A number of factors has pushed new home prices in the Calgary region higher with a forecast of the average absorbed price for a single-detached property to rise to nearly $600,000 this year, which would be a record.

Canada Mortgage and Housing Corp. measures prices in the new home market when a property is “absorbed” which means the unit is no longer on the market as it has been sold or rented.

The federal agency is forecasting the single-detached average absorbed price in the Calgary census metropolitan area to increase to $598,000 this year from a forecast $583,000 in 2013 and $580,135 in 2012.

Doug Whitney, vice-president of sale for Crystal Creek Homes and president this year of the Canadian Home Builders’ Association-Calgary Region, said a number of factors will lead to higher new house prices this year.

He said the industry is seeing pressure on its own prices for materials such as drywall, concrete, heating, insulation – a lot of the components that go into building a home.

“There’s an uptick in the U.S. housing construction industry. So there’s a little more competition for materials,” said Whitney. “It’s a supply and demand thing. They’re a bigger market than we are and they’re starting to come alive. It’s going to drive up those basic costs for us here.”

He said most of the builders have been absorbing a lot of the cost increases from 2012 and 2013 but with the current sellers’ market in the resale sector, characterized by low supply and high demand, that will also impact decisions made by some builders on prices this year.

“Probably one of the biggest components that builders have to be aware of is the upward pressure on land prices, which is a huge component in the price of a home,” added Whitney.

“So if it’s costing a developer more to bring land to market, or if there’s a shortage of (land) and they’re charging more, the house price is going to be higher,” said Whitney.

Teresa Centanni, area sales manager for Douglas Homes in the Kinniburgh community in Chestermere, said prices are going up for a number of reasons including a strong economy, attracting more people moving here, which is driving up housing demand. Also, there is a low inventory of active listings in the resale market these days.

She said homebuyers like the idea of a builder’s warranty on a new home and having the ability to have some input on the home’s specifications before it is built.

“We already had a price increase on September 1. Our trades increased their prices due to the flood (in June) and there’s going to be another three to four per cent price increase they’re predicting for March, April. We’re trying to do our best to keep our prices.”

According to the CMHC, the number of single-detached absorptions in the Calgary CMA until the end of November was 5,622. It’s the latest data the agency has for the market. In 2012, there were 5,429 absorptions which was up from 2011 at 4,733.

The following is the Calgary CMA single-detached absorbed price for each year back to 2000, according to the CMHC: 2000, $225,996; 2001, $239,454; 2002, $242,525; 2003, $267,106; 2004, $285,321; 2005, $315,796; 2006, $353,662; 2007, $474,511; 2008, $581,800; 2009, $547,795; 2010, $514,466; 2011, $547,670; 2012, $580,135; 2013 (forecast), $583,000; and 2014 (forecast), $598,000.“We’re starting to see growth in prices for new homes. There’s a number of factors contributing to this,” said Richard Cho, senior market analyst in Calgary for the CMHC. “One is our economy has been growing so with that we’re seeing stronger demand for housing. Also, with the supply in the resale market coming down as well, we’re seeing more people look to the new home market for their housing needs.

“Also, with the new home price, we’re also seeing more pressure on costs, materials, labour. That’s also contributing to the increase in the home price.”

He said labour market conditions, demand for materials and land costs are expected to maintain upward pressure on home prices this year.

As a comparison, the following is the average yearly MLS sale price for single-family homes in the city of Calgary, according to the Calgary Real Estate Board: 2000, $194,202; 2001, $201,137; 2002, $221,028; 2003, $237,081; 2004, $251,558; 2005, $287,125; 2006, $400,081; 2007, $471,852; 2008, $460,057; 2009; $442,828; 2010, $461,420; 2011, $466,509; 2012, $481,259; and 2013, $517,887.

The single-family home inventory of 1,515 MLS listings is the lowest level to begin a year since 2006 and it’s the second fewest active listings in a decade to begin a year, says a Calgary realtor.

According to research by Mike Fotiou, associate broker with First Place Realty, there were 2,236 active listings in the city’s overall real estate market to begin the month of January, down 17.9 per cent from a year ago.

In January of last year, there were 1,267 fewer homes for sale in Calgary, representing a 31.8 per cent reduction in listings from the 3,989 the city had to start 2012.

“Calgary’s market has worked through the glut of inventory we experienced after the boom in 2008 when speculators expecting house prices to continue their meteoric rise were left holding multiple properties,” said Fotiou. “Record levels of net international and interprovincial migration in Alberta over the past couple years has resulted in high demand for housing. In Calgary’s resale market, continued strong sales have kept inventory low despite a rise in new listings.

“The new home sector has benefited as buyers looking for quick possession turn to builder spec homes. We’ll likely see more construction this year as new home builders step up to meet demand.”

As of Sunday, Calgary Real Estate Board data indicates total active listings in the city at 2,302, down 17.46 per cent from a year ago while the single-family inventory has dropped by 18.39 per cent to 1,549.

The lack of listings, combined with continued demand, has pushed prices upwards. Calgary’s resale housing market finished 2013 with all-time records in average sale prices for total MLS ($456,703) and single-family homes ($517,887).

Records were also set in 2013 for the median sale price for total MLS at $401,000 and for single-family homes at $450,000. The median price rose by 5.53 per cent from the previous year for total MLS and it was a 7.14 per cent hike in the single-family market.

Ann-Marie Lurie, chief economist at CREB, said it’s only a week into January so it’s difficult to see what the trend will be for sales and listings during the month.

“What we had been seeing throughout last year is that in the second half of the year those listings were actually starting to improve. The level of new listings,” she said. “Now, overall the inventory levels are still relatively low compared to what they had been in previous years.

