Patience required in Calgary’s housing market recovery
City of Calgary, August 1, 2018 –
Recent struggles in the job market, accompanied by yet another interest rate increase, is piling on to the decisions potential purchasers have to make in the housing market.
The month of July saw 1,547 units sold in Calgary, nearly five per cent below last year. New listings eased to 2,964 units, causing inventories to total 8,450 units. With more supply than demand, prices continued to edge down, with a citywide average of $435,200. This amounted to a month-over-month price decline of 0.30 per cent and year-over-year decline of 1.89 per cent.
"Despite some positive momentum in some aspects of our economy, our job market has continued to struggle as of late, with some easing in total employment levels over the past few months and persistently high unemployment rates," said CREB® chief economist Ann-Marie Lurie.
"Also, the Bank of Canada raised rates again in July. Rising costs, combined with a slow recovery, are weighing on the demand for resale homes in the city. At the same time supply remains high and is resulting in an oversupplied market."
Citywide months of supply have risen for each property type and currently range from nearly five months in the detached sector to seven months in the apartment sector. These elevated levels have been placing pressure on prices in the city.
Detached benchmark home prices totaled $501,300 in July, down 0.4 per cent from last month and over two per cent from last year's levels. Year-to-date average benchmark prices in the detached sector remain just below levels recorded last year.
The apartment ownership sector continues to see the steepest declines, with year-to-date benchmark prices averaging $257,343, three per cent below last year and nearly 14 per cent below 2014 highs.
"In a buyers' market, it's critical for all parties to have the most up-to-date information to make a fully informed decision, whether you are buying or selling," said CREB® president Tom Westcott.
"A REALTOR® can help make an accurate determination on how much to sell a home for or how much is too much when purchasing one."
HOUSING MARKET FACTS
REGIONAL MARKET FACTS
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November marks a rise in sales
The November housing market was spurred by a rise in sales, particularly in the lower price ranges.
Sales totaled 1,411 units in November, an increase of 15 percent over last year. This is comparable to longer-term averages for the month of November. Improved sales activity occurred in each of the housing segments, with most of the gains occurring in homes priced under $500,000.
"The combination of improved confidence and pending mortgage rule changes have likely contributed to the stronger sales activity this month," said CREB® chief economist Ann-Marie Lurie. According to Lurie, the last time that sales activity rose to long-term averages for the month was October 2016, when the stress test for high-ratio loans was first announced.
"Moving forward, we will continue to monitor shifts in demand as improving economic conditions should help offset the impact to the housing market after the new lending policy comes into force in January," said Lurie.
The largest gains in the detached sector were in the $300,000 - $399,999 price range, while the apartment and attached sectors saw the largest gains among homes priced below $300,000.
"We have seen some improvements in confidence with many of our clients. There are some concerns regarding the changes in the lending market, but there is also a significant amount of confusion regarding how it will affect them," said CREB® president David P. Brown.
"For a lot of buyers, they are interested in taking advantage of the choice in the market at all price ranges."
The rise in sales relative to new listings improved this month, helping ease inventory levels over the previous month and keeping the months of supply relatively stable. However, the amount of supply relative to the sales in the market remains elevated. This continues to weigh on prices.
Citywide benchmark prices totaled $436,700, 0.50 percent below last month, but 0.46 percent above last year's levels.
Both median and average prices recorded a more significant decline compared to last year. This should not come as a surprise, as more sales in the lower price range this year compared to last November would cause a more pronounced drop in average and median prices.
Prices remain similar to last year but ease in October 2017.
October's housing market conditions closely echoed previous month's trends with easing sales, rising inventories and downward price pressure. Like last month, the monthly activity was not enough to derail gains that occurred earlier in the year.
October sales and inventories totaled 1,467 and 6,463 units for a month of supply of 4.4. Several months of elevated supply in comparison to demand has weighed on pricing over the past several months. The city-wide unadjusted benchmark price in October totaled $438,900, 0.6 percent below last month, but comparable to last year.
"While economic activity has improved in 2017, it will take some time for this to translate into housing market growth.
There have been employment gains, but most of this has occurred in areas with traditionally lower income," said CREB® chief economist Ann-Marie Lurie.
"We also continue to face weak migration, higher lending rates and changes to lending policy. The combination of these factors is impacting housing demand, which is prolonging the pace of recovery."
Resale inventory gains occurred in each product type and across most districts in the city. The largest gains were in districts with substantial new development growth.
In the detached segment, the largest number of units added to inventory occurred in the $300,000 - $500,000 price range. This represents nearly 42 percent of all detached inventory. 62 percent of the inventory in the city-wide market is priced below $500,000.
