Jason Bell writes:
On a daily basis again, Tess and I receive at least one or two calls or e-mails asking what's happening with the real estate market. This "cycle" or "pattern" has happened before when there has been uncertainty in the real estate market or if economically, we have been on an upswing or a downturn.
To some, we have uncertainty in the market. Sales volume is down but prices remain high. Many ask why? Inventory is increasing (i.e. more and more properties are coming on the market) which should drive prices down, but hasn't. Again, why?
To others, the real estate market looks promising. Average single family detached house prices in Calgary have risen 10% +/- June 2009 to June 2010. (It is important to note that sales in the luxury home market have increased and as such, have "skewed" or driven the average numbers up.)
Mario Toneguzzi from wrote an informative article about the current conditions; it is below:
'Crummy' June Sees Home Sales Slide
Byline: Mario Toneguzzi
Publication: Calgary Herald
Date: Saturday July 3rd, 2010
The downturn in Calgary's residential real estate market was dramatically evident in June as MLS sales plunged from year-ago levels.
Sales in the single-family home category of 1,061 for the month plummeted by 42.24 per cent while condominium transactions of 445 took a nosedive of 39.7 per cent.
Diane Scott, president of the Calgary Real Estate Board, called the June numbers "crummy." "It's a buyer's market. We have evolved into a buyer's market, but the buyers aren't buying," said Scott. "It makes for a quiet market."
While the number of properties for sale continued to rise, average sale prices moved upwards as well -- by 7.79 per cent for single family homes to $481,964 and by 2.33 per cent for condos to $292,238. The average prices were buoyed by an increase in sales in the luxury home market, particularly for single family homes.
An increase in the luxury home market has kept average prices elevated and that speaks to the confidence people with plenty of money have in the economy, Scott said. "As far as the average buyer-seller out there, it's a different market than we've seen in prior years. It's going to slump over the summer and stay in a buyer's market."
She said Calgary will continue to see a moderation in home sales in the face of higher mortgage rates, increased inventory levels and a decreasing number of first time homebuyers entering the market.
New listings in June rose from a year ago by 21.79 per cent for single-family homes to 2,733 and by 16.94 per cent in condos to 1,084. The month-end inventory for single-family homes for sale stood at 5,991, up from 3,395 in June 2009 while for condos it has risen to 2,626 from 1,744 last year.
The pace of sales in the local housing market has been moderating, said Richard Cho, senior market analyst for Calgary for Canada Mortgage and Housing Corp. "More conservative lending practices, higher financing costs as well as elevated unemployment and weaker net migration have tempered resale activity," he said. "With more new listings entering the market and the pace of sales slowing, active listings have on the rise."
Cho said average price growth is expected to soften in the months ahead because of the moderation in sales and rise in listings. June was the second consecutive month that year-over-year sales for both single-family homes and condos have been down. In May, there were 1,262 single-family home sales for an average price of $483,240 and 518 condo sales for an average of $304,662.
Homebuyers are taking a bit of a breather right now in the local market, said Todd Hirsch, senior economist with ATB Financial in Calgary.
"In the spring, there was the anticipation that mortgage rates would be rising soon, and that brought forward some buyers that would have normally waited a bit longer to buy. So now, there are somewhat fewer buyers in the market," Hirsch said. He said listings always rise when prices are rising. "Homeowners anticipate that they can get a good price, and some owners put their home on the market at an unrealistically high price just to see what happens," explained Hirsch. "But if there are too many homes on the market, it eventually forces the price down as home sellers compete for buyers. "So if prices fall, the pendulum will eventually swing the other way and listings will fall too."
He said prices have not caught up with the rising inventory of homes on the market, and with slowing demand. "But prices cannot keep rising for long. In fact, prices are likely to be flat or even dip a bit in the second half of 2010 as demand slows and listings rise," added Hirsch.
In the towns surrounding Calgary, overall sales in June dropped by 35.38 per cent from a year ago to 305 sales with an average price of $378,237, which was up 6.75 per cent. The country residential market, which includes acreages, saw sales drop by 30.23 per cent to 60 but the average price jumped 27.57 per cent to $943,400.
Gregory Klump, chief economist with the Canadian Real Estate Association, said activity is easing most among first-time homebuyers, but it's still above year-ago levels for luxury homes and that's helping to skew the average price higher. "That's what's resulting in these year-over-year price gains in average price as at the same time sales are easing," Klump said.
"One of the fundamental things, when the Bank of Canada raised interest rates in early June, I think that injected a lot of caution among first-time homebuyers. They want to see how things are going to play out and that's also showing up in the consumer confidence numbers as well, that people have become more cautious."