Calgary Realtors, mortgage brokers, real estate number-crunchers, and (most importantly) potential buyers and sellers can’t agree!
Is Calgary’s hot real estate market strategy, or just simple math?
With logic and facts to support both sides of the story, there is consensus that with some trending ups and downs, Calgary continues as – if not a hot market – definitely a positive seller’s market.
CREB tracks the listings/sales ratios and suggests Calgary may even be moving, very, very gradually toward a balanced market. CREB’s September stats indicated that “housing activity continues to move away from the extreme sellers’ market conditions experienced throughout the spring, and although the number of new listings is expected to increase over the remainder of the year, the tracking highlights that Calgary resale supply levels remain low, especially for lower-priced properties.”
Sales in Calgary’s apartment condo category continue to climb, up six per cent from last summer, as buyers sought out more affordable housing options. CREB highlights that this summer, sales of apartments and condos were 19 per cent better than last year.
Ann-Marie Lurie, chief economist at CREB monitors the Calgary market and cautions that it will take time for supply levels for Calgary to return to more balanced conditions.
After stronger-than-expected gains earlier this year, price hikes are stabilizing. By late summer, according to CREB, the unadjusted residential benchmark price reached $601,800, a six per cent increase from last year and a slight dip from mid-summer.
CREB also points out that year-to-date, the average Calgary benchmark price has gone up by about nine per cent. Stats show that detached home sales dropped by 14 per cent, compared to last year, and that gains in homes priced above $600,000 couldn’t offset the declines in lower-priced categories, which continue to be impacted by limited supply.
By late summer, 2,011 detached homes were available, with over 85 per cent priced above $600,000.
“The summer of 2024 was a bit of a slump,” says the plugged-in Jared Chamberlain, realtor and team lead, with Calgary’s Chamberlain Group. “Prices dropped slightly across all property types, and despite an increase in inventory, sales didn’t keep up. Affordability is one of Calgary’s strong suits,” he points out, “especially compared to other major Canadian cities.
“Our affordability index is at 43.5 per cent, much lower than places like Toronto and Vancouver, which makes Calgary more attractive for homebuyers despite the slight price fluctuations.”
Calgary real estate experts agree. Mortgage rates DO matter. Early last month, the Bank of Canada cut its benchmark interest rate by 25 basis points for the third consecutive time, bringing it down to 4.25 per cent. Economists are predicting further interest rate cuts for the remainder of the year and likely into 2025.
Real estate strategists caution that, while overall lower central bank rates are always positive, good consumer and business news, the three .25 drops and lowered mortgage rates still aren’t low enough reignite much activity in Calgary’s housing market, and it will likely take a few more decrease to trigger a blip.
“The September rate drop will have an impact on Calgary’s real estate market but possibly not right away,” Chamberlain adds. “With so many mortgages up for renewal between now and 2026, this could give homeowners some relief. While lower rates might encourage more sales, we still have to consider other factors like rising unemployment and slowing wage growth, which could affect buyer confidence.
“Last month’s rate drop will have an impact on Calgary’s real estate market but possibly not right away,” he says. “This is the third 25-basis point cut from the Bank of Canada, and it’s aimed at easing borrowing costs, which will make variable-rate mortgages more attractive. And we expect to see five-year fixed rates to lower as well, as the bond rate possibly lowers in the coming months.”
Realtors and mortgage lenders suggest the fixed-rate mortgage holders will not see the effects of any mortgage rate decreases until they renew, although the impact is immediate for variable rate payers.
Variable rate mortgages have been around for years. The logic and strategy are that a person’s mortgage rate is tied to the Bank of Canada rate, and every time the rate goes up or down, it immediately effects the amount paid on the mortgage.
The basic math about mortgages defines that when the interest rate goes up, more of the monthly payment goes towards the interest, and less to the principal. If the interest rate goes down, more of the payment goes towards to the principal, paying-off the mortgage faster.
The basic math about variable rate mortgages is slightly more immediate good money news, especially recently, as rates dropped. For every 25-basis point cut, a homeowner can expect a reduction of approximately $15 in monthly payments (per $100,000 of mortgage).
“Oh sure, the rate cuts will help,” he says, “but we’re not going to see the kind of rapid price increases we had in the past.”
Calgary money experts explain that, while the first time in four years Bank of Canada rate cuts is welcome news for some mortgages, the lowered rates likely don’t make much immediate difference for buyers, nor are they a boost for lagging listings or Calgary affordability.
The practical reality and real estate bottom line for buyers is that, despite the three 2024 rate decreases, mortgage rates are still high, and even a full percentage point drop would likely not result in a significant increase in buying power.
Calgary realtors and mortgage brokers warn that, with home prices being as high as they have been for the past couple of years, simply waiting for an interest rate drop is not always in the best interest of prospective homebuyers. Lower mortgage rates may help the calculation slightly, but, especially for buyers, it really doesn’t change anything.
Although real estate doesn’t follow rules or routines, lower mortgage rates may provide more purchasing power. Beware! Economists explain that lower rates give buyers more purchasing power but can be a vicious cycle.
More purchasing power invariably puts further pressure on sales and prices, because when affordability changes for everybody, suddenly everybody is able to afford more.
Calgary’s real estate market trending shows flux. While mortgage rate drops are far better than spikes, the practical real estate market reality is that mortgage rates have not come down nearly fast enough, or significantly enough, to spark the the city’s housing market.
The culprit is mostly Calgary’s high home prices. And despite gradually lowering mortgage rates, the city’s continuing benchmark prices in most categories, affordability is still a big factor for many buyers.
Even with another possible Bank of Canada rate drop before the end of the year, and resales moving toward a balanced Calgary market, Jared Chamberlain suggests a slow, steady growth for the rest of 2024, without dramatic price jumps or declines. “Inventory is likely to keep rising, and more buyers might come in as rates stabilize. But the days of massive price surges are behind us.
“For 2025, I think we’re heading into a more normal, balanced Calgary real estate market, especially as we approach winter, and a potentially decent spring.”
