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.