LISTINGS DOWN, PRICES UP

Listings remain down in Calgary resale housing market
Pressure on prices which continue to rise
By Mario Toneguzzi 
Calgary Herald February 3, 2014

CALGARY - Pressure on prices in Calgary’s resale housing market continued in January as MLS listings remained at lower levels compared with a year ago.

According to the Calgary Real Estate Board, new listings of 2,393 for the month were down 4.01 per cent from January 2013 and active listings were off by 18.16 per cent to 2,524.

With sales growing by 17.17 per cent to 1,440, that help spike prices to record levels for the month.

CREB said the median price jumped by 6.71 per cent to $417,250 while the average MLS sale price rose by 5.09 per cent to $462,168. The board, in releasing its official statistics on Monday, said the overall benchmark price in the city, which if what it calls typical property sales, rose by 9.46 per cent to $429,100.

According to Mike Fotiou, associate broker with First Place Realty, January also set a record for most luxury home sales for the month. There were 41 MLS transactions of at least $1 million, eclipsing the previous record of 36 set in 2007.

Last year, Calgary experienced a record year for total luxury home sales of 727 with 10 months setting records. The only months in 2013 that didn’t set luxury home sale records were January and December.

Grace Yan, a realtor with RE/MAX Real Estate (Central) in Calgary, said property inventory has steadily declined over the past year due to a high volume of migration of people to the city, a low unemployment rate and better job opportunities.

“As a result, turnkey properties that are well priced, whether it’s a condo, fixer-upper, starter homes to high-end luxury homes, are selling within days and realtors are lined up outside taking turns for showings resulting in competing offers selling well above list price,” she said. “The market is currently so competitive that we are seeing unconditional or minimal condition offers and I’ve recently seen offers even as high as $70,000 over list and selling within the first day.

“The shortage of listings is really tough on buyers and disappointing when they place their best offer on their perfect home and not to even be close to other competing offers. On the other hand it’s excellent for the sellers who are pleasantly surprised what their properties are selling for. We typically see listing inventory rise come the spring and summer. Real estate, like any other investment, has its ups and downs. It’s just trying to find the right time and the right place in the current hot market.”

The inventory of active listings in Calgary year-over-year hasn’t been positive since February 2011.

Ann-Marie Lurie, CREB’s chief economist, said the overall trend of a declining inventory in the resale housing market has been around since March 2011.

“They had actually too much for a period of time. There was really an excess amount of inventory,” she said. “And a lot of that was working through the system . . . There was over supply in the market at that time frame.

“It’s really over the past year and into this year that we’ve seen those levels to continue to decline . . . They’ve been falling. What I’ve been watching has been that rate of decline which had actually started to ease . . . Towards the beginning of 2013, and into 2012, we were in those high 20 per cent declines, like almost 30 per cent declines, over the previous year. As you go through the later portion of 2013, the levels came off a bit. It’s still declining but not declining as much.”

She said sales have been increasing at a greater rate than the level of new listings.

In January, MLS sales for different housing categories and their percentage increase from last year were: single-family, 974, 10.93 per cent; condo apartment, 260, 27.45 per cent; condo townhouse, 206, 40.14 per cent; and towns, 251, 2.45 per cent.

The average sale prices and their annual hikes were: single-family, $520,686, 4.80 per cent; condo apartment, $314,678, 12.36 per cent; condo townhouse, $371,638, 15.92 per cent; and towns, $379,053, 8.54 per cent.

The benchmark prices and their year-over-year growth were: single-family, $476,700, 9.11 per cent; condo apartment, $280,600, 11.66 per cent; condo townhouse, $308,100, 8.72 per cent; and towns, $346,500, 5.26 per cent.

“Listings are low in Calgary due to a number of factors. However one of the biggest is the lack of housing options available in Calgary and region due to the combination of increased demand through population growth, the flood zone financing and insurance issues and lack of new product readily available,” said Don Campbell, senior analyst with the Real Estate Investment Network.

“This reduction in housing options brings pause to the homeowner who was considering selling their homes to move within the city or region. When homeowners do not have confidence that they will be able to find an appropriate property to replace the one they are considering to sell, then they delay the decision.”