"There is far more product availability in the lower price ranges now compared to several years ago," said CREB® president David P. Brown.
"This provides more options for potential buyers concerned about their purchasing power given all the changes in the lending market."
The largest monthly price change occurred in the apartment condominium sector which recorded an unadjusted monthly decline of 0.8 percent, resulting in a 13 percent spread over monthly highs recorded in 2014.
Despite some recent adjustments, prices in the attached and detached segments remain relatively stable compared to last year.
Click here to view the full City of Calgary monthly stats package.
Click here to view the full Calgary region monthly stats package.
Inventory increases and sales drop in September, but overall sales for the year remain higher than last year.
Strong gains in the first-half of 2017 have put the Calgary year-to-date sales at seven percent above last years' levels and 11 percent below long-term averages, but challenges remain with easing sales and rising new listings.
Inventories rose across all property types to 6,861 units, while both apartment and attached-style properties saw the highest inventory on record for the month of September.
"The recent rise in inventories is preventing further price recovery as sales activity has moderated over recent months.
This does not come as a surprise as sales activity is expected to remain modest by historical standards until more substantial economic improvements take hold," said CREB® chief economist Ann-Marie Lurie.
"Some may consider this a setback, but it is important to note that recent movements are balancing out the higher than expected gains that occurred in the first half of the year."
New listings in September totaled 3,266 units, a year-over-year gain of nearly 10 percent.
"There are several factors influencing new listings. Given the falling prices over the past two years, some sellers were waiting for market conditions to improve prior to listing their homes. More stability in the market has prompted many of those sellers to no longer delay their listing decision," said CREB® president David P. Brown.
"In some segments, rising new home inventories are also impacting total housing supply. Ultimately, prices are affected.
However, this inventory also opens up an opportunity for buyers to step up into a home that was financially unattainable."
As of September, unadjusted benchmark prices totaled $441,500. This is 0.2 percent below last month, but nearly one percent above last year. Downward price pressure this month occurred across most product types. However, year-to-date benchmark prices in the detached sector remain comparable to last year.
Prices in the detached sector remain relatively stable compared to last year. Condominium apartment prices remain four percent below 2016 levels and twelve percent below 2014 highs. This sector continues to struggle with price declines resulting from excess supply as months of supply pushed above eight months.
These days, with many homebuyers searching for their new homes online, many people wonder about the effectiveness of an open house. While some consider open houses to be an outdated practice, it can actually be a rather effective tactic, if done correctly. Here are 8 ways to make sure your open house is a success.
1. Stage Your Home
Staging your home is a critical step that allows anyone walking into your home to imagine themselves living there. When you stage your home, it should be a neutral environment. While it may be difficult to do, declutter your home and depersonalize it, removing personal items (such as family photos). Remove anything that might be considered controversial. Take the time to clean up. Steam clean carpets (which freshens them and removes odors). Pick up area rugs to show off wood flooring. Clean counters, sinks, and cabinets. Leave on the lights. You may want to consider a fresh coat of paint as well.
2. Take Advantage of the Internet
Since homebuyers are on the web anyway, utilize the internet to advertise your open house! There are some real estate sites (like Zillow) on which you can post your open house for free. Real estate agents have the advantage of being able to advertise your open house on other popular real estate sites as well. When you post, make sure you have plenty of high-quality pictures to go along with the information.
3. Don’t Be Afraid of Signs
Even though many people rely on GPS to get where they need to go, never underestimate the power of “Open House” signs. And don’t be afraid to place several, helping potential buyers to easily find your house (especially if you are located off of a main road). Your open house signs may even attract potential buyers who may just be driving by and haven’t seen your house online. You never know who will see your home as their dream home.
4. Invite the Neighbors
Oftentimes, people get irritated by nosy neighbors. Your open house is exactly the time you want them to be checking out your home. Invite your neighbors to your open house. They may know of someone looking to move to the area (family, friend, or otherwise), and may be willing to recommend your home to them. Think of them almost as your scouts. Nosy neighbors will be the first to tell their friends about the amazing kitchen counters or bathroom remodel that you had done months ago. Consider sending your neighbor's personal invitations or fliers. Or, if you prefer, send an email or personalized electronic invitation.
5. Lock Up Valuables
Before allowing potential buyers into your home, make sure you secure your valuables (and any medication). Even though you might like to think that everyone entering your home is there as a potential buyer, thefts can happen. Pharmaceutical theft is one of the biggest. Make sure your medicine cabinets are clear. Dispose of any medications you no longer need and lock up the ones that are in use (or take them with you). Also, be sure to lock up anything else that may tempt someone, such as jewelry, cash, credit cards, or one of a kind knickknacks.
