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Calgary Real Estate News

Housing shortage continues to drive up Calgary real estate prices

The Calgary Real Estate Board (CREB) reports that the average price of a single-family home in Calgary reached $636,167 in the first quarter of 2023, and is expected to continue to rise. CREB also predicts that there will be around 20,000 transactions in the year, but the rate of price growth should slow. The market is favoring sellers, and with a low level of inventory, buyers have to enter into a protracted one-upmanship procedure to get what they want. Inflation remains a dominant theme and population growth due to interprovincial migration is also influencing the market.

CREB’s chief

Calgary Real Estate News

Calgary sets new April record as benchmark price hits $550,800

The Calgary Real Estate Board says the city set a new April record last month as the benchmark price of a home sold reached $550,800.

The Alberta board says the price amounts to a two per cent increase from March and a 1.19 per cent increase from a year ago.

The increase in the benchmark price came as the actual average price of a home sold in the city last month was $549,524, a roughly three per cent rise from a year ago.

The board says the number of sales tumbled almost 21 per cent to 2,690 over the same period, leaving the market with tighter conditions than were seen earlier in the year and when compared with April.

New listings fell nearly 32 per cent since last April to 3,133.

While sales activity is at a level the board expected, Ann-Marie Lurie, the Calgary board’s chief economist, says the steeper pullback in new listings has ensured that supply levels remain low.

“The limited supply choice is causing more buyers to place offers above the list price, contributing to the stronger than expected gains in home prices,” Lurie said in a statement.

-Canadian Press

Calgary Real Estate News

Tax-Free First Home Savings Account is launching: Here are the basics

Canadians could soon get some assistance when it comes to buying a home when the federal government’s Tax-Free First Home Savings Account (FHSA) launches on April 1.

The program was announced in the 2022 federal budget and is aimed at helping first-time homebuyers jump into Canada’s pricey housing market.

Here’s what you need to know about the savings vehicle that’s set to launch on Saturday.

WHAT’S A FHSA?

The FHSA is a mix between a Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA), but it’s specifically geared towards saving for a house.

Contributions to an account would be tax-deductible and withdrawals to buy a home would be non-taxable.

In order to qualify for an account, an individual must be a Canadian resident between the ages of 18 to 71 and a first-time homebuyer. In some provinces where the legal age to enter a contract is 19, residents will have to wait until that age to open an account.

If you end up becoming a non-resident of Canada after you’ve already opened a FHSA, you can participate normally in contributions; however, you cannot make a withdrawal to buy or build a home while you’re not a Canadian resident.

There will be an $8,000 annual contribution limit, but unused portions of a yearly contribution can be carried forward into the next year. The lifetime FHSA limit is $40,000.

The account can remain open until the 15th anniversary of opening it, until the person turns 71, or the year following a person’s first qualifying withdrawal of their FHSA, whichever comes first.

INVESTMENTS AND WITHDRAWALS

Canadians can have the same kind of investments as a TFSA, in their First Home Savings Account. This means you can hold assets such as publicly traded securities, mutual funds and bonds.

However, when it comes time to withdrawing funds from the FHSA, there are a few requirements that must be met.

The property the funds are being used to purchase has to be in Canada, the taxpayer has to intend on living in that house as their principal residence and they need to have a written agreement to buy or build a qualifying home before Oct. 1 of the year following the withdrawal.

It’s worth noting that anyone who has funds in both a FHSA and the Home Buyers’ Plan wouldn’t be permitted to make withdrawals from both accounts for the same home purchase.

If you end up transferring more than your FHSA contribution room for that year, you will generally have to pay a one per cent tax per month on the highest excess amount in that month.

The federal government’s website said Canadians can remove excess FHSA amounts by: “Making a withdrawal of a designated amount  from your FHSAs (designated withdrawal), or making a direct transfer of a designated amount from your FHSAs to your RRSPs or RRIFs  (designated transfer), or making a taxable withdrawal from your FHSA, or any amounts deemed to be included in income if the account loses its status as an FHSA.”

TAX SEASON

While we are in the middle of tax season, Canadians should take note that contributions to your FHSA during the first 60 days of the year are not deductible on the previous year’s income tax return.

The federal government’s website added that “You also cannot claim a tax deduction for any FHSA contributions that you make after your first qualifying withdrawal.”

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account.html

While contributions to a FHSA are usually deductible, if Canadians are planning to transfer from their RRSP to the housing account, it will not be deductible.

ENOUGH FOR A DOWN PAYMENT?

Tim Cestnick, co-founder and CEO of Our Family Office, said the FHSA was a great idea from the federal government, but he doesn’t know how much it will help the average Canadian buying a home.