Also on Monday, TD Economics released a housing report forecasting sales in Calgary to grow by 5.8 per cent this year and by another 2.1 per cent in 2015. It forecast the average price for existing home sales to rise by 3.5 per cent this year and by 1.2 per cent next year.

The report said Calgary’s sales to new listings ratio was 70.2 per cent in 2013 and forecasts that to rise to 73.1 per cent in 2014 before falling back to 69.9 per cent in 2015.

TD also said the percentage of income an average household would have to devote to mortgage payments in Calgary in 2013 was 24.9 per cent in 2013 and it is forecast to rise to 25.0 per cent this year but fall back to 24.6 per cent in 2015.

Diana Petramala, economist with TD Economics, said current interest rates are likely unsustainable, nor are they expected to increase to more normal levels in the near future.

“Overall, given the expectations of a modest increase in interest rates, home prices are likely roughly 10 per cent overvalued,” she said of the national housing market. “Housing is very regional, and some markets are more vulnerable than others. For instance, the overvaluation in Toronto, Vancouver, Montreal and Ottawa is likely more significant than that found in markets in the Prairie and Atlantic Regions.

“Looking forward, the combination of softer demand and rising supply of homes for sale on the market will likely pull some steam out of home price growth. Slower home price growth, rising incomes and only modestly rising interest rates will help keep housing in check over the next few years.”

Photo By: Sepehr Ehsani

BALLOONING SALES

Calgary and Vancouver lead Canadian housing market boom
August MLS sales balloon

By Mario Toneguzzi 

Calgary Herald September 16, 2013

CALGARY — Strong sales in Calgary and Vancouver led to a Canadian housing market boom in August as MLS transactions across the country were up 11.1 per cent compared with a year ago, according to the Canadian Real Estate Association.

In releasing its national data on Monday, CREA said sales in Vancouver were up 53.1 per cent from last year to 2,557 while Calgary transactions rose by 28.8 per cent to 2,830.
In Canada, total MLS sales in August were 40,350.

“The year 2013 has been a very strong year for the Calgary real estate market,” said Crystal Tost, a realtor with RE/MAX Realty Professionals in Calgary. “Earlier in the year we saw the market pick up as we transitioned into a sellers’ market as a direct result of low inventory levels. The market maintained strong with low inventory right through to spring. The summer months are traditionally a bit slower than spring months, but not for 2013. The market continued on with record sales without rest as inventory levels continued a downward motion into summer months.

“There is no doubt that the flood has greatly affected the housing market in Calgary not just for sales. Workers that have flocked to the city to aid in Calgary’s rebuilding and displaced people looking for temporary housing have exhausted the inventory in the rental market and in turn we are seeing rising rental prices. The raised rental market is making it sense for some first-time buyers to enter into the market. Bank interest rates are also on the rise. We are seeing many buyers out there with great interest rate holds nearing expiration so some of those buyers will be on a time crunch to save some money in interest.”

In August, Calgary had the highest growth year-over-year in the MLS Home Price Index, which tracks typical sales in nine major Canadian centres. Calgary prices rose by 7.39 per cent compared to the national aggregate of 2.92 per cent.

As for average prices, Calgary was once again a leader with an 8.1 per cent annual hike to $432,576, while Canada saw an 8.1 per cent hike as well to $378,369.

Ann-Marie Lurie, chief economist with the Calgary Real Estate Board, said the past two months have seen sales activity in the city shoot up higher than long-term trends.

“Both in July and August, those numbers were a little stronger. Part of that I think is due to the fact of the floods (in June),” said Lurie. “Because of that if you look at June we were running really in line with long-term trends — just above it. And then floods hit and in July and August we saw that activity increase. And some of that is from that demand being pulled forward.”
But other factors have also come into play in the local residential real estate market, she said, with stronger than expected migration this year.

“We still continue to have employment growth. The overall economic situation has done fairly well,” said Lurie. “That’s all the backdrop behind it as well. And wages have been increasing.”

There’s also the added possibility of increasing mortgage rates causing people to get into home ownership sooner.

In August, Alberta saw MLS sales increase by 17.8 per cent from last year to 6,124 while the average price rose by 7.1 per cent to $381,642.

On Monday, CREA also released its forecast for the rest of this year and 2014. It said Alberta MLS sales would grow by 6.2 per cent this year, the best in the country, to 64,100 and by another 2.3 per cent in 2014 to 65,600.

