|Housing market remains unchanged in January|
|Slow sales activity and inventory gains place downward pressure on prices
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Calgary’s housing market is starting 2016 firmly in buyers’ market territory, much the same as last year ended.
“The recent slide in energy prices has raised concerns about near-term recovery prospects for the city,” said CREB® chief economist Ann-Marie Lurie. “Energy market uncertainty and a soft labour market are weighing on many aspects of our economy, including the housing sector.”
City wide, January sales totaled 763 units, 13 per cent below last year and 43 per cent below long-term averages. While new listings declined by 16 per cent compared to January 2015, the number of new listings far outpaced the sales, causing inventory gains. January’s city wide months of supply levels rose above six months.
“Selection for buyers in all product types and price ranges has improved,” said CREB® president Cliff Stevenson. “More choice and low interest rates have encouraged some potential buyers to start window shopping. So far, this hasn’t translated into sales activity as many are waiting for steeper price declines from motivated sellers.”
The aggregate benchmark price of $447,300 in January was 1.21 per cent lower than the previous month and 3.27 per cent below the January 2015 price of $462,400.
“As expected, the imbalance between housing supply and demand is continuing to place downward pressure on prices,” said Lurie. “However, the recent price retraction has not erased all the gains recorded in recent years, as the benchmark price remains 4.41 per cent above the January 2014 price of $428,400.”
While all property types have recorded price contractions from recent highs, the largest price declines have occurred in the apartment sector as this segment has had elevated months of supply since the second quarter of 2015.
The apartment benchmark price totaled $281,900 in January, a year-over-year decrease of 6.35 per cent and 2.12 per cent lower than the previous month’s price. In fact, apartment sector prices have once again fallen below the 2007 monthly high of $301,500.
The detached segment of the market continues to show variations depending on price range. The under $500,000 segment remains relatively balanced. However, recent trends are pointing to weaker sales-to-new-listings ratios in the $500,000 to $600,000 range of the market.
“Calgary’s housing market continues to face a wide range of challenges,” said Stevenson. “Sellers are reflecting on their expectations and considering all options available to them, given the dynamics of their specific market. In this environment, buyers have the opportunity to carefully consider their housing needs and make a decision based on their lifestyle and future goals.”
CREB® forecasts downward pressure on prices in 2016
With no economic change on the horizon, demand for housing in Calgary will be weak in 2016, as sales activity is expected to fall by 2.2 per cent to 18,416 units, CREB® said today in its annual forecast. The annualized benchmark price is expected to decline by 3.44 per cent to $438,652.
Weak demand and supply gains are expected in 2016, adding to an already elevated level of inventory. In this situation, the markets ability to effectively absorb more inventory will be limited, resulting in some downward price pressure across all housing sectors.
“As we move into the second year of this environment, we expect to see additional housing supply pressure and further price declines,” said CREB® chief economist Ann-Marie Lurie. “Weakness in the energy sector is overshadowing all aspects of our economy and with more people looking for work and fewer opportunities, we could see some families making adjustments to their housing situation.”
While price declines are forecasted in each of the detached, attached and apartment markets, steeper declines are anticipated in the higher density segments, a trend which already started in the fourth quarter of 2015. This is related to the near record high level of multi-family units under construction. As these units are completed, there will be more product available for a smaller pool of buyers.
“Market intelligence really matters in today’s operating environment. Pricing trends have and will continue to vary depending on product type, price range and location,” said CREB® president Cliff Stevenson. “Sellers in this market need to have a good understanding of activity within their specific niche of the market. This is where a real estate professionals can really help navigate market conditions and real estate options, which are always unique to each consumer.”
With oil prices expected to remain lower for a longer period of time, the additional impact on employment and the extent of the spillover to other industries is still uncertain. While current forecasts expect employment weakness to persist throughout 2016, further losses are not expected beyond this year.
“The main risk to the housing outlook lies with the deepness of the pullback in demand and how that will translate into supply gains,” said Lurie. “Any sign of sustained recovery in the energy sector could limit the impact on the housing market.”
For the complete 2016 CREB® regional housing forecast report, click here.
|Housing market characterized by slow demand|
|Elevated supply levels placed downward pressure on prices in December
Click here to view the full monthly stats package.
With the focus shifting toward the holiday season, December sales activity slowed to 878 units in the city, 18 per cent below last year at this time and well below the five and 10-year averages.
As a result, the unadjusted benchmark price dipped to $448,800, a 0.42 per cent decline over the previous month and 2.33 year over year.
