Amid a constant barrage of negative economic news these days, Calgary’s resale housing market is seeing some dramatic swings in listings and MLS sales so far in January.
According to the Calgary Real Estate Board website, January MLS sales are down 34.8 per cent from the same period a year ago (from 842 to 549), while new listings have risen by 42.8 per cent to 2,262 and active listings are up by 75.2 per cent to 4,311.
That dynamic has affected the average sale price, which is down by 0.6 per cent to $457,853. The median price has dropped slightly as well by 0.3 per cent to $412,500.
Pending sales of 87 are down by 62.7 per cent.
Potential first-time homebuyer Steve MacLean, who works in oil and gas sales, said it’s an exciting and confusing time to buy a home right now but it could be a rare opportunity to purchase at a lower price.
“I’m renting right now,” he said. “The rental market in Calgary is crazy. It’s a ton of cash to rent a unit here in Calgary and it just doesn’t make sense to rent anymore if you can jump out and get yourself into a mortgage where you’re putting that cash towards something you can call your own rather than just seeing it vaporize.
“I’m not in a panic to buy. . . . Let’s just see if I can scoop up a deal here. I feel I’m in as good a position as I could be for sure. I don’t think we need to buying at 2014 prices when we may be able to buy something at let’s say a 2010 or 2009 price here. Patience is going to be key in the market.”
Phil Soper, president and chief executive of Royal LePage, said when you see a sharp change in the number of house sales and new listings in a very short period of time it’s because the buyer or the seller is expecting further change in the market.
“So in Calgary right now, we’ve got buyers who are expecting that there might be an opportunity to purchase a home for a discount over recent value. So they’re delaying transactions in the hope that they see some movement in prices,” said Soper. “In the meantime, when those transactions aren’t going through that normally would have, people who in normal course would have been listing their home, they start to get piled up and you start to see inventory grow.
Soper says the volatility is a natural reaction to the sharp and unexpected drop in the price of oil.
“It will be interesting to see if some of that bottleneck clears when two things happen. One, the real market begins. January is a poor proxy for how the year is going to unfold because it’s typically the slowest month on the calendar for real estate transactions. It will be interesting to see the impact of further stimulus in the way of lower mortgage rates and the arrival of the true spring market which we’re probably about four weeks away from the leading edge. At that stage, we’ll have a better handle on how things are going to unfold in Calgary and how seriously lower oil prices have damaged consumer confidence.”
Don Campbell, senior analyst with the Real Estate Investment Network, said the city has just passed the magic six-month oil decline mark when traditionally the housing market begins to feel the impact of loss of confidence.
“The first statistic to show up is increase in listings on a year-versus-year comparison, then the next to increase, as sales demand drops, will be active listings as the large number of new listings pile onto the un-solds,” he said.
“This is when the tipping point begins and the market turns to a true buyer’s market, where sellers no longer have the advantage. A buyer’s market then leads to the inevitable decrease in average selling price and then to the dreaded layoffs in the new home construction industry — historically nine to 10 months after the beginning of oil price drops. The limiting factor to all of this is length of time oil stays in the $40s or below. The longer the time, the less activity in the market, thus an even more propensity for average sale prices to drop.”
According to Mike Fotiou, associate broker with First Place Realty, the month-to-date sales for the first three weeks in January are the second lowest level in 15 years. The lowest was recorded in 2009 after the economic downturn in the fall of 2008.
Ann-Marie Lurie, CREB’s chief economist, said there could be a number of reasons that new listings are increasing but she said last year was a very low year for listings. She said a 10-year average for January is about 2,900 for listings. The five-year average is about 2,600.
People may be committed to another home. They may have lost their jobs in recent oilpatch layoffs. They may be concerned about the future. Maybe they’re just testing the market. Lurie said it’s hard to speculate at this time the reasons for the rise in new listings from a year ago.
“We have to keep in mind that last year we didn’t have very many new listings come onto the market,” she said. “That’s partly why you see that big increase in percentage.”
The impact to the overall resale housing market of increased listings is relative to what is happening in sales activity, added Lurie.
“That’s the one area I’m looking at. If listings go up and the demand is there, it doesn’t necessarily cause that rise in supply. It keeps market conditions relatively balanced,” she said. “However, if that pullback continues in demand — we’ve seen it, you’re starting to see that those sales are coming off and coming off at fairly strong rates at this point — what could happen is if you have the listings rise it gives more choice in the market but because of that if the demand isn’t there that can impact obviously that balance in the market and could push it closer towards that buyer’s territory.
“If that demand falls and that pace of fall continues, and you still have these listings and they don’t tend to ease off, it impacts the balance in the market and obviously influences pricing as well.”
Soper said the Bank of Canada’s drop this week in its trend-setting interest rate, to 0.75 per cent from one per cent, should stimulate the housing market from coast-to-coast.
“The degree the market responds really depends on the trading area we’re talking about,” he said. “In areas of the country where lower oil prices can actually be seen as an economic stimulus, such as Ontario, we believe it will have a significant impact on activity and price levels. In areas of the country, such as Alberta, where lower oil prices are clearly a drag on the economy, we think its impact will be more muted. However, it will still have a positive impact.”