In Canada, sales are expected to drop by 1.0 per cent this year to 449,900 but expand by 3.5 per cent next year to $465,600.

The average sale price in Alberta is expected to rise by 4.8 per cent this year to $380,500, the second best growth rate in the country behind Newfoundland’s 6.1 per cent. Alberta is then forecast to lead the country in 2014 with 3.4 per cent growth to $393,300.

Canadian average sale prices are forecast to grow by 3.6 per cent this year to $376,300 and by another 1.7 per cent in 2014 to $382,800.

“Sales activity dropped sharply around this time last year in the wake of tightened mortgage rules and has improved since then, so a sizable year-over-year increase this August was expected,” said Gregory Klump, CREA’s chief economist, about the national August sales data.

“Buyers who put off purchase decisions or who were otherwise sidelined by tighter mortgage rules and lending guidelines implemented last year were anticipated to return to the housing market. That said, the upward trend and levels for activity in recent months has been steeper than expected, but that may not last.


“Recent increases to fixed mortgage rates caused sales to be pulled forward as buyers with pre-approved financing at lower rates jumped into the market sooner than they might have otherwise. That pool of homebuyers has largely evaporated so demand may soften over the fourth quarter. The outsized year-over-year gains may persist, however, due to weak sales toward the end of last year.”

STAY STRONG

Calgary MLS sales in August on pace for 2nd highest ever
August 2005 set the record
By Mario Toneguzzi
Calgary Herald August 23, 2013

CALGARY — Calgary home sales are on pace for the highest August total since 2005 and the second highest on record for the month, says a Calgary realtor.

Mike Fotiou, associate broker of First Place Realty, said month-to-date between August 1-21 there have been 1,462 MLS sales in the city, up 32.4 per cent from last year.

That’s down from the 1,516 sales pace set in August 2005 for the same period. Sales ended up at 2,326 for the entire month of August in 2005.

According to the Calgary Real Estate Board, for the first three weeks of August, the average sale price increased by 10.14 per cent to $456,105 and active listings of 4,089 were down 24.57 per cent.

Tanya Eklund, with RE/MAX Real Estate (Central) in Calgary, said there are so many factors that have helped the real estate market reach such impressive numbers.

“The flood did throw a wrench into things in some communities, yet we have seen other communities flourish from the flood. As long as the price of oil stays strong, the pipeline out east goes forward, the vacancy rate stays low, all of these will contribute to the continued strength in our economy,” said Eklund in a live Herald web chat on the real estate market with Ann-Marie Lurie, CREB’s chief economist and Don Campbell, senior analyst and founding partner of the Real Estate Investment Network.

“We are in a seller’s market currently I would say. I base it on number of sales versus listings and I also consider days on market. We are fairly low in inventory based on last year and our sales have increased substantially.”

Campbell said Calgary entered the year with a real estate market that was performing exactly how it should have been, based on its underlying economics.

“While the world turmoil was continuing to grow, Calgary’s economy almost felt sheltered from the storm. Economic growth, population growth, housing demand right on trend ... then the floods hit and turned the city and its market upside down,” he said.

He said, now post flood, the numbers will not be indicative of the actual underlying market and although will still look good, they won’t be reflective of how the market is really performing.

“The bottom line is this: the results of this flood will play a role in the housing numbers for at least 12 months in all cities and towns affected by it and will skew the market health readings,” he said.

Lurie said strong resale growth numbers will likely persist for much of this year, outside of the flood, as migration levels posted stronger than expected levels, supporting stronger than expected demand growth.

“The housing market will continue to benefit due to strong fundamentals, assuming the energy sector remains strong,” she said.

A TEXTBOOK MARKET?

What happened to the expected Alberta real estate boom?
Market influencers tempering demand
By Mario Toneguzzi
Calgary Herald April 11, 2013

CALGARY — Several ‘market influencers’ have kept the reins on the expected Alberta real estate boom, says a new report on the housing market.

The report, by Don Campbell, senior analyst and founding partner of the Real Estate Investment Network, said debate is raging about why the market isn’t booming like it did in 2006 and 2007 when the job market and population in the province were growing at the same rates as they are today.

