The first two months of 2021 rival even the busiest of markets that Alberta has ever experienced! 

With sales in February rising 56% year over year, and new inventory selling faster than it can come onto the market, the conditions are quickly changing to favour sellers in many markets across the Province.

The hot spots in the Province continue to be Cochane, Canmore, Okotoks and Airdrie. With notable mentions to Camrose, Brooks, Rocky Mountain House and Sundre who all had strong months compared to February’s past. The slowest markets continue to be our more Northern communities like Grand Prairie and Fort McMurray.

Over the past few years most of the buyers that wanted to buy, also had a home they needed to sell. With many first time buyers finding improved buying power and entering the markets, due to low interest rates, the disposable income savings rate remaining around 13%, strengthening confidence in the energy sector and other areas of employment, along with a new appreciation for home they continue to feed the property ladder as homeowners are now able to move up.

Another real challenge for the Alberta Real Estate Market over the past six years has been consumer confidence. With other major Canadian cities price points rapidly climbing, and buyers being priced out of the markets, we are seeing investors shifting their focus to Alberta. Whether it is in the energy sector or the pandemic, there is returning confidence and consumers are once again seeing value in Alberta’s market. 

As always, there are many variations and conditions within each market that help determine what is happening in each “micro” market.  Understanding these variances are critical in proper pricing to achieve the best results for our clients.

-Steve Phillips, CIR Realty

The Bank of Canada today held its target for the overnight rate at the effective lower bound of ¼ percent, with the Bank Rate at ½ percent and the deposit rate at ¼ percent. The Bank is maintaining its extraordinary forward guidance, reinforced and supplemented by its quantitative easing (QE) program, which continues at its current pace of at least $4 billion per week.

The global economy is recovering from the economic effects of COVID-19, albeit with ongoing unevenness across regions and sectors. The US economic recovery appears to be gaining momentum as virus infections decline and fiscal support boosts incomes and consumption. New fiscal stimulus will increase US consumption and output growth further. Global yield curves have steepened, largely reflecting the improved US growth outlook, but global financial conditions remain highly accommodative. Oil and other commodity prices have risen. The Canadian dollar has been relatively stable against the US dollar, but has appreciated against most other currencies.

In Canada, the economy is proving to be more resilient than anticipated to the second wave of the virus and the associated containment measures.  Although activity in hard-to-distance sectors continues to be held back, recent data point to continued recovery in the rest of the economy. GDP grew 9.6% in the final quarter of 2020, led by strong inventory accumulation. GDP growth in the first quarter of 2021 is now expected to be positive, rather than the contraction forecast in January. Consumers and businesses are adapting to containment measures, and housing market activity has been much stronger than expected. Improving foreign demand and higher commodity prices have also brightened the prospects for exports and business investment.

Despite the stronger near-term outlook, there is still considerable economic slack and a great deal of uncertainty about the evolution of the virus and the path of economic growth. The labour market is a long way from recovery, with employment still well below pre-COVID levels. Low-wage workers, young people and women have borne the brunt of the job losses. The spread of more transmissible variants of the virus poses the largest downside risk to activity, as localized outbreaks and restrictions could restrain growth and add choppiness to the recovery.

CPI inflation is near the bottom of the 1-3 percent target band but is likely to move temporarily to around the top of the band in the next few months. The expected rise in CPI inflation reflects base-year effects from deep price declines in some goods and services at the outset of the crisis a year ago, combined with higher gasoline prices pushed up by the recent run-up in oil prices. CPI inflation is then expected to moderate as base-year effects dissipate and excess capacity continues to exert downward pressure. Measures of core inflation currently range from 1.3 to 2 percent. 

While economic prospects have improved, the Governing Council judges that the recovery continues to require extraordinary monetary policy support. We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In the Bank’s January projection, this does not happen until into 2023. To reinforce this commitment and keep interest rates low across the yield curve, the Bank will continue its QE program until the recovery is well underway.  As the Governing Council continues to gain confidence in the strength of the recovery, the pace of net purchases of Government of Canada bonds will be adjusted as required. We will continue to provide the appropriate degree of monetary policy stimulus to support the recovery and achieve the inflation objective.

-Bankofcanada.com

Even by Vancouver’s ridiculous standards, it seems absurd. A home on the east side of Vancouver selling for $872,134 over asking?

But that’s what happened late last month. The house, listed for $1.72-million, went for $2.6-million after nine days on the market. And while that transaction seems shocking, it actually seems to be part of a trend. Homes going for a half-million dollars or more than the list price isn’t uncommon these days. Sales of places getting snapped up in 24 hours amid multiple offers aren’t unique either.

And it’s not just happening in Vancouver. It is a phenomenon taking place, to varying degrees, across the country.

It’s almost like it’s 2016 again – except, strangely, without all the anger and outrage.

You remember this period, don’t you? When foreign investors were blamed for driving prices beyond the grasp of young Canadians? When governments were forced into action to quell the anger of a citizenry furious that so many of our young people were apparently having their middle-class dreams crushed by mercenary investors from China?

Well those investors have, for the most part, been deterred from returning, but the market is no more accessible to Canada’s young home buyers. Which would suggest we all think an insane housing market is just fine – as long as it’s homegrown Canadians (and domestic monetary policy) that are responsible for it.

According to the Canadian Real Estate Association, January marked an all-time record in home sales across the country, with actual average sale prices increasing 22.8 per cent from a year earlier.