“Forty-thousand dollars is not going to be enough to really act as a down payment in most cases,” Cestnick said in a phone interview last August.

“Most of the time you’re going to need to put down 10 per cent and there’s not too many homes that you can buy for $400,000 in Canada right now, it’s certainly in the major cities like Toronto and Vancouver, where it’s going to be tough to save enough for a full down payment.”

However, Cestnick said all first-time homebuyers should think of setting up an account, regardless if they end up using it.

“I think it’s a no brainer for first-time homebuyers to set up the account because it doesn’t hurt you in any way,” Cestnick said.

“You can pull money out tax-free if you buy a home, if you don’t, that money goes into your RRSP and those are both good options.”

-Hilary Punchard, BNN Bloomberg

Calgary Real Estate News

HOW’S THE MARKET

After what was one of Alberta’s strongest Novembers on record for sales, we are heading into December with the lowest inventory levels in November since 2005!

The migration into Alberta continues as the population has grown to 4,543,111 which is just about 100,000 more people since the third quarter of 2021. This is putting pressure on the rental market with inventory levels well below the same time as last year, and rent prices climbing as a result. The affordability of housing compared to other major cities in Canada, along with the opportunity for jobs is continuing to keep our Province as a major draw for people to move to.

Looking back at sales in Alberta over the top five Novembers in the past ten years, the sales volume dropped through December and January, recovering to numbers higher than Novembers sales in February of the New Year. The listing inventory for those same years also dropped through December to February, recovering to higher inventories by March the following year. Over the past decade, 50% of time the average price across Alberta dropped from November through to January and then recovered to a higher average price in February than what was recorded the November prior. In that same decade, there were two years where prices increased by January, one year was in March and the other in May.

ALBERTA SHOWINGS

When we look at the showings for listings across the Province, the trends show that sellers may get one more uptick of activity this coming weekend before the Holiday slow down occurs. 

CIR REALTY SHOWINGS

The showings at CIR Realty’s listings are also showing slowing activity but the inventory under $300,000 had an increase of activity. This is likely due to higher interest rates forcing buyers to explore lower price ranges. The showings resulting in transactions is still higher than average for the year sitting around 18%, but that number is dropping week over week.

Summary

Based on all of the information above, it is reasonable to conclude that if sellers want to sell in the coming months they will need to have a compelling price for buyers. If there is a time for buyers to take advantage of lowering price points, it will likely be in December and January as markets move into balanced and in some cases, buyers markets. But we anticipate sales to increase from February through Spring with the caveat being how low the listing inventory gets as we normally don’t see listings start to climb higher until March. Without inventory, we may see lower sales numbers for longer which will keep more competitive conditions in the market. 

With population increasing, rentals being competitive, sales remaining strong and low inventory levels, it is setting us up for a competitive Spring Market in the New Year.

-Steve Phillips, CIR Realty

Calgary Real Estate News

Canada’s slumping housing market weighs on Home Capital’s loans

The tumult in Canada’s housing market is starting to take its toll on lenders, with Home Capital Group Inc. reporting a plunge in third-quarter originations.

Home Capital, which lends largely to borrowers considered somewhat riskier than prime customers, said Tuesday that single-family mortgage originations plummeted 28 per cent from a year earlier. The lender’s so-called Alt-A borrowers include self-employed workers or those who are new to Canada and don’t have extensive credit histories. Total mortgage originations fell 23 per cent to $1.85 billion (US$1.38 billion), missing the $2.5 billion estimate of Royal Bank of Canada analyst Geoffrey Kwan. 

Sales activity in Canada’s housing market has slowed, with transactions down 32 per cent in September from a year earlier, as the Bank of Canada’s aggressive rate-hiking campaign ratchets up mortgage costs. Prices have fallen for seven straight months, and are down almost 9 per cent from their peak.

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The market spiral had yet to make its way to lenders’ results, with Canada’s biggest banks all reporting growth in their mortgage books in their most recent earnings. Home Capital’s results provide a window into a segment of borrowers who are considered riskier than those the big banks typically take on, and therefore pay more to borrow.

“The housing market is currently in a period of transition as buyers and sellers adjust to a higher-interest-rate environment,” Home Capital Chief Executive Officer Yousry Bissada said in a statement, adding that the Toronto-based company expects “softer market conditions to persist in the near term.”

The drop in originations contributed to Home Capital’s net income falling 43 per cent to $31 million, or 77 cents a share. Excluding some items, profit was 95 cents a share, matching analysts’ estimates.