7. Take Off
With a real estate agent helping you sell your home, there is no reason for you to be present during your open house. In fact, it may be more beneficial if you take off. Pack up the kids, and the pets (if you have any) and go for a drive, visit with friends/family, or head to the park. This will lessen the stress on potential buyers, and help them to feel as though they can speak freely and candidly with the agent. If you can, take your pets items with you (dishes, litter box, etc.). If not, make sure they are spotless.
8. Leave Informational Packets
Make sure you leave informational sheets for potential homebuyers to take home with them. If they are looking at multiple houses, having information easily accessible about your home will help them to more easily recall it. Consider such things as property details, community information, and information regarding the school district.
9. Provide Some Treats
Providing freshly baked treats has two advantages. One, it creates an inviting, enticing aroma, and two, your potential buyers have a delicious snack to enjoy while they tour your home. With a special treat, potential buyers are sure to remember your property.
Growth in new listings outpaced sales preventing inventory declines
Sales posted a modest gain in August, but a rise in new listings kept inventory levels elevated.
Inventories totaled 6,624 units, where over half were comprised of attached and apartment-style properties. While inventories were 16 percent higher than August 2016 levels, the slight rise in sales prevented further gains in the months-of-supply, which remain just above four months.
"Employment growth is contributing to the stability in sales activity, but it is not enough to meet the recent rise in listings and make a substantial dent in inventory levels," said CREB® chief economist Ann-Marie Lurie.
"Unemployment rates remain elevated and job growth is mostly occurring outside the energy sector, slowing the recovery process. Broader economic improvements will be required prior to it translating into substantial improvements in the housing market."
The second month of higher inventories compared to sales weighed on prices for the month. The unadjusted city wide benchmark price totaled $442,300 in August. This is 0.3 percent below last month but remains nearly one percent above last year's levels. Overall total residential prices remain four percent below peak levels.
"Buyers have several options in this market, and sellers need to continue to be realistic regarding the price they expect to receive for their home," said CREB® president David P. Brown.
"While some of the buyers are re-entering the market, they are also considering all of their options prior to making a commitment."
The pace of growth in detached sales has closely matched new listings this year. However, inventory levels continue to remain at 3,280 and months of supply pushed up to 3.32. Recent gains in months-of-supply prevented further gains in prices this month. Detached prices totaled $510,900 in August. This is slightly lower than last year, but 1.5 percent above last year's levels.
With over seven months-of-supply, the excess supply continues to weigh heavily on the apartment condominium sector. As of August, the benchmark price totaled $263,300. This is one percent below last month and three percent below last year's levels. Downward price pressure in this sector is expected as supply levels remain elevated in the new, resale and rental market.
CREB® forecasts a process of recovery for the remainder of 2017
The first-half of 2017 marked a shift in Alberta's economy from recession to recovery, with conditions supporting stability rather than expansion.
"Economic challenges continue to exist, as high unemployment rates, weak migration levels and more stringent lending conditions are weighing on the housing market," said CREB® chief economist Ann-Marie Lurie.
"This will continue to cause some adjustments in the housing market for the remainder of this year. However, this is not expected to offset earlier gains supporting general stability in 2017."
Resale sales activity is expected to total 18,401 units in 2017, a 3.3 per cent improvement over last year. The pace of growth is slightly faster than originally anticipated, due to the stronger growth that occurred in the first half of the year.
"We saw many of those consumers who delayed any purchasing decisions willing to re-enter the market as concerns regarding the economy eased," said CREB® president David P. Brown.
"More potential buyers on the market helped move some of the product in inventory and started to create some price stability."
Improvements in the supply demand balance, primarily in the detached and attached sector, caused prices to start to trend up. Demand growth through the remainder of the year is expected to ease relative to inventory levels. This should prevent further substantial shifts in pricing. Overall, annual city wide prices are expected to remain at levels comparable to last year.
Despite generally improving trends, difficulties continue to exist in the condo-apartment ownership market. Rising sales cannot keep pace with the growth in new listings, keeping supply levels high and placing continued downward pressure on prices. This area of the housing market will likely continue to face challenges well into next year, as it will take time to absorb additional inventory in the resale, new and rental markets.
"Improvements in the labour market are supporting the shift in the housing market this year. However, activity over the past two years was amongst the weakest we have seen since the financial crisis," said Lurie.
"While the shift is welcome news for many, we continue to expect that process of recovery will be slow and dependent on the property type and location within the market."
For more information, please refer to the CREB®'s 2017 Economic Outlook & Regional Housing Market Mid-Year Update found here.
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