A review of CREB’s numbers from April’s sales can be at first glance a bit sobering. Inventory is up 32.73% year over year and sales are down -20.11% year over year compared to April of 2017. Calgary sales remain well below the 10 year average by about 25%. This has resulted in the absorption rate rising to 4.82 months which is firm territory for a buyers market. Some segments and areas of the market are seeing larger slow downs than others. The largest appears to be in the Detached Single Family Home sector, with the North, Northeast and East Districts all experiencing the greatest declines. The stronger districts remain the South, City Centre and Southeast Districts. The average days on the market depends on the community, but many are in the 40-50 day range, which is still very healthy for many municipalities in North America. Pricing remains relatively stable even with all of these factors in place. Condos continue to have high inventory, as new construction boosts availability both in new and resale units.
However, if we take a larger look at what is happening in the province, there appears to be light at the end of the tunnel. The economic indicators for Alberta are showing strong signs of improvement that include Average weekly earnings rising 4.6%, the unemployment rate dropping -2.0%, and migration rising 1.4% across the Province. Even the Energy sector has some very interesting stats seeing the Drilling Rigs activity rate climbing by 8.3% and production increasing by 1.4%. This is likely due to the news that Saudia Arabia is cooperating with OPEC, a 24 nation coalition of oil producers to attempt to re-balancing world markets. The aim in this is to help raise the price of oil which will have a positive impact on Alberta’s economy. Some other encouraging news is that the federal government will intervene in the British Columbia court case over the Trans Mountain pipeline expansion project. All this in addition to a letter from the U.S. State Department stating that TransCanada plans to start preliminary work on its Keystone XL pipeline project in Montana this Fall bodes very well for Alberta.
The opportunity this season is for buyers. The new mortgage rules brought in for January 1st of this year received a lot of press, and it has definitely put pressure on the $600-900,000 sales market for conventional (more than 20%) mortgage approvals. However, those rules have been in place for insured (under 20% down payment) mortgages since the fall of 2016. First time buyers have a wealth of selection to choose from, and with mortgage rates inching higher, now is the right time to start building equity in a home, rather than paying rent. It’s important to remember that current rates are still far below historical averages. Talk to anyone who held a mortgage in the 80’s or 90’s. Even 10 years ago, rates were over 4% for a five year term. The discounted rate for a bank’s best customers is currently about 3.5%, and other options are available. It’s what I refer to as the ‘new normal’ and consumers need time to digest the change.
We will continue to monitor what is happening in the Real Estate market, and wait with cautious optimism that a busier Spring Market still lies ahead of us. If we see the rental vacancy rate continue to drop due to increased migration, and increased employment and earnings rise, this will push buyers into the markets. In the meantime, it will remains critical to show value to potential buyers, and to properly price homes to remain competitive in todays market.
Excerpts of this post courtesy of Jennifer McInnis, Marketing and Administration Coordinator, CIR REALTY