Home Month and Year July 2023 The Limited Supply Market

The Limited Supply Market

The Calgary market is ok, but…


When it comes to key factors like affordability and benchmark prices, inventory and sales-to-listings ratios, consumer confidence, the impact of mortgage rates – and even though Calgary’s real estate market fares slightly better than other major Canadian markets like Toronto and Vancouver – there is a speedbump.

Forecasting the next six months of Calgary’s real estate year can only be a well-intentioned, educated guess, because all the facts and figures are hindsight.

According to CREB’s Q1 Summary, persistent sellers’ market conditions placed further upward pressure on Calgary home prices. As of the end of April, after four months of persistent gains, the total unadjusted Calgary benchmark price was $550,800, nearly two per cent higher than the previous month but still a new monthly record high for the city.

“While sales activity is performing as expected, the steeper pullback in new listings has ensured that supply levels remain low,” says CREB® chief economist Ann-Marie Lurie. “The limited supply choice is causing more buyers to place offers above the list price, contributing to the stronger than expected gains in home prices.”

CREB’s summary tracked that sales reached 2,690 units compared to the 3,133 new listings. With a sales-to-new-listings ratio of 86 per cent, inventories declined by 34 per cent compared to last year.

But mortgage rates are proving to be a lingering broadside, because the Bank aggressively hiked interest rates, last year. Although it appears to have taken heat off inflation, economists caution about the lingering impact on housing and Canadian real estate. The trends and numbers show that higher mortgage rates, and jitters about possibly more hikes, are keeping many Canadians on the housing market sidelines.

The Bank of Canada is more worried than ever about household debt loads in-general, particularly the crunch of managing payments when a mortgage comes up for renewal or people opt to play it safe and lock-in open mortgages at higher rates.

Stats show that, while only about one-quarter of Canadian mortgage holders have a variable rate loan, the overall effect of mortgage rate hikes has been dramatic, adding thousands of dollars to monthly payments, and extending the term of the mortgage by years.

CREB and some experienced Calgary Realtors offer the cautious assurance that, all things considered, the Calgary market is doing okay.

“I don’t see the market cooling because of the interest rates,” says upbeat Jared Chamberlain, broker and co-owner of Calgary’s popular Chamberlain Real Estate Group. “It has stayed stable for several months, which is excellent. However, with the recent news of inflation increasing, it is hard to say what will happen in the coming months.

“Even if the Bank of Canada raises interest rates again, specifically for Calgary, it will likely not cool our market. A true cooling period would mean seeing more listings actively on the market than Calgary’s current demand. And with the number of people continuing to move here from other provinces, on top of the already existing local market demand, that could be a while.”

While CREB does not speculate about the past being prologue, it points out that the most notable challenge in the Calgary market has been related to supply levels. New listings were expected to ease, as higher lending rates would make it more difficult for the move-up buyer.

Crunching the actual numbers, the pace of decline in new listings has exceeded expectations. New listings in the first quarter, declined by 40 per cent, preventing any significant shift in the supply levels given the relatively strong sales.

“Sales are down about 20 per cent, from this time last year,” notes Corinne Lyall, owner/broker at Royal LePage Benchmark. “Interest rates have played a role in sellers holding tight to their current lower rates. This has also impacted an increase in prices, as the decrease in inventory is forcing buyers to bid for the same property.”

The Bank of Canada is hinting an end to rate hikes, at least for this year but, Lyall adds the caution that. “If interest rates do rise, it could impact buyers purchasing ability and stop some from moving forward. But those that stay in the market will continue to bid competitively, especially at the lower price points.”

With occasional hiccups, Calgary is still a hot – sometimes lukewarm – real estate market.

“Right now, everything feels hot. Every area of the city and product type currently has a buyer looking for it,” Chamberlain says. “Much of the time, the homes that are not selling have an asking price way beyond the condition of the house. Some sellers think they have won the lottery and ask crazy, overpriced amounts. And they are shocked when they don’t get multiple offers.”

Corinne Lyall underscores two, unrelated positives of the Calgary market. Migration and condos. “The status of the condo market has improved immensely over the last few years. We have gone from 8.5 months of supply in 2019 to only 1.5 in 2023. As prices increase for single family properties, buyers are moving into the attached and condominium markets.

“And there is a noticeable market impact from inter-provincial migration. Many recent Calgary buyers are from Ontario and B.C., in search of more affordable prices.”