CREB® chief economist Ann-Marie Lurie noted December followed a pattern established early on in 2015, which was characterized by slower housing demand.
“Economic uncertainty, followed by weak economic conditions and job losses, contributed to slowing housing demand throughout the year,” she said.
“That said, while aggregate prices trended down in 2015, it was not to the same extent as some had speculated. Supply levels were low moving into this cycle and thus provided some cushion to absorb the inventory gains.”
In December, monthly inventory levels declined, as expected, to 4,336 units. Yet they were still 28 per cent higher than the same time last year, and at the highest December level recorded since 2008.
Inventory levels were notably up in both the apartment and attached sectors, which neared the highest December total on record.
“December showed that buyers in this market are continuing to be much more cautious as the impact of further oil price declines weighs on their confidence,” said CREB® president Corinne Lyall.
“Some sellers, meanwhile, are concerned about what supply levels may look like next year and are not delaying their decisions.”
On an annual basis, sales activity declined by 24 per cent in the detached sector and 33 and 28 per cent in the apartment and attached segments, respectively.
While months of supply in 2015 trended higher in all sectors, the apartment was the only one to average above four for the entire year. As a result, the apartment sector was also the only one to record an annual decline in average benchmark price, by 0.82 per cent.
While December prices for both the detached and attached sectors were 1.91 and 1.29 per cent lower than levels recorded at the beginning of 2015, on an annual average basis, they remained 1.35 and 1.84 per cent above 2014 numbers. “Aggregate statistics often do not provide the full story as activity varies by product type, price ranges and location,” said Lyall.
“While prices have trended down this year citywide, there are some areas of the city where prices for detached homes have improved compared to the start of the year.”
Note: CREB®’s annual forecast outlook will be available on Jan. 13.
|Housing market conditions favour buyers|
|Weak sales activity relative to inventory places downward pressure on prices
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Calgary, Dec. 1, 2015 – Persistently high inventory levels within Calgary’s residential resale housing market, combined with weak sales activity, contributed to buyers’ conditions in November.
Monthly sales totaled 1,263 units, a 28 per cent decline from last year and nearly 20 per cent below the 10-year average. Meanwhile, the amount of new listings in the market increased by five per cent over last November, and moved five per cent above 10-year average.
The combination of both soft sales and elevated listings caused months of supply to rise above four months. It represents the third consecutive month that housing supply in the city has remained near four months, which is an indicator that supports buyers’ conditions.
“The housing market is reflecting the realities of the economic conditions,” said CREB® chief economist Ann-Marie Lurie. “Calgary has continued to post job losses in the energy sector, unemployment levels are high, wages are down and recovery expectations have changed. All of these factors have contributed to the weak demand we have seen throughout the year.”
CREB® president Corinne Lyall pointed out that inventory levels still remained 27 per cent below the November highs recorded in 2008.
“Furthermore, price declines have not been as steep as those recorded during the last downturn,” she said.
The unadjusted benchmark price in November declined to $450,700, a 0.5 per cent drop compared to last month and two per cent from last year.
Calgary’s detached housing sector faired the best in November as months of supply increased to only 3.4. Nonetheless, the unadjusted benchmark price declined by 0.6 per cent compared to October, and 1.52 per cent from November 2014, to $510,700.
In the attached category, buyers’ conditions emerged as months of supply increased to 4.8. As a result, the unadjusted benchmark price declined to $352,400, a 0.5 per cent drop from last month and 1.5 per cent from last year.
The apartment sector continued to be the hardest hit of the three sectors. Months of supply increased to 6.9 in November, causing benchmark prices to slide 0.5 per cent from October to $287,000. Meanwhile, year-over-year prices were off by 4.6 per cent.
Despite weaker absorption rates for most of 2015, residential benchmark prices have only recently started to decline – while average and median prices have dropped more dramatically. Lurie attributed that to slower activity in the higher-priced segments of the market, which can skew average and median prices.
Benchmark prices represent changes for similar-type homes, minimizing the impact caused by changes in distribution.
“It is not a surprise that the average price has recorded a steeper decline than the benchmark price,” she said. “Last November, detached sales in the city over $700,000 totaled 159 units or 15 per cent of the market sales. This November, there were only 103 sales representing 13 per cent of the market sales.”
Lyall said knowing the difference between indicators such as average, median and benchmark prices is important for sellers.
“There is no question that this can be a challenging market,” she said. “However, because of these circumstances there is a greater need for market intelligence.”