Increased Rates. High Gas Prices. The Market Slowing Down. The sky must be falling, right?
In this update I’m going to share with you the most important things you need to know about the housing results from May 2022 just released by our real estate board.
We find ourselves nearing the halfway mark of the year and year-to-date it’s been nothing short of a wild ride.
We started the year off with a bang, completely obliterating 2021’s January by 66%.
Then, in February and March, we experienced record-breaking sales figures for that time of the year. It felt like the 2005 – 2007 boom days around here, but even better.
Then, in April, despite a pullback in total sales things continued to sell well beyond prior bests.
And the funny thing is that the media & the naysayers were saying the ‘slow down’ was in effect. “Watch out! Brace for impact because the sky is about to fall!”
And this brings us to May.
So, sadly, I’m here to tell you that I need to eat my positive & optimistic words. Sales did once again fall. They were right. The headline predictions were true. It is time to panic!
Or… maybe not.
Maybe – just maybe – Alberta, and specifically the greater Calgary area, is writing its own story. A story that is unlike other Canadian marketplaces, and unlike many of our North American peers.
Let me unpack this and share with you the details of our unique story so you can rest easy and leave this update with confidence about the local real estate market.
THE SALES SUMMARY
Yes, we did see sales slip from April. Which, again, was a slip from March. But that’s not all. As I said before, “Of course they did.” There is no way on God’s green earth that the sales pace could continue to surpass historical averages by huge margins every month! Of course, months like that were going to be a temporary thing.
Digging deeper, you’ll see that we recorded 3,071 sales in the month. This is 100 sales per day. And guess what? That makes this is the best May of all time! Once again, we’ve set an all-time record for a given month. Here we are breaking new records and doing so in a year in which we’ve already had such huge gains.
So, did sales slow somewhat in comparison to a few recent months? Sure, but it’s nearly irrelevant.
And when looking Year-to-Date on this chart you see again how far we sit above and beyond recent years.
THE INVENTORY STORY
First of all, many people focus heaviest on the total sales number to gauge the market, and I think this is a huge mistake. It’s part of the story, but not the most important part (at least in my opinion) and this is where inventory comes in.
A couple of things are happening here that I want to talk about…
1. New Listings to Market
So, while sales eased, as a whole, over the last month, so did new listings to market.
During the busy ‘spring season’ you typically see more and more inventory get flooded to the market. This simply isn’t happening right now.
For 2 months straight we’ve seen fewer new properties come to market in comparison to last year. Yes, we listed more in May than April – as we should and always do – but it’s a drop off from the year before.
Why does this matter? Well, the concern is if sales numbers start to slow, that as inventory climbs it will disrupt the supply & demand equation and apply negative pressure on our pricing… and the sky will fall.
But again, we are writing a different story here. We are not seeing surplus inventory coming to market. We are seeing less than seasonal gains, driving us right into my second point…
2. Active Listing Inventory
Currently we are sitting with a 15+ year low inventory for this time of the year. This is at the opposite end of the worry spectrum.
Again, why does this matter? Well, if inventory on the market remains near record lows, those who “may” be concerned about housing values staying steady should know that we have a great deal of buffer room if sales do slow down far enough.
But remember, I just finished saying that last month was the best-selling May of all time. So, you don’t have to be a rocket scientist to understand how we are writing a different story than the rest of Canada.
Okay let’s transition to the 3rd point in our market update triangle…
THE PRICING PICTURE
What does all of this mean in terms of our housing values?
Here is the gist of it.. year-over-year our pricing gains remain nice and strong with 14.5% growth overall.
Detached – up 16.6%
Semi-Detached – up 14.6%
Row Homes – up 16.7%
And Apartments – up 8.9%
So, very strong across the board. And strong across all areas, both in & around the city.
This is also a month-over-month price gain of about $1,700. All of this happening amidst the ‘market slowing’ and ‘sky is falling’ messaging that is out there.
Yes, the month-over-month growth has slowed, But, again, of course it has.
People will talk about the average sale price and the median sale price adjustments as declining since February and March, but this simply doesn’t matter as much as benchmark. Benchmark is the truest metric of the market for us to use and to provide the most accurate measure of the specific market activity.
Sales in the Apartment & Row Home markets soared in May. And those markets are priced more affordably, so as you record more sales in the cheaper parts of the market it will obviously change the average home price accordingly. So again, this is why benchmark provides the truest indication of what’s happening.
So, let me bring this all together for you…
You might be saying “Yeah, that all sounds great, but aren’t the government interest rate hikes and inflation going to continue to hurt us?”
Well, first of all, there is no hiding from the mess the government has gotten us into. Nobody is going to be sheltered from the economic strain this will cause to each and every Canadian household. But there is a silver lining and there needs to be some intelligent discussion around it and, specifically, our local situation.
Here in Alberta we sit atop the Canadian Average Salary chart. Which means we simply have the most money per household.
As I’ve mentioned many a time, take a look at this to see how nicely our housing prices sit among our Canadian peers (who, as just mentioned, make less on average than us).
Not only did our year-over-year number grow by one of the lowest percentages in Canada, but we continue to be far lower than Canada’s big employment centres. Yet our power as an economy continues to push up & up.
And then, further to that, our recent price growth is the only price growth we’ve had since 2014. That certainly has not been the case elsewhere in Canada.
And no, just because we didn’t grow doesn’t mean we aren’t going to be affected. It’s more than that. It’s because we didn’t grow and everywhere else continued to get worse off in terms of their housing affordability. In tough times people will gravitate to where they can afford to live and build a family. And right now, that’s here.
Remember, we have some of the cheapest real estate for a major urban centre and we earn the most. That’s a killer combo!
A study released just a few days ago found Calgary to be 10th in the world in terms of affordability. That is something to hold confidence in and something that doesn’t change overnight.
I can’t finish this update without discussing interest rates.
Take a look at this graph. Look to the far right. What do you notice?
This is where we’re at after the last 2 interest rate increases. And there is the continued messaging that they’re going to get bumped up again this year.
So, looking at this graph, do you think that – taking into account points #1 & points #2 (already discussed and I’m assuming agreed upon) – we can weather a bit of a storm when it comes to those interest rate hikes and those yet to come?
The answer here locally – where we earn the most in Canada and are one of the most affordable places on the planet – is a resounding Yes.
I’m in real estate – I earn my living as a realtor – and, yes, I do better when more people are excited about buying and selling real estate. But nowhere in my discussion today, nor in any of my market updates to date, did my reporting on things coming from a place of greed or “airy fairy” commentary. This stuff is fact – cold, hard macro-economic fact – that gives me a great deal of confidence in the Greater Calgary real estate market.
And that’s all for this month! If you require any market information relating to your specific situation, please don’t hesitate to let us know so a market specialist at Redline can be connected with you!