For more than a year, despite the fallout from lockdowns and workplace unpredictability, Calgary sellers basked in wild home prices, a lack of inventory and listings supply falling way short of buyer demand. Calgary buyers cringed about wild home prices, having to strategize and maneuver around discouraging multiple offers, often ridiculously above listing price.
While Calgary buyers and sellers credit and blame the obvious – spiking mortgage rates and high prices – Calgary realtors suggest a different cause and effect. “The most significant factor to help the market cool off, meaning slow the pace down, is the supply of homes,” says Jared Chamberlain, broker/owner of the Chamberlain Real Estate Group.
“The inventory is really low for the current rate of demand. If many homes came into the market that were quality properties, then we could start to see things slowing in terms of the urgency in the market and moving to a balanced market. Prices, on the other hand, probably wouldn’t decrease. Interest rates and other external factors won’t cool down the market because we only have a supply shortage issue, nothing else. We are still seeing the market in full swing, with less urgency. The Calgary market hasn’t seen interest from other provinces like this before, where people are changing their whole life and where they live to find more affordability,” he notes.
The Canadian Real Estate Association (CREA) points out that Calgary is a reflection of a nation-wide trend. ”Following a record-breaking couple of years, housing markets in many parts of Canada have cooled off pretty sharply over the last two months, in line with a jump in interest rates and buyer fatigue,” the CREA says. “Home prices across Canada appear to be slipping under the weight of rising interest rates, with the nationwide average home price falling to $746,000.”
CREA’s benchmark home price index – a metric designed to create an “apples-to-apples” comparison of typical home sales over time – also posted a decline of 0.6 per cent month-over-month, the first such decline since April 2020.
According to the recent Royal LePage (RLP) House Price Survey, the aggregate price of a home in Canada increased 25.1 per cent year-over-year to $856,900 in the first quarter of 2022 – `the highest gain on record since the Company began tracking aggregate prices. As strong buyer demand continues to outpace supply in almost every market from coast to coast, RLP is forecasting continued strong seller’s market conditions.
“Call it buyer fatigue or easing demand,” the RLP survey says, “these periods of uncomfortably high home price appreciation do run their course. We are seeing the first signs of moderation in some regions, as more inventory is becoming available and competition eases slightly.”
The aggregate price of a home in Calgary increased 13.3 per cent year-over-year to $612,000 in the first quarter of 2022 – the highest gain on record since the Company began tracking aggregate prices. RLP is forecasting that the aggregate price of a home in Calgary will increase 8.0 per cent in the fourth quarter of 2022, compared to the same quarter last year.
Most Calgary realtors are doing their best to manage the momentum and impact of the Calgary market. “We are definitely moving towards more of a balanced market,” says the knowledgeable and respected Corinne Lyall, owner/broker of Calgary’s Royal LePage Benchmark. “The rising interest rates combined with the price increases in the last year, some buyers have either chosen to drop out of the market or have been priced out. COVID is either over or nearing the end of its serious impact, and the urgency to move for factors such as distance or working to move for factors such as distance or working from home have diminished.”
As Calgary changes in terms of real estate listings and sales, Lyall points out that, in many ways, Calgary’s dynamics are also transitioning. “I’m not sure that the energy market has the same impact on our real estate market that it used to. Of course, the increased oil prices certainly impact and help stabilize our economy, but the people that are moving here from other provinces are generally employed in other industries. There has been a rising need for employees in the technology, aerospace, manufacturing/supply chain, healthcare and hospitality.”
As the Calgary market abates the flux and nudges toward a balanced market, real estate professionals caution about continued speedbumps ahead. CREB chief economist, Ann-Marie Lurie predicts that:“Mortgage rates are expected to continue to rise this year. Many lenders have already been increasing their rates ahead of moves from the Bank of Canada. And the federal budget has outlined a number of initiatives including supporting supply growth.”
With Calgary expertise, Chamberlain offers caution. “Mortgage rates are increasing. We have been spoiled for the past couple of years with never-heard-of-before low rates. We are starting to see four-plus per cent rates for five-year fixed products. By the end of the year, we could see this increase another point or so. But rising interest rates will not significantly impact Calgary’s market this coming year.”