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The Falling Price of Oil and Calgary Real Estate

Posted by Jim Sparrow on Wednesday, January 13th, 2016 at 4:47am.

Calgary Real Estate & The Falling Price of Oil

Home Prices & the Fall In Oil Prices

 January 13 2016: 2015 was a challenging year for businesses, and the Calgary real estate market wasn't immune to lower oil prices and the resulting downturn in the economy.

The falling price of oil impacted sales of Calgary property as well as home values across most price ranges. Nonetheless, some Calgary homes sold for more last year than they would have in 2014.

Between 2011-2014, the price of detached Calgary homes increased by 20% as WTI oil sold for an average price of $94 per barrel.

In the space of just over a year the price of oil has fallen by 70%, trading today at just over $30/bbl. These are price levels not seen in 12 years, 40% lower than the average 2015 price of $49/bbl .

Price of WTI Oil 2011 thru 2015


Detached home sales in Calgary fell 24% last year vs. 2014. Despite this, Calgary home prices declined only by low single-digit percentages in 2015. The median sale price for a Calgary home in 2015 was $479,900, down 1.6% from $487,500 in 2014.

Median Sale Price of Detached Calgary Homes 2005 - 2015

 

CREB chief economist Ann-Marie Lurie summed up the current market nicely:

"Economic uncertainty, followed by weak economic conditions and job losses, contributed to a slowing housing demand throughout the year. That said, while aggregate prices trended down in 2015, it was not to the same extent as some had speculated".

December 2015 statistics released by the Calgary Real Estate Board can by viewed by clicking the link below:

Calgary Market Stats December 2015
What the CREB® numbers don't show is how sales and property value vary so widely across price ranges and location in Calgary. Prices for low to moderately valued properties stayed relatively flat or rose in 2015, while higher priced homes saw their values drop by higher single-digit percentages.


Listing Inventory And Why It's Important

Listing inventory is a key indicator of the balance of supply and demand for home listings. Measured in months, listing inventory is calculated by dividing the total number of listings by the sales in the past month.

The single number normally reported for the entire city is misleading as it doesn't reflect the wide range of inventories in different price ranges or areas of the city.

Compare the average city inventory number to those from the four quadrants of the city gives you a better idea of what the market is like in the niche you own, or are planning on selling or buying a home in.

Calgary Listing Inventory: City-wide

City-wide, the Average Calgary listing inventory is 4.0 months. Homes priced under $500,000 have much lower inventory numbers, indicating a seller's market. Homes above $600,000 have considerbly more supply. Homes over $1,000,000 now have more than 12 months of listings, a range that heavily favours buyers.

Calgary Detached Home Inventory - Citywide January 2016
Average Citywide Calgary Listing Inventory: 4.0 Months (Jan 2016)

Northeast Calgary Listing Inventory

The Average Northeast Calgary Listing inventory is 3.1 months. Homes priced under $500,000 represent 92% of all sales in this part of the city. This price range has been the least impacted by the economic downturn.

Northeast Calgary Detached Home Inventory - January 2016
Average Northeast Calgary Listing Inventory: 3.1 Months (Jan 2016)

Southeast Calgary Listing Inventory

The Average Southeast Calgary listing inventory is 3.5 months. Listing inventory for homes priced under $400,000 have only 0.8 months of supply indicating a tight (seller's) market, while homes over $600,000 are in a buyer's market.

Southeast Calgary Detached Home Inventory - January 2016
Average Southeast Calgary Listing Inventory: 3.5 Months (Jan 2016)

Northwest Calgary Listing Inventory

The Average Northwest Calgary listing inventory is 4.1 months. Inventories range from just over one month for homes under $400,000 to over 18 months for homes priced over $1,000,000.

Northwest Calgary Detached Home Inventory - January 2016
Average Northwest Calgary Listing Inventory: 4.1 Months (Jan 2016)

Southwest Calgary Listing Inventory

The Average Southwest Calgary listing inventory is 4.8 months. Inventories range from less than 1.5 months for homes under $400,000 to 11 months for homes priced over $1,000,000.

