November 2018 – Market Update

Calgary’s Struggle with Oversupply Causes Home Prices to Soften

Prices are softening in Calgary’s housing market due to an elevated inventory when compared to sales.

Benchmark prices across the city in October came to $426,300, which indicates a downward trend for the fifth straight month. The year-over-year result shows a 2.9% decline.

Anne-Marie Lurie, chief economist for CREB® said, “Job growth in Calgary is still a worry, as the level of unemployment is still far higher than anyone expected for 2018. The rising cost of home ownership continues to have a detrimental effect on housing demand.”

“Simultaneously, supply levels haven’t adapted quickly enough to these conditions, which has caused prices to soften.”

Inventories totalled 7,345 in October, whereas sales came to just 1,322. The result is months of supply at 5.6, which is not at all typical for October. Although some softening in the growth of new listings will prevent more supply gains, inventory levels for October remained at near record highs for this month of the year.

Tom Westcott, president of CREB® said, “Under these market conditions, a lot of potential homebuyers should have a good chance of finding the home they want in their price range if the homes are priced right.” He added that, “Sellers need to have realistic expectations and have up-to-date data from the correct sources so that they know what’s selling and what isn’t in their neighbourhood.”

In each property type, sales have improved if you look at homes priced in the lower ranges, which means that most of those segments are in relative balance. However, in the upper price ranges there have been huge gains in supply when compared to demand. This is bound to have a stronger impact on prices in the upper ranges.

UPDATES IN THE HOUSING MARKET

Detached Homes

• In October sales of detached homes totalled 829 units, indicating an 8.6% decline, which means a 15% year-to-date decline. This shows that detached sales are moving at the slowest level since the late 1990s.
• Year-to-date, the strongest sales decline was in the $600,000 to $999,999 price range, which reflects a low demand from buyers moving up.
• For two months in a row now, there has been a softening of new listings, which does prevent additional gains in inventory. However, since this segment is still oversupplied, the downward trend in prices will continue.
• Benchmark prices in October for detached homes totalled $490,000. This is lower than last month and 3% lower than levels this time last year. Year-to-date, prices are 1% lower than levels this time last year.
• Year-over-year prices as of October have softened across all districts, but the strongest declines are in the South, South East, North East and North West districts. This is probably the result of the new-home sector creating some competition.

Condominiums & Apartments

• Year-to-date sales of apartments totalled 2,316 units, which is almost 7% lower than this time last year. New listings have softened by 6%, which does help to lower inventory levels in the market.
• Despite inventory softening, the months of oversupply remains too high at 7 months.
• Year-to-date prices of condominiums and apartments have softened by 2.8% and are still 14% lower than 2014 highs. Prices declined across all districts, with the strongest declines in the South, East and North East districts.

Attached Homes

• Year-to-date sales of attached homes were at 3,098 in October. This is 15% lower than this time last year and 14% lower than long-term averages.
• In the meantime, despite the recent slowing in new listings, inventories for October were at the highest level ever recorded.
• The oversupply is having a detrimental affect on the semi-detached as well as the row sectors. Both have experienced a downward trend in prices over the last 5 months.
• Year-to-date benchmark prices for the row sector are averaging $298,140, which is almost 2% lower than last year at this time and 9% lower than previous highs. But, prices have stayed relatively flat in the North West and City Centre districts.
• Prices for semi-detached homes in October were at $403,400, which is 1% below last month and almost 3% below this time last year. Despite recent price declines, year-to-date prices citywide stayed comparatively flat when you consider last year. This was primarily due to the gains in the North East, East and City Centre districts, which offset the declines occurring in the South, South East and North West.

REGIONAL MARKET UPDATE

Airdrie

• In comparison with last year, the housing market in Airdrie continues to suffer from declines in sales and increases in inventory. Oversupply has led to the softening of benchmark prices in the detached-home sector.
• Year-to-date sales for residential homes now totals 1,032 units, which is 11% lower than levels this time last year. New listings year-to-date have stayed relatively stable, but are still substantially more than long-term averages.
• Average inventory levels year-to-date are 19% higher than this time last year. This has resulted in months of elevated oversupply that now stands at 6 months, causing relentless pressure on the benchmark price. The year-to-date of homes in the detached sector is now at $370,888, a year-over-year decline of almost 2%.

Cochrane

• Sales of residential homes year-to-date have declined by 10%, with just 530 residential homes sold thus far in 2018. This is similar to other times in the past several years, but it is more than long-term averages.
• New listings were at 1,164 in October, which is historically a peak for this time of year and well more than long-term averages. Inventory levels this year in Cochrane have continued to be elevated and are nearly 17% above this time last year.
• This has begun to soften prices. But, year-to-date benchmark prices for detached homes have stayed relatively stable at $424,900 as compared to 2017.

Okotoks

• Year-to-date sales of residential homes have dropped to 428 units this far in 2018, which compare to 2011 levels and are far lower than long-term averages.
• New listings were at 936 in October, which is 8% higher than this time last year and comparable to long-term averages. October inventory levels stayed elevated at 232 units.
• Despite supply gains when compared to sales, the prices for detached homes in Okotoks have shown modest gains. Benchmark prices year-to-date for detached homes totalled $436,660, which is 1.25% higher than this time last year.

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