If you’re following house prices in Calgary, you’ll know that inventory has increased and the number of days it takes to sell a property have also increased, but house prices themselves have not significantly fallen. There are some exceptions, of course, especially in the super-luxury market, but all things considering house prices haven’t lost a lot of ground.
According to Canada Mortgage and Housing Corp (CHMC), our National’s real estate moderator, there are signs that house prices are really over priced in relation to the current state of Alberta’ economy.
A new report released by CMHC this week contained the results of the corporation’s analysis of other market conditions such as Calgary’s current unemployment rate. At 8.3% as of this week, it’s way above the 10-year average of 5%. In fact, the lower demand for labour due to the price of oil has resulted in the loss of 24,000 jobs and all of them full-time jobs.
Red flags were up last April when CMHC warned that there might some problematic conditions brewing in Calgary real estate because of the obvious discrepancy between prices, the demand for housing and what was happening in the marketplace.
CHMC looked at Calgary and 15 other markets across the country. It ranked in the top 10 markets that were either moderately overvalued or strongly overvalued.
The report also examined other factors common to other markets where the energy sector hasn’t been so strongly impacted. Things like overheating, over-building and price acceleration, although overheating isn’t a problem here in Calgary with the sales-to-new listings ratio well under 85%. Overbuilding certainly was identified by CMHC as moderately problematic particularly in the apartment sector. The vacancy rate is hovering around 5.5% in Calgary so that weaker demand for rentals in the city and more for rent, possibly due to condo sellers deciding to rent out empty properties and too many new construction units coming online
Price acceleration is not an issue in our city. There has been some growth in the cost of housing in some communities and in some home types. Single-family homes in the $400,000 to $450,000 price bracket in areas such as Calgary North East experienced very modest gains. In the second quarter of 2016, the average price rose by 1.2% over the second quarter of 2015 to $468,116. The first quarter of the year saw a nearly imperceptible rise of 0.5% in the average home price.
In terms of homes sales there was a slight bump the first quarter of 2015 with a 9% uptick in sales over 2015 but the second quarter those numbers fell back through the floor again.
Calgary’s not the only one
There were four cities out of the 16 markets which were given a red flag for overvaluation. They were Toronto, Vancouver, Hamilton and Quebec City. Calgary received a yellow flag.
Despite being given a yellow warning flag, CMHC says that house prices are not expected to instantly fall just because the corporation says they’re too high for conditions in the rest of the market. Prices will adjust of their own accord over time and the Canadian housing market will likely not experience a complete free-fall similar to what happened eight years ago in the U.S.