Home Capital’s shares fell 4.8 per cent to $25.23 at 10:32 a.m. in Toronto, bringing their decline this year to 35 per cent. That’s the fourth-worst performance in the 29-company S&P/TSX Financials Index. 

Despite the market turmoil, Home Capital’s borrowers have continued to make payments on their mortgages. Net non-performing loans accounted for 0.16 per cent of gross loans last quarter. That compares with 0.15 per cent a year earlier and 0.47 per cent in the same period in 2020.

-Bloomberg

Calgary Real Estate News

Winter Checklist

  • Check and clean or replace furnace air filters each month during the heating season. Ventilation systems, such as heat recovery ventilator filters, should be checked every two months.
  • After consulting your hot water tank owner’s manual, drain off a dishpan full of water from the clean-out valve at the bottom of your hot water tank to control sediment and maintain efficiency.
  • Clean your humidifier two or three times during the winter season.
  • Vacuum bathroom fan grills to ensure proper ventilation.
  • Vacuum fire and smoke detectors, as dust or spiderwebs can prevent them from functioning.
  • Vacuum radiator grills on the back of refrigerators and freezers, and empty and clean drip trays.
  • Check gauges on all fire extinguishers, and recharge or replace as necessary.
  • Check fire escape routes, door and window locks and hardware, and lighting around the home’s exterior. Ensure your family has good security habits.
  • Check the basement floor drain to ensure the trap contains water. Refill with water if necessary.
  • Monitor your home for excessive moisture levels – for instance, since condensation on your windows can cause significant damage over time and pose serious health problems, this requires corrective action.
  • Check all faucets for signs of dripping and change washers as needed. Faucets requiring frequent replacement of washers may be in need of repair or replacement.
  • If you have a plumbing fixture that’s not used frequently, such as a laundry tub or spare bathroom sink, tub or shower stall, briefly run some water to keep water in the trap.
  • Clean drains in the dishwasher, sinks, bathtubs and shower stalls.
  • Test plumbing shut-off valves to ensure they’re working and to prevent them from seizing.
  • Examine windows and doors for ice accumulation or cold air leaks. If found, make a note for repair or replacement in the spring.
  • Examine attic for frost accumulation. Check roof for ice dams or icicles. If there’s excessive frost or staining of the underside of the roof, or ice dams on the roof surface, be sure to have an expert look into the issue.
  • Check electrical cords, plugs and outlets for all indoor and outdoor seasonal lights to ensure fire safety. If showing signs of wear, or if plugs/cords feel warm, replace immediately.
Calgary Real Estate News

Bank of Canada increases policy interest rate

The Bank of Canada today increased its target for the overnight rate to ½ %, with the Bank Rate at ¾ % and the deposit rate at ½ %. The Bank is continuing its reinvestment phase, keeping its overall holdings of Government of Canada bonds on its balance sheet roughly constant until such time as it becomes appropriate to allow the size of its balance sheet to decline.

The unprovoked invasion of Ukraine by Russia is a major new source of uncertainty. Prices for oil and other commodities have risen sharply. This will add to inflation around the world, and negative impacts on confidence and new supply disruptions could weigh on global growth. Financial market volatility has increased. The situation remains fluid and we are following events closely.

Global economic data has come in broadly in line with projections in the Bank’s January Monetary Policy Report (MPR). Economies are emerging from the impact of the Omicron variant of COVID-19 more quickly than expected, although the virus continues to circulate and the possibility of new variants remains a concern. Demand is robust, particularly in the United States. Global supply bottlenecks remain challenging, although there are indications that some constraints have eased.

Economic growth in Canada was very strong in the fourth quarter of last year at 6.7%. This is stronger than the Bank’s projection and confirms its view that economic slack has been absorbed. Both exports and imports have picked up, consistent with solid global demand. In January, the recovery in Canada’s labour market suffered a setback due to the Omicron variant, with temporary layoffs in service sectors and elevated employee absenteeism. However, the rebound from Omicron now appears to be well in train: household spending is proving resilient and should strengthen further with the lifting of public health restrictions. Housing market activity is more elevated, adding further pressure to house prices. Overall, first-quarter growth is now looking more solid than previously projected.

CPI inflation is currently at 5.1%, as expected in January, and remains well above the Bank’s target range. Price increases have become more pervasive, and measures of core inflation have all risen. Poor harvests and higher transportation costs have pushed up food prices. The invasion of Ukraine is putting further upward pressure on prices for both energy and food-related commodities. All told, inflation is now expected to be higher in the near term than projected in January. Persistently elevated inflation is increasing the risk that longer-run inflation expectations could drift upwards. The Bank will use its monetary policy tools to return inflation to the 2% target and keep inflation expectations well-anchored.

