October 2018 – Market Update

Sluggish Economy and House Oversupply Leads to Buyer’s Market

With no discernable changes in the economic picture, the sales in Calgary for September came to 1,272 units, which is 13% less than 2017, and far below the years-long averages. Across all housing types, there was a distinct pullback, especially in the detached market.

Ann-Marie Lurie, CREB^® chief economist noted Calgary is still struggling with unemployment, which was up 8% in September. Concerns about the continued unemployment, higher interest rates and a lack of economic confidence are depressing the housing market.

“While unemployment continues to be a problem, supply levels remain high, causing an ongoing oversupply and declining prices.”

Inventories reached 7,941 units, which means the months of oversupply is now at 6.25. The longer this goes on the more the oversupply will depress prices. The unadjusted benchmark price citywide came to $428,700 in September. This figure is almost 1% lower than August and 3% lower than this time last year.

Tom Westcott, CREB^® president said, “This has become the new normal for real estate in Calgary.”

“A number of potential buyers may be motivated to take advantage of the current market conditions, but they will no doubt confront difficulties when they try putting their existing home on the market at a price they would accept. In most cases, unless homeowners can sell the home they currently live in they won’t be able to purchase a new one.”

Sales in September were down, but third-quarter numbers seem to indicate a slower sales decline and fewer new listings. Even so, these factors were not enough to affect inventory levels this past quarter.

While the economy in Calgary struggles, there are some indications that the rental market is improving and this could contribute to a slow decrease in the housing supply overall.

UPDATES IN THE HOUSING MARKET

Detached Homes

• Year-to-date sales limped to 7,945 units, which was 20% lower than the 10-year average. Sales were soft across all price ranges, but not for properties that sold for less than $300,000, which showed a modest gain.
• Soft sales met up with some new listing adjustments in September. Unfortunately, inventories are still too high and in most districts the oversupply is more than long-term averages.
• Months of oversupply reached 5.5 months in September and this factor causes a softening of housing prices across all districts.
• Benchmark prices for detached homes came to $493,100 in September. This amounts to a decline of 0.8% over the previous month and 3% below 2017.
• Prices inched downward in most districts in September. However, when you look at year-to-date figures, benchmark prices are still higher than last year in the West districts and City Centre.

Condominiums & Apartments

• The condominium and apartment sector has experienced the slowest sales decline at 6% so far in 2018. Similar to the detached sector, sales remain more than 20% below long-term averages at a total of 2,103 units.
• For four months running, new listings have been inching lower than these months last year. This has reduced inventory in this market somewhat compared to 2017.
• However, even with inventory a bit lower, this is still a buyer’s market when you consider the lower sales numbers.
• When there is more supply than demand, which was the case in the condominium and apartment sector, benchmark prices softened in September, with a decline of 0.4% over the previous month and 2.7% when compared to 2017.

Attached Homes

• The year-to-date sales recorded for the attached sector came in at 2,814 units. This figure is 15% lower than 2017 and 14% lower than long-term averages.
• With no real lowering of new listings, inventory continued to be elevated, leading to more than 7 months of oversupply.
• Elevated supply when compared to demand continued to be the case in both row and semi-detached homes. Like every other sector, the oversupply has softened prices across all districts, save for North East, East and the City Centre.
• While the benchmark prices softened in September for semi-detached homes, year-to-date prices were still higher than 2017 levels. The oversupply in recent months has eroded some of the progress made towards price recovery in 2017.
• Benchmark prices for row homes have been at an average of $298,667 so far this year, which is nearly 2% below 2017 and 9% lower than previous highs. Despite the pullback across the city, row prices have stayed relatively stable in the South East and North West districts and the City Centre.

REGIONAL MARKET UPDATE

Airdrie

• The housing market in Airdrie has so far this year been in a buyer’s market. This can be attributed to a weak economy, which has hindered any growth in demand. This won’t help to alleviate the oversupply and has led to a softening of benchmark prices in the detached home sector.
• Residential sales year-to-date in Airdrie have gone down when compared to 2017 and remain at levels similar to those in 2012. In the meantime, new listings have stayed elevated, which in turn caused inventories for September to reach new highs.
• Months of oversupply have continued to soften prices. The benchmark price year-to-date for detached homes averaged $371,244, which shows a 1.7% decline from last year and is 5% lower than previous highs.

Cochrane

• Due to a similarly weak economy, the Cochrane housing market has been experiencing a slight supply-side imbalance.
• Year-to-date sales in Cochrane were 477 units, which was 59 units lower than last year. Growth in sales has been decreasing for most of this year. However, 2018 levels are still higher than in 2015 and 2016.
• New listings have been continuing to grow in Cochrane for most of 2018 and year-to-date numbers show 269 units more than long-term averages. Inventories have reached a new high for September, peaking at 360 units, which only leads to months more of elevated supply.
• Due to the persistent oversupply, prices are softening in the third quarter. However, not enough to wipe out earlier gains. This leaves benchmark prices year-to-date a little higher than last year’s levels. So far in 2018, prices for detached homes remain 4% lower than recent highs.

Okotoks

• Okotoks is also undergoing supply pressures due to slow sales and an increase in new listings.
• Despite the oversupply, benchmark prices in the third quarter have remained relatively stable when compared to last quarter. The year-to-date benchmark price for detached homes is at $436.422, which is almost 1% higher than 2017, but still 3% lower than previous highs.

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