Southwest Calgary Detached Home Inventory - January 2016
Average Southwest Calgary Listing Inventory: 4.8 Months (Jan 2016)

Calgary Home Prices: 2015 vs 2014

Calgary home prices mirrored the the rollercoaster ups and downs of oil prices last year, falling early only to rebound in the 2nd quarter and early summer. Homes in NE Calgary, for much of the year, sold for higher prices Yr/Yr than those seen in 2014.

It must be noted that Calgary does not have a uniform mix of homes and price points; this is reflected in sale price changes for the four quadrants of the city. As mentioned above, northeast homes sold for above 2014 prices until the past few months, while for most of the year many southwest homes sold for lower prices.

Both the average and median sale prices can be misleading when used as baromters of price changes. With the exception of northeast Calgary, all other areas of the city saw a Yr/Yr percentage decrese in home sales over $500K while homes under that price grew:

  • Northwest Calgary: 3.1% decrease in market share over $500K
  • Northeast Calgary: 2.5% increase in market share over $500K
  • Southwest Calgary: 6.1% decrease in market share over $500K
  • Southeast Calgary: 0.9% decrease in market share over $500K

Calgary Sale Prices: City-wide

City-Wide Calgary Detached Median Price: 2015 vs 2014

City-Wide Calgary Median Sale Price vs WTI Oil Price

City-wide, the 2015 median price of detached Calgary homes dropped 1.6% Yr/Yr. Most recently, the December median price city-wide was down 4.2% Yr/Yr.

Northeast Calgary Sale Prices

NE Calgary Detached Median Price: 2015 vs 2014

Northeast Calgary Median Sale Price vs WTI Oil Price

For all but 3 months, NE Calgary detached home prices were higher last year vs. 2014. The 2015 median sale price of Northeast homes was 2.5% higher Yr/Yr. The December NE Calgary median price was down 4.1% Yr/Yr.

Southeast Calgary Sale Prices

SE Calgary Detached Median Price: 2015 vs 2014

Southeast Calgary Median Sale Price vs WTI Oil Price

2015 Southeast detached home prices were higher 4 of the past 12 months Yr/Yr. The 2015 median price of SE Calgary homes was 0.8% less Yr/Yr The December SE Calgary median price was down 5.0% Yr/Yr.

Northwest Calgary Sale Prices

NW Calgary Detached Median Price: 2015 vs 2014

Northwest Calgary Median Sale Price vs WTI Oil Price

Northwest Calgary detached home prices were lower 9 of the past 12 months Yr/Yr . The 2015 median price of NW homes was 2.3% lower Yr/Yr. The December NW median price was 8.7% lower Yr/Yr.

Southwest Calgary Sale Prices

SW Calgary Detached Median Price: 2015 vs 2014

Southwest Calgary Median Sale Price vs WTI Oil Price

The 2015 median sale price of detached Southwest homes fell 6.2% Yr/Yr. The December SW median price was down 4.9% Yr/Yr

Homes prices in Southwest Calgary, because of their high price point, were impacted more than any other segment of the city in 2015. Even so, the median price change shown above is skewed due to a significant shift from high value sales to lower price ranges.

2016 Outlook For Calgary

Despite oil hovering just above $30/bbl today and indications the price will soon slip into the $20's, we're now in the 8th or 9th inning of low oil prices. Analysts expect 2016 to be oil's rebound year.

First-time and move-up buyers haven't seen these price level opportunites for two or three years, and when oil finds a bottom a price reversal will occur quickly.

What will the market look like in three to six months? It's about choosing and buying value - not about picking when.

Jim Sparrow sells Calgary Real Estate with Royal LePage & specializes in South Calgary and luxury homes. Browse through our Living in Calgary blog, view current listings, and when you have questions, simply email, or page me directly at Royal LePage Solutions 403.252.5900.

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