The policy rate is the Bank’s primary monetary policy instrument. As the economy continues to expand and inflation pressures remain elevated, the Governing Council expects interest rates will need to rise further. The Governing Council will also be considering when to end the reinvestment phase and allow its holdings of Government of Canada bonds to begin to shrink. The resulting quantitative tightening (QT) would complement increases in the policy interest rate. The timing and pace of further increases in the policy rate, and the start of QT, will be guided by the Bank’s ongoing assessment of the economy and its commitment to achieving the 2% inflation target.

Information note

The next scheduled date for announcing the overnight rate target is April 13, 2022. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR at the same time.

-Bank of Canada

Calgary Real Estate News

April brings a slight inventory decline

There have been no significant changes occurring in sales activity, but the number of new listings coming onto the market continues to ease relative to 2018 levels.

The decline in new listings was enough to start chipping away at overall inventory levels, which have eased slightly compared to last year.

The slight adjustment in supply levels has helped support further reductions in the months of supply, which was 4.6 months in April. While this level still represents oversupply in our market, it does reflect improvement from the nearly seven months of supply that we saw at the start of the year.

“Demand remains relatively weak in the resale market. However, if supply levels continue to adjust, this could help reduce the amount of oversupply and eventually support some price stability,” said CREB® chief economist Ann-Marie Lurie.

As of April, the total residential benchmark price in Calgary was $415,900. This is slightly higher than last month, but still nearly five per cent lower than last year’s levels.

Citywide sales were 1,547 units in April, two per cent higher than last year’s levels. Year-to-date sales remain nearly six per cent lower than last year and are 26 per cent below longer-term averages.

“Sales have been improving mostly in the lower price ranges, causing tighter supply conditions in that segment.  This will likely have a different impact on price trends in the lower price ranges depending on location,” said Lurie.


HOUSING MARKET FACTS

Detached

  • Detached sales improved by nearly three per cent in April compared to last year, due to gains in homes priced under $500,000. However, with 930 sales, activity still remain 24 per cent below long-term averages.  Recent gains were also not high enough to offset pullbacks earlier in the year, causing year-to-date sales to fall by over five per cent.
  • Improving sales did not occur across all districts. In April, there was growth in the North East, North West, South and South East districts of the city. Despite some signs of sales improvement, overall sales activity remains well below 10-year averages throughout every region in the city.
  • April detached inventories citywide continue to remain just above levels recorded last year. Months of supply remain relatively unchanged at four months.
  • The amount of oversupply has varied significantly depending on the area of the city. Months of supply has only risen in the City Centre, South and West districts of the city.
  • Despite some of the adjustments occurring in the detached sector, overall April prices remain lower than last year’s levels across all districts. Year to date, the largest year-over-year declines occurred in in the City Centre, North West and South districts.

Apartment

  • Despite the affordability of apartment condominiums, sales activity continues to fall across the city and in most districts. There have been 714 apartment condominium sales so far this year, the lowest level since 2001.
  • The decline in new listings has started to outweigh the sales decline, causing inventories to ease. As of April, resale apartment condominium inventories totaled 1,546 units, 16 per cent lower than inventory levels last April.
  • The easing inventories have also caused the months of supply to decline to just above six months. While this is still a buyers’ market, this trend could help ease the downward pressure on prices if it continues.
  • Apartment condominium prices in April totalled $250,400, comparable to last month, but over two per cent below last year’s levels and nearly 17 per cent below 2014 highs.

Attached

  • Attached sales activity improved compared to last year’s levels for the second straight month, almost offsetting the declines occurring in the first two months of the year.  Year-to-date sales were 1,113 units, nearly one per cent below last year’s levels, and 14 per cent below long-term averages.
  • Year-to-date sales have improved in all districts except the City Centre, North West and West.
  • Improved sales and easing listings have helped prevent further inventory gains in this sector and overall months of supply have trended down to five months.
  • Following several months of prices trending down, semi-detached benchmark prices in April rose over the previous month. However, prices remain over five per cent below last year’s levels at $395,300.
  • Row prices were $284,900 in April, over five per cent below last year’s levels.


REGIONAL MARKET FACTS

Airdrie

  • Stronger sales in March and April offset earlier declines, causing year-to-date sales to total 363 units, similar to levels recorded last year. New listings continue to decline, causing April inventories to ease compared to last year. Months of supply remain elevated at five months, but this is a notable improvement compared to last year, when months of supply was over six months.
  • Rising sales and easing inventories helped prevent further price declines in April compared to March. However, overall, April prices remained nearly four per cent below last year’s levels. Prices have eased across all property types, with the largest year-to-date decline in the apartment sector at eight per cent.