“The real difference this time is hidden in the strong forces of today’s market influencers. It is very true that the market drivers are all in place to support a large growth in housing purchase demand and price increases, in fact it is a textbook market for a boom,” said Campbell.

“In Alberta, the GDP and job growth have driven very strong population growth which has led to low vacancy rates not experienced in this province for many years. Street rents are jumping due to the rental supply/demand inequality. So, on the surface that means Alberta should be experiencing another one of those unsustainable booms. Well why isn’t it? And is there one still in the works?”

He said certain wild cards can throw a market off its prescribed cycle for periods of time.

“So, despite all of the market drivers being in place to push the Alberta real estate market into its next boom cycle the market continues to underperform its economics. Why? Simply, there are market influencers in play and that is why we are not yet seeing the expected rush into the market demand,” he said.

They include the once-bitten, twice-shy attitude equating into a local lack of confidence in the market. Many Albertans made their first home purchases during the previous boom. They were hit hard when the financial crash came. This has tempered enthusiasm for the market now.

Tighter mortgage qualification rules have also tempered market demand.

Overall consumer confidence in real estate is taking a hit with many recent reports and headlines on the state of the Canadian market saying it may be over-priced or overvalued.

A large portion of Alberta population growth is from two key demographics who are less likely to buy a house immediately — immigrants and ‘Echo-boomers’.

According to the Calgary Real Estate Board, total MLS sales year-to-date in the city until April 10 were 5,798 transactions, up 3.72 per cent compared with the same period last year.

The average sale price this year has risen by 8.08 per cent to $451,246 while the median price is up by 5.92 per cent to $397,000.

Ann-Marie Lurie, CREB’s chief economist, said the organization never felt the economy was about to boom, based on several factors.

“The first consideration is the economy,” she said. “In the 2005-2007 period, we had significant growth in both the oil and natural gas sector, economic growth as of late has only been driven by the oil sector. While this has helped support growth, there have been some challenges regarding bottlenecks and price discounts which has impacted employment growth prospects in the province. We also shouldn’t forget that the natural gas market continues to struggle. Our economic growth is progressing but at a slower pace, and forecasters also estimated that employment growth and net migration would ease this year, two factors pointing towards slower demand growth in housing.

“The next consideration is fundamentals in the housing market. Inventory levels were generally more elevated in the resale market, and it has taken some time to absorb some of the excess in the market. While this has occurred primarily in the single-family market, it has only started to spillover into the surrounding areas, the condominium market, and the new home market. When considering all the options available to consumers, there was sufficient choice to prevent any significant shortage in the entire housing market, which was the case in 2006-2007, causing a unsustainable jump in home prices.”

She said she is not surprised that the market didn’t boom, given the economic backdrop and current supply in the market.

Lai Sing Louie, regional economist for the Prairies and Territories for Canada Mortgage and Housing Corp., said market conditions in Alberta’s housing markets today are different from the boom.

“Some of the differences include higher household debt as well as more prudent lending conditions today. Also, some of the transactions in that period were investor driven and we have not experienced that to the same extent today,” he said.

The underlying economics and Market Drivers state that the market should be on fire, just like it was back in 2006 and 2007 – that is unless you begin to factor in these influencers, said Campbell.

“Let us make sure we are analyzing today’s markets with today’s conditions and not compare them to previous boom-bust cycles. Each cycle has its own influencers that either heat up or cool down a market and this current cycle from 2006 until today is the perfect proof of that,” he said.

“As long as the drivers are strong, the market is structurally strong, no matter what the influencers are doing. The concern should arise when the drivers are weak and the influencers are pushing the market upwards with no support. That is not what is happening in Alberta right now; in fact, the drivers remain strong despite the headlines.”

Ben Brunnen, chief economist with the Calgary Chamber of Commerce, said the province is definitely seeing all of the signs of strong economic and potentially housing growth.

“Net inter-provincial migration, population growth is up. Unemployment is low and GDP growth is relatively high,” said Brunnen. “I think we’re seeing probably a bit more of a cautious consumer out there. I do think we’ll see some strong real estate activity happening in Calgary but not like in the boom.

“I think there continues to be some caution in the market for a number of reasons. While Alberta’s economy is good, the global economy continues to be shaky, especially Europe and the United States. So people don’t have that strong confidence per se that this economic activity is going to be sufficiently robust that they should buy a house.”