Vancouver also recently maintained its spot in Demographia International’s latest Housing Affordability Survey as the second-most expensive housing market in the world, following Hong Kong. Median property values rose to 13 times the household income in 2020, compared with 11.9 per cent in 2019, according to a report from the Urban Reform Institute and Frontier Centre for Public Policy.

There now seems little doubt that the Bank of Canada’s decision to keep interest rates low to help a pandemic-battered economy stay alive may have had unintended consequences.

Bank Governor Tiff Macklem himself recently alluded to what he called “excess exuberance” in the market, and suggested low interest rates were likely the reason. He promised to keep an eye on things. Well, we’re glad he’s on it.

Still, my question is: Where is all the fury? Surely, these insane prices are locking out tens of thousands of potential home buyers, no? People from whom dreams are being robbed anew?

Josh Gordon, a professor at Simon Fraser University’s (SFU) School of Public Policy, said there are likely a few reasons why this housing frenzy isn’t accompanied by the same degree of protest. While low interest rates are fueling demand, he said, those same rates also mean price increases aren’t being felt as acutely. He also believes that the massive amounts of foreign capital we saw in the 2016 house price era created a sense there was a one-sided competition in the marketplace. That has since been allayed.

“With that dynamic less prominent, the sense of unfairness is less pronounced and hence anger is mitigated,” he said.

Andy Yan, the director of the city program at SFU, says millennials – who now comprise the largest population of Canadians – are driving the market. Some are settling down and starting families and the oldest among the cohort are now 40. Many have excellent-paying jobs and have saved a ton during the pandemic. “What we still don’t know is how much of this demand is first-time buyers versus those who are moving up the property ladder,” he said.

Another factor could be a lack of single-family detached homes, which are in high demand right now because of a pandemic that has incited a craving for more space and privacy. COVID-19, however, has simultaneously made many older Canadians reluctant to give up what they have to move into something that resembles a seniors’ complex, particularly given the disturbing images they have seen over the past year.

Meantime, new supply is coming on stream, including townhomes that were seen as the “missing middle” of the market a few years ago. Build more of that kind of density, developers had promised, and that would be the end of these massive price surges.

Right. Townhome projects are going up all over the place in Vancouver, with modest 1,100-square-foot units starting at $1.5-million and rising quickly from there. That they were ever going to solve housing affordability in our major cities was always a cruel joke.

So utter madness has returned to the housing market. Who could have imagined a pandemic would fuel it?

-Globe and Mail

The Calgary Real Estate Board said Monday that the market has faced low inventory levels compared to sales for the past several months, while prices continued to climb.

The board’s February numbers show that prices jumped by about 8 per cent to reach an average of $485,870, up from $446,690 the year prior.

CREB’s chief economist Ann-Marie Lurie attributed the spike to pandemic conditions.

“Despite continued COVID-19 restrictions, housing activity continues to improve. Much of the strong sales activity is expected to be driven by exceptionally low mortgage rates,” she said.

“Confidence is also likely improving as vaccine rollouts are underway. Additionally, some of the worst fears concerning the energy sector are easing with recent gains in energy prices.”

Sales totalled 1,836 last month, a more than 54 per cent increase over February 2020 and a volume not seen since February 2014.

New listings, however, didn’t keep up the pace. They amounted to 2,848, a 13 per cent increase from 2,517 the year before.

The gap between sales and new listings is doing little to help the market’s inventory woes, CREB said.

It estimated the area now has fewer than three months’ worth of homes on the market.

Conditions are particularly tight in the detached sector, especially for homes priced below $600,000, said CREB.

That portion of the market alone has less than two months of housing supply, but is also experiencing the most significant price gains.

Detached home sales in February amounted to 1,123, up from 678 the year prior, while prices edged up to $572,670 from $526,084 previously.

New listings for the category were up about 17 per cent, but inventory was down by almost 30 per cent.

At the other end of the housing spectrum, apartments and condos have a relatively high level of inventory compared to sales.

CREB said 272 apartments sold in February, up from 209 the February before.

Inventory in the category reached 1,433, a slight dip from 1,470 the year prior.

-Globe and Mail

The week over week showings have continued to climb across the Province. 

While we have not caught up to the showing activity of 2020, there is some speculation that restrictions to showings due to the current climate, and how fast new listings are selling are both contributing factors to fewer showings being available.

The activity on CIR Realty’s listings has climber 12% week over week, and is 49% higher than the same week in 2020.  With record amounts of new listings being brought on (and sold), the brokerages showing activity continues to do well.

With showing restrictions, and the pace of the market, there are some solid strategies to host “Live online open houses” prior to launching the listing to allow more people to see the home, which has the potential to increase more interest.

After all, the key to selling anything is to generate the highest amount of exposure possible, to create the largest amount of demand.

-Steve Phillips, CIR Realty

The showings for CIR Realty’s listings week over week have continued to climb. They have risen 20% week over week, which is up over 31% compared to the same week last year! The largest increase in activity has been in the price points below $500,000. Due to this we can anticipate the higher price points to see increased activity in the weeks to come.

With the inventory continuing to decline with the heightened sales activity, the markets continue to tighten, and are getting more competitive. While some markets are beginning to move into sellers markets, many remain in busy balanced territory. The signs to watch for are when we start seeing months of inventory drop below 2 months, prices increasing and days on markets lowering, then markets have shifted to the sellers territory.

Keep in mind that even with the multiple offers, and the back up offers occurring in the markets, it is still important to price properly as buyers recognise the over priced inventory, and it will sit on the market if not properly priced.

-Steve Phillips, CIR Realty