Calgary Real Estate: Window of Opportunity Closing?
Updated May 1 2016: At the risk of sounding repetitive, Calgary real estate sales continue to be slow as April nears an end. Traditional 1st quarter seasonality combined with oil’s February’s 13-year low of $26 per barrel have had a negative impact on sales and prices.
While market activity increased with the arrival of spring, sales continue to trend downward year-over-year. There was a 3% decline Yr/Yr for detached home sales in April. Meanwhile apartment condo sales were 21% lower than 2015. Compared to the pre-oil drop of 2014, detached home sales are 25% lower while apartment sales are down 39%.
The median sale price for detached homes is virtually the same as 2015 (+0.6%), and only 1.2% lower than the April 2014 number. Apartment sale prices are now 1.4% higher than last year and 1.5% lower than 2014. As anyone who’s bought or sold a home knows, these numbers can be misleading. YTD 2016 home prices are down 2.1% (2015) and 3.6% (2014) *year end prices*.
"If you have fewer short kids in the class, and more tall kids in the class, the average and median height is going to rise" - Gregory Klump, Chief Economist CREA
Prices for affordable homes haven't seen anywhere near the price concessions that the luxury end of the market has (inner city or west side). Many real estate bears have been surprised there hasn't been more distressed selling in the Calgary market. Entry level Calgary homes are selling for only 3 or 4% less than last year, and in many cases for more than prices paid in 2014. Higher priced homes have seen steeper price erosion, with declines of 10% or more for some properties over a million dollars.
The best time to move up is in a soft market, as the price concessions come primarily at the luxury end of the market and not so much at the affordable end. With the improvement in the price of oil, the economic prospects will improve, as will prospects for the housing market.
In a buyer's market, listing inventory is the the key indicator to market activity, far more important than days on the market.
Listing inventory is Total Listings divided by Sales past 30 days. A listing inventory under two months indicate a Seller’s Market, while over 4 months shows a Buyer’s Market.
Unfortunately the public only see's a city wide average of all price ranges. Currently there are 3.1 months of detached home inventory on the market citywide. In reality, listing inventories in some areas in Calgary are far less than two months, while other areas have over 10 months in higher price ranges.
Oil Prices and Real Estate
The consensus among energy analysts is oil prices will move steadily higher through the end of the year. Two years of less spending on exploration across the industry is taking its toll. When price goes down producers eventually produce less.
Oil has rebounded in the last few months from the lowest levels the market has seen since 2003. Prices are up 75% since February, 30% this month. US shale oil production is in free fall.
"Market fundamentals continue to suggest that the combination of robust demand and weak supply growth will move global oil markets into balance by the end of the year" - BP CEO Bob Dudley
It might be three or four months before oil is trading for $50, or as soon as next week. Prices will remain choppy for some time. While $85 oil won’t likely return anytime soon, higher oil prices will bring a return to balance in Calgary sale prices. Certain segments of the market will see price increases sooner than others, depending on listing inventory and demand.
Calgary real estate is on sale in a way it hasn't been since early 2009. As the price of oil rises, this window of opportunity to purchase at these prices will close.
As always I'd be more than happy to discuss personal situations in detail.
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