Cochrane

  • Despite improving sales in April, year-to-date sales in Cochrane eased by six per cent compared to last year. However, new listings have also eased, helping reduce some of the inventory in the market.  While inventories and months of supply remain elevated, for the first time since June 2018, the months of supply fell below six months.
  • Some improvement with oversupply has likely prevented further monthly declines in prices. As of April, total benchmark prices remain over three per cent below last year’s levels for a total of $415,100.

Okotoks

  • Despite some recent improvements in sales, year-to-date sales activity slowed compared to last year. New listings have also eased, but it was not enough to prevent further inventory gains, keeping months of supply above five months.
  • The amount of oversupply has impacted prices. April residential prices totalled $406,700. This is nearly four per cent below last year’s levels. Price declines were slightly higher in the attached sector, with a year-over-year decline of nearly five per cent.

-CREB

Calgary Real Estate News

Mortgage Loan Insurance: Quick Reference Guide

This handy quick reference tool provides helpful information to submit applications to CMHC for homeowner and small rental loans, for all CMHC programs: Purchase, Improvement, Newcomers, Self-Employed, Green Home, Portability, and Income Property.

Benefits of mortgage insurance

Some of the benefits of CMHC mortgage loan insurance include:

  • Available for purchase of an existing residential property with or without improvements and for new construction financing.
  • Our Green Home program offers a partial mortgage loan insurance premium refund of up to 25%. Refunds are available directly to borrowers who buy, build or renovate for energy efficiency using CMHC-insured financing. Find out more with our Green Home Program.
  • Self-employed borrowers with documentation to support their income have access to CMHC mortgage loan insurance.
  • Our portability feature saves money for repeat users of mortgage loan insurance by reducing or eliminating the premium payable on the new insured loan for the purchase of a subsequent home.

Loan-to-Value (LTV) ratios

For homeowner loans (owner-occupied properties), the Loan-to-Value ratio for 1–2 units is up to 95% LTV. For 3–4 units, the ratio is up to 90% LTV.

For small rental loans (non-owner occupied), the ratio is up to 80% LTV.

Minimum equity requirements

For homeowner loans, the minimum equity requirement for 1–2 units is 5% of the first $500,000 of lending value and 10% of the remainder of the lending value. For 3–4 units, the minimum equity requirement is 10%.

For small rental loans, the minimum equity requirement is 20%.

Purchase price / lending value, amortization and location

For both homeowner and small rental loans, the maximum purchase price / lending value or as-improved property value must be below $1,000,000.

The maximum amortization period is 25 years.

The property must be located in Canada and must be suitable and available for full-time, year-round occupancy. The property must also have year-round access including homes located on an island (via a vehicular bridge or ferry).

Traditional and non-traditional down payments

A traditional down payment comes from sources such as savings, the sale of a property, or a non-repayable financial gift from a relative.

A non-traditional down payment must be arm’s length and not tied to the purchase and sale of the property, either directly or indirectly such as unsecured personal loans or unsecured lines of credit. Non-traditional down payments are available for 1–2 units, with 90.01% to 95% LTV, with a recommended minimum credit score of 650.

Creditworthiness

At least one borrower (or guarantor) must have a minimum credit score of 600. In certain circumstances, a higher recommended minimum credit score may be required. CMHC may consider alternative methods of establishing creditworthiness for borrowers without a credit history.

Debt service guidelines

The standard threshold is GDS 35% / TDS 42%. The maximum threshold is GDS 39% / TDS 44% (recommended minimum credit score of 680). CMHC considers the strength of the overall mortgage loan insurance application including the recommended minimum credit scores.

Interest rates

The GDS and TDS ratios must be calculated using an interest rate which is the greater of the contract interest rate or the Bank of Canada’s 5-year conventional mortgage interest rate.

Advancing options

Single advances include improvement costs less than or equal to 10% of the as-improved value.

Progress advances include new construction financing or improvement costs greater than 10% of the as-improved value. With Full Service, CMHC validates up to 4 consecutive advances at no cost. For Basic Service, the Lender validates advances without pre-approval from CMHC.

Non-permanent residents (homeowner loans only)

Non-permanent residents must be legally authorized to work in Canada (i.e. a work permit). Mortgage loan insurance is only available for non-permanent residents for homeowner loans for 1 unit, up to 90% LTV, with a down payment from traditional sources.

-CMHC