by CREB on July 29, 2015
Continued weakness in housing demand will limit downward pressure on supply levels and cause prices to ease in the second half of the year, CREB® said in its 2015 mid-year forecast. Despite this anticipated retraction, Calgary’s benchmark prices are only expected to decline by less than one per cent on an annual basis.
"Further job losses are expected in the second half of the year,” said CREB® chief economist Ann-Marie Lurie. “These employment changes, combined with overall weakness and slower than anticipated recovery of oil prices, are expected to keep housing demand relatively weak for the rest of 2015. However, with the initial shock of oil price declines having dissipated, the pullback in sales activity in the second half is not expected to be as dramatic as the first part of the year,” said Lurie.
Overall sales activity in Calgary is forecasted to total 19,798 in 2015, a 22 per cent decline relative to last year, but only six per cent lower than average activity over the past five years.
Dramatic swings in new listings during the first half of the year caused inventory levels to rise, but by June, they remained below previous highs. Over the second half of the year, inventory levels traditionally ease as we move toward the fall and winter markets. However, this year housing supply levels are expected to remain relatively elevated due to improved selection in the rental markets, completion of projects under construction, and an easing in the rate of decline in resale new listings.
While some price moderation is expected moving forward, it should be noted that it’s not going to be the double-digit decline that some have suggested. In part, this is related to the limited supply in the market moving into this next cycle. Also, the forecasted pullback in employment and migration is not going to be as severe as what occurred last time we recorded significant price declines. Calgary’s residential benchmark price is expected to average $448,354 for 2015, a modest 0.20 per cent decline over the previous year.
“It’s a two sided coin when talking about pricing for buyers and sellers,” said CREB® president Corinne Lyall. “Some buyers have the expectation that they will get significant price reductions in this market, but that’s not always the case. In some areas, supply levels are more balanced with demand and that creates price stability. On the other hand, in most situations, it will be the sellers who need to adjust expectations, particularly if they have to compete with a large amount of comparable product in the neighbourhood.”
While slower demand is impacting all sectors of the market, the apartment sector is expected to record the largest pull-back in both sales and price growth in the second half. Challenges in this segment are linked to the rising supply in competing markets. There is more selection in the detached and attached segments, which makes it difficult to attract buyers. Sellers also faced added competition from new apartment units and increased selection in the rental market.
Meanwhile, activity in the detached segments will continue to vary based on price and location. Continued weakness in demand relative to supply levels, particularly in the higher price ranges, are expected to cause aggregate detached benchmark home prices to decline in the second half of this year. However, annual prices are expected to remain relatively unchanged compared to last year. Overall, detached sales are expected to total 12,105 units in 2015, a 19.8 per cent decline over last year.
“It’s important for active housing consumers to understand what type of comparable property is available by product type, community and price range,” said Lyall. “While some degree of competition exists in every market condition, most sellers in the current environment will need to take extra care in setting realistic expectations to attract a good crop of potential buyers. This kind of smart pricing may encourage buyers who are sitting on the sidelines to consider entering the market if they are in a position to do so.”
As with any market forecast, there are several factors that could influence the outlook. On the upside, if there is no further deterioration in the economic climate, it’s possible that the pullback in housing demand could be less severe. In this scenario, potential buyers who are in the market may decide to take advantage of higher supply levels and overlook short-term risks in favour of the positive long-term outlook. This possibility could keep market conditions relatively balanced in the second half and prevent any further price declines.
“Ultimately, what happens to prices will depend on supply levels and how much they go up or down against demand,” said Lurie. “The duration of this economic downturn and the resulting job loss will determine which direction supply will go in the months ahead.”
by CREB on August 04, 2015
Declines in residential housing sales activity eased in July, creating, when combined with stable inventory levels, no change to the month-over-month price.
Year-over-year sales fell by 14 per cent to 1,995 units in July, compared to a 17.8 per cent decrease the previous month. Despite the decline, sales activity during the month was consistent with the 10-year average.
While sales decline eased, so too did the decline in new listings, causing the unadjusted sales-to-new listings ratio to edge down to 67 per cent in July and months of supply to increase to 2.53 months.
“As weakness in the energy sector continues, this is trickling into several other aspects of our local economy, including our housing market,” said CREB® chief economist Ann-Marie Lurie.
Despite weaker absorption rates, market conditions remained relatively balanced and helped maintain month-over-month stability in benchmark prices, which remained unchanged from the previous month at $455,400.
“Often, the focus is on home prices. In fact, Calgary has recorded significant gains in home prices over the past several years,” said Lurie. “And despite the recent retraction, we have not seen all those previous gains eroded.”
While benchmark prices exhibited some month-over-month resilience, they still declined by 0.15 per cent annually and one per cent lower than levels recorded in January. It represents the first time since 2011 that benchmark prices have posted a year-over-year decline.
Lurie attributes most of the year-over-year decline to the apartment sector, where prices fell by 1.61 per cent to $293,300 – nearly two per cent lower than the price at the beginning of the year – due to weak demand and growing supply.
Year-to-date new listings in the apartment sector declined by 4.6 per, while sales declined by 29 per cent over the same period, resulting in inventory gains. By July, the months of supply pushed up to 3.77 months compared to three months in June.
“The relatively weak demand for apartment product, combined with rising supply, continued to place downward pressure on prices for the second month in a row,” said Lurie.
CREB® president Corinne Lyall noted Calgary’s housing market is continuing to see some nuances in supply between the different segments of the market.
“These differences are really important to understand as it relates to consumer expectations,” she said. “Some buyers expect they will get major price reductions in this market, but that’s not always the case. In some areas, supply levels are more balanced with demand and that creates price stability.”
Meanwhile, detached home prices remained steady month-over-month at $515,300. While absorption rates eased in the sector, conditions remained relatively balanced.
“Many clients are optimistic about the long-term outlook and are less concerned about short-term fluctuations in the housing market,” said Lyall.
“They’re focused on taking the time they need to make the right choices for their lifestyle. Saying that, it’s important to stay current and become educated with the market dynamics in the communities where they may be making real estate decisions.”