“I would be concerned if I still saw those active listings basically declining and new listings declining. That would concern me more than what I am seeing now. Because we’ve seen new listings start to rise, that actually means that decline in active listings is starting to improve.”

On a historical basis, she said, active listings are still trending higher than the lows the real estate market experienced in 2006 during the housing market boom.

“That’s a good sign. We’re not as tight as we were back then,” said Lurie.

“Looking forward, active listings they have been declining. Will they continue to decline? It will depend on if we continue to see these new listings rising. If new listings keep going up, this should help alleviate some of the supply pressure in the market. That tends to happen as prices increase. Another thing to note is you’re starting to see some increased activity in the new home sector which should start to ease some of the pressure on the resale market.”

 -Source: Calgary Real Estate Board

A booming luxury market, and tight overall conditions with listings not keeping pace with demand, has pushed Calgary house prices to unprecedented levels.

Average sale and median prices hit all-time records for the city in 2013 for both total MLS transactions and in the single-family home category, according to data released Thursday by the Calgary Real Estate Board.

The average sale price for total MLS reached $456,703 for the year, up 6.54 per cent from 2012, while the single-family average price rose by 7.61 per cent to $517,887.

The median sale price for total MLS was $401,000 and it was $450,000 for single-family homes. The median price rose by 5.53 per cent from the previous year for total MLS and it was a 7.14 per cent hike in the single-family market.

Also, December capped a solid year for the residential real estate market with the highest-ever monthly average sale price at $527,764, eclipsing the previous record of $526,546 set in June 2013.

“Momentum was building from the last quarter of 2012,” said Christina Hagerty, a realtor with RE/MAX Realty Professionals in Calgary. “We approached 2013 with low interest rates, one of the lowest unemployment rates in the country and the lowest vacancy rate in the past decade. Employment growth and higher than expected net migration into the city helped support the demand for housing and increased sales and pricing. 2013 was an extremely busy year for us with informed and prepared purchasers.

“People talk about the flood adding to this, but I focus on the amazing ability for a city to rebound in a very short period of time. Something that may have devastated other major centres. I believe that this is largely due to the sense of community and the job market allowing people the ability to rebuild.”

The previous records for average sale prices were set in 2012 at $428,649 for total MLS and $481,259 for single-family homes. The previous records for median prices were set in 2007 at $382,000 for total MLS and in both 2007 and 2012 at $420,000 for the single-family market.

Average prices in the city ballooned this year as a result of a strong luxury market that set a record for most transactions ever at $1 million or more.

devastated other major centres. I believe that this is largely due to the sense of community and the job market allowing people the ability to rebuild.”

According to Mike Fotiou, associate broker with First Place Realty, there were 727 luxury home sales in 2013, which was a 33.6 per cent hike from the previous annual peak in 2012. The year was marked by 10 consecutive months of new monthly sales records. Only January and December did not set records in 2013.

Total MLS sales in the city reached 23,489 units in 2013, up 10.78 per cent from the previous year. New listings of 32,153 were up 0.97 per cent but active listings at the end of December were down by 17.80 per cent to 2,235.

“Companies are recruiting professionals across Canada and globally and this has put Calgary on the map as a thriving metropolis of opportunity and a safe place to raise their families,” said Hagerty. “With vacancy rates at one per cent and an abundance of job opportunity, there is a confidence in the city. 2014 looks to continue with solid growth fueled by sound fundamentals.”

MLS sales and percentage increase from 2012 for different housing categories were: single-family, 16,302, 7.92 per cent; condo apartment, 4,007, 14.45 per cent; condo townhouse, 3,180, 22.40 per cent; and towns, 4,516, 13.81 per cent.

Average sale price and percentage increase from 2012 were: single-family, $517,887, 7.61 per cent; condo apartment, $299,517, 5.17 per cent; condo townhouse, $341,116, 7.73 per cent; and towns, $381,884, 9.55 per cent.

Median price and percentage increase from 2012 were: single-family, $450,000, 7.14 per cent; condo apartment, $261,000, 3.78 per cent; condo townhouse, $306,000, 6.45 per cent; and towns, $355,700, 6.18 per cent.

Scott Bollinger, broker with the ComFree Commonsense Network, said prices in Calgary climbed because of increased sales and listings not keeping pace with the demand.

“Most notably in 2013 we saw rising wages, low interest rates and record in-migration. So it’s not surprising after three to five years of relatively little price growth, and despite the steady employment and the wage growth along with record low interest rates, that prices surged this year,” he said.

“Add to that the Alberta and Calgary economies outperformed almost every other region in Canada in 2013 by a wide margin, which had the effect of attracting all of those people. But the interesting thing is that 70 per cent of the net migration to Calgary in particular was international. And the other thing about the migration was that we set a record this year for the growth of the cohort of ages between 25 and 45 and those people, along with the international crowd, are most likely to engage in household formation.”

Bollinger said he is surprised that the listings didn’t catch up with the sales. He said the market might expect to see more of a reaction from the listing side early in the new year.

“If we don’t see that increase in listings, I think we’re going to continue to see farily significant price increases,” said Bollinger.

In a statement, Ann-Marie Lurie, CREB’s chief economist, said sales growth exceeded expectations in 2013, pushing above long-term trends.

“Two consecutive years of elevated levels of net migration, combined with an improving job outlook and confidence surrounding long-term economic prospects, supported the demand growth,” she said.

“In 2014, both sales activity and prices are expected to improve, but not at the same pace recorded this year. While factors influencing demand will support growth in 2014, rising listings and increased competition from the new home sector should alleviate some of the supply pressure in the market.”

Those factors, combined with potential increases in long-term lending rates, should take some of the steam off the exceptionally strong price growth recorded in 2013, said Lurie.