expect the economy to gain more traction in the second half of the year. This should slow down the lessening in demand, but probably not enough to make up for the declines suffered in the first six months of the year.

Sales throughout Calgary are expected to go down by 9.7%, which translates to 17,047 units, which is now our forecast after revising our estimates.

This softening in sales continues to be met with more new listings, which just serves to keep inventories high. Conditions in the second half of 2018 are expected to improve slightly, which should reduce some of the oversupply. However, it’s unlikely that the oversupply situation will subside enough this year to maintain prices. A slight easing in prices is expected for most types of housing.

“All we can do is be patient during this recovery,” said Tom Westcott, president of CREB^®.

“In this type of market, sellers need a solid pricing strategy in order to make their home more appealing,” said Westcott. “Buyers need to compare local market trends with long-term value in order to make informed decisions on how much to offer on a property.”

What is causing the housing market to struggle so much to recover?   

• Stricter requirements for borrowing and higher interest rates are keeping many potential first-time buyers from becoming homeowners. These factors are also affecting existing homeowners who would otherwise be moving up to a more expensive home.
• Although there is an improving economy, we are still recovering from the recession since the economy still has not reached pre-recession levels of activity.
• There has been a shift in the types of jobs experiencing growth, as employment gains are not happening in traditional industries.
• Consumer confidence is still lagging due to concerns about the prospects in Alberta. How this could continue to affect housing prices is a concern, especially now with so much inventory.