The headline from our real estate board was this…
Sellers’ market conditions continue to impact prices
So, what does this mean anyways? It means that our current real estate market in metro Calgary & the surrounding areas is tilted in the favour of the homeowner (sellers).
When a real estate market is this way, home prices are on the rise & buyers are required to adhere to the wishes of the seller. The idea of getting big discounts or great undervalued property doesn’t really exist in a seller’s market scenario like we have now.
In this update I want to explain a couple of key elements rather than hitting you with a bunch of market data.
Our current market is paralleling one of the best market scenarios in Calgary’s real estate history – the run up of 2005-2007.
Many of you may remember those years when, within a 3 year period, we basically doubled our average benchmark price.
Alberta Real Estate was insanely affordable in relation to our high household incomes, and it was only a matter of time before things were corrected. We grew about 20% year-over-year, then 30% and then finally 40%.
I bring this up because it’s the last time we saw sales values consistently – like we are having right now – coupled with very low total active homes on the market.
The 2012-2014 run-up, you may remember, did not have sales figures as high and as consistent as we’ve been having recently, and it did not have nearly as low a number of homes on the market as we have now.
Those years had us, year-over-year, increasing our sale price by 8,10 and12% respectively… so, more of a modest growth.
The paralleling of our market with the 2005-2007 period also relates to our benchmark sale price. As I mentioned, we were so low back then that there was nowhere to go but up.
Calgary over the last 6-7 years has been on a decline in relation to the rest of the developed world. While we suffered from oil price issues, political issues, pipeline issues and so on, the rest of the world didn’t. The world continued to see year-over-year positive growth in its housing sector.
So, again, for a powerful market centre like Alberta, we find ourselves with very inexpensive housing.
As the world emerges from Covid, as our economy diversifies, and our oil sector remains in incredibly strong demand, we are positioned to go through another run up. Will it be like 2005-2007 or more like 2012-2014? Nobody knows, but the parallels are obvious and all signs are looking positive for a good while.
Should we be concerned about the Alberta real estate market – including Calgary and surrounding areas – being in “real estate bubble” territory like some in Canada are discussing?
I don’t think so, and this is why…
There is a difference between “busy, yet healthy” & “dangerously overheated”. From our recent data here are a few things to consider:
1. Our active number of homes on the market is low, yes, but we are still listing a historically high number of homes on the market.
In January this year we listed about 10% more homes than last January.
In 2021 we listed more homes than 2020, 2019, 2018, 2017, 2016, and I could go on…
The growth we’ve had recently in our benchmark sale price is really a product of well balanced positive demand, not due to over inflated sale prices cause there is nothing to buy (like we are seeing in GTA, and the GVA).
2. The market, as a whole, tells the full tale – not jthe headlines.
You’ll hear from Realtors, you’ll hear from news outlets, and you’ll hear from your neighbours of price records being shattered, $100k over list price results, and so on…
So, it’s to be expected that the overall Calgary & area market narrative could become embellished and, thus, slightly incorrect.
Pulling some math of my own, I looked into a few extra data points to paint you the full picture and to show the true “heat map” of our market.
Pulling up graph #1 of 2, you’ll see a chart comparing “Sales to List Price vs. the Price Ranges”…
What do you notice? You will see that as we crept up to $450k through to about 850k that the Sales-to-List-Price Ratio is averaging around 100% to a maximum of 103%.
What this means, in layman’s terms, is that, for properties prices between $450,000 and almost $900,000, sellers are basically getting what they are asking.
Below $450K, it starts to decline to about 96-98% of what they are asking, and then the same occurs as we go up to $1.25 Mil & above.
So, yes, the market is “healthy” and sellers are basically getting what their advisors are suggesting is fair value.
We aren’t seeing, on average, that prices are being pushed 20% above list, 50% above, or anything more. There are exceptions, sure, but this is NOT the norm.
Will some very aggressive buyers pay too much right now to get the home they want or need? Yes, for sure. But that doesn’t mean it’s driving all housing prices to a place of over-inflation.
This next graph shows Price Ranges vs Days on Market…
You will have heard that homes are selling in a day, or their first day on market, or with no conditions. And yes, there are some like this. But, again, they are the exception rather than the rule.
Homes under $400K – there are lots of condos and townhouses in those price ranges – are still seeing Days-on-Market averages of 50+.
Homes above $1 Million – same thing.
But the middle part of the market is moving fast, with an average Days-on-Market under 30. But that still means that not everybody is getting those unconditional deals on Day 1!
And my final point to this relates to something I comment on a lot – the “Sales to New Listing Ratios”.
I often use the word PACE when discussing this topic.
The ratio for all of the Calgary Real Estate Board region so far in 2022 is 80%. That means that 80% of the new listings turned into sales within the month.
Again, not 100% or 200%.
The higher the number over 100% means the more the market is swallowing up all available homes. This is not the case with us at all. It’s healthy again, but not dangerous. We are not selling through everything that hits the market.
So, with these 3 points in mind, the answer to my question of “Should we be concerned about Calgary & area being in ‘bubble’ territory?” is simply “No”.
Our market is very healthy, and despite it feeling rushed and maybe a little out of control, it’s a great market! And it’s one that most of Canada would rather be in, I promise you that.
So, in summary…
The market is acting differently everywhere – each district of our city, each satellite community and each rural county, each property type, and each price range. You need to have a detailed conversation with your local real estate advisor to be sure you are in full understanding of how our current market applies to your specific situation. If you need help finding a truly educated and reliable agent, don’t hesitate to contact us a Redline | Real Broker to be connected with a real estate professional in your market segment.