Could Calgary’s Real Estate Pricing Jump Up Again?
The story in Calgary’s real estate today is one of Low Inventory –in other words, the total homes on the market available to buy – it’s not one focused on Sales.
And make sure you stick to the very end where I talk Money, Money, Money! No update is complete without understanding what all this means in terms of your money.
As I write this, the Calgary real estate market has 2,750 homes for sale.
When we look at this graph, you can immediately see what that actually means. This represents one of the fewest homes available for purchase that we’ve ever seen, and the lowest number since 2006.
For further context, in February we listed 2,389 new homes to the market – 60% less than the 4,651 homes listed in February 2022!
As well, from January to February 2022 the total ‘net new’ homes that appeared on the market grew by about 1,000. That was helpful in serving the high amount of buyer demand we’d had.
This year from January to February we only saw a ‘net new’ amount of 400 homes.
This is a historically low gain and why we are sitting down where that red line indicates the ROCK BOTTOM number of places to buy.
Let’s break things down a little further…
Detached Market (our biggest part of the market)
– 60% drop in new properties to market, resulting in 24% less than last year.
– 50% drop in new properties to market, leaving us with 19% less than last year.
– 48% drop in new listings, resulting in 39% fewer total active homes,
And finally Apartments, which are acting a little differently. As our most affordable part of the market – and thus the one which most Calgarians & new Calgarians can afford – it is seeing the same amount of new properties come to market as last year.
Why? Because its price points apply to the greatest number of people in this new higher interest rate environment. So, confidence and demand remain high in this segment.
Overall, we have 19% fewer homes to purchase than at this point last year.
Now, before moving on, I wanted to comment on the surrounding communities…
Last year, during the absolutely firestorm of sales that happened in the first half of 2022, the sales demand in the satellite regions to Calgary outpaced Calgary proper and, as a result, the total active inventory available was insanely low at this time of the year (new listings took a while to get going in the spring).
But, looking at the data so far in 2023, we are seeing things flip a bit from 2022. Those communities generally have the same or more available homes to buy than last year, but not nearly enough to take them out of seller’s market conditions.
So, with all this being said, does our region have an inventory problem?
That depends which side of the coin you are on.
If you are a buyer right now, then yes, inventory is a problem. You’ll have to act very fast to get your home, and if the home is priced fairly you’ll be paying at least asking price.
But… this is not a bad thing. This is simply what it costs to get a home in Greater Calgary today, with nothing but upside on the horizon for housing values.
If you are a seller right now, the inventory shortage is in your favour. If you are going to market, or considering doing so, you remain in the driver’s seat.
Now, this doesn’t mean that you can pick your price. Nope not at all. This is the big difference between this year and last year – despite the pace and the continued demand, in today’s higher interest rate world almost nobody is overpaying. They are simply paying fair prices at a speedy pace.
If your price is as much as 5% too high you could be completely overlooked in all price points and all property types. So, Sellers, don’t get greedy and you’ll be handsomely rewarded.
Okay, we started with Inventory because it is the most important story, but now let’s also talk a little bit about SALES…
Market data generally compares current statistics to the previous year (“year-over-year”). But with 2022 being what I call our “unicorn year”, I’m not going to do that. Instead, I will compare how we are currently doing to our recent history.
Check out this graph which shows how February stacked up in relation to the last 10 years of Februarys. What does this red line tell us? Sales are pretty darn good, aren’t they? Yes, the headlines will say that we’re down 47% from last year, but this was still one of our best Februarys of all time (despite the interest rates, despite the economic slowdown…)
Now this chart doesn’t tell the full story – not a by a long shot – but it does show that overall demand is not a problem here in our region.
The story that continues to unfold is the adjustment in where the sales are focused. Detached is still the highest volume of sales (as it always is), but that percentage of sales has shifted greatly.
2022 in February looked like this:
16% Row Homes
2023 in February we see this:
18% Row Homes
The big difference is the portion the 2 lowest priced property types are taking in terms of the whole market – 46% in 2023 vs 33% in 2022. That’s a drastic shift towards affordable options. Row Homes & Apartments are the star of the market and expect this to continue all year long and to re-shape these percentages continually.
Now, check out this graph. What you will see is that 80% of the sales have been in Calgary proper. There has been a shift, as well, with this statistic. As the months have gone on, we’ve seen the total sales in the surrounding communities continue to shrink. Personally, this 80% market share for Calgary is as high as I’ve ever seen it.
So, what does this mean?
Well, as we’ve shifted to affordability, it’s Calgary that has the largest amount of apartments and row homes for sale. Historically, the satellite cities have been built out to give people more bang for the buck – i.e. more square footage for the dollar – so they have a larger percentage of single family homes within their communities.
So, since we have a push for affordable options, Calgary is getting a larger and larger portion of the sales.
Anything to worry about? No not at all. It’s keeping single family markets tight outside of Calgary because Calgarians who seek that increased size and want to maintain affordability continue to migrate and take residence in those regions, too.
Okay let’s now talk MONEY! Or, in our terms, ‘Housing Values’.
For the second month in a row now we’ve seen our benchmark sales price increase. Year to date we are up about $12,000 across the board.
In terms of percentages, we’ve climbed 2.5%. All this in a year many were questioning and forecasting to ‘crash’.
Now, let me be clear about one thing, though – this doesn’t yet have us reclaiming the all-time high of $546,000 we hit in May 2022. But since we are just coming into the spring market and already seeing this building momentum, it’s not likely long before we do.
But, as we did before, let’s go deeper here.
If you recall in the early parts of this update we saw that the Row Home & Apartment segments are really what’s driving the market, so you’d likely expect that they are performing better in terms of their housing price growth, and you’d be right…
Apartments year-over-year are up, on average, by 11% – some districts of the city as high as 19% and the lowest being 9%.
Monthly they are seeing price growth on average of a whopping 3%!!
Great news for apartment owners in Calgary right now.
Row Homes year-over-year have seen a jump of 9% in their values, and 2.3% month-over -month. Again, an amazing stat!
Both of these property types are acting contrary to my earlier statement about us ‘not yet’ reclaiming our peak sales price, because these two segments have now surpassed last year’s top prices and show no signs of slowing down.
From here, it gets much more modest as we talk about the Single Family & Semi-Detached segments They both sit with a year-over-year price growth of 2.5% and are still chasing last year’s highs.
The price growth in our satellite regions is also happening in these similar ranges…
Airdrie is flat year-over-year
Cochrane – 2.5% growth
Okotoks – 3.2%.
Again, since those communities aren’t driven right now by Apartment & Row Home sales growth, they aren’t seeing the same year-over-year price growth figures. (But, if you remember my 2022 updates, they led the price growth last year, so all that’s happening is that we have a new ‘ring leader’ for this year.)
Okay… I started the update with the headline “Could Calgary Prices Jump Up Again?”
With all you’ve now heard… what do you think?
Supply & Demand rules the world, and supply & demand rules our real estate – it’s no different.
When we consider that earlier Sales graph showing 2nd best sales month ever and compare it to the second graph, the absolute lowest amount of properties to buy… it doesn’t take an economist to point out that we have the makings of another very positive real estate year ahead of us.
I can easily see the year drive our benchmark average sale price up over 10% growth once again, similar to the years of 2013 & 2014. Certainly, we should expect this in the Row Home & Apartment segments – they have nowhere to go but up.
And here is the kicker – we can afford it! We are really the only place in Canada that can. Our housing affordability index is the best in the nation and it would take years & years & years of double digits price increases to put that in jeopardy.
I’m ‘all in’ on Calgary real estate right now, and I think you should be, too.
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