We can all agree that 2021 was an unexpected year for Calgary’s housing market. In our recent blog: “Year in Review – 2021” we talked about what an unusual year it was.
January has continued the trend we saw in December – extremely low inventory and extremely high demand. With this in mind, you may be wondering; “Do I wait to sell my home in case prices continue to increase?”, “Do I buy now while mortgage rates are still low?”. Well, here are some thoughts that may help you decide how to navigate your real estate plans for 2022.
Yesterday we attended the Calgary Real Estate Board’s 2022 forecast and got an overview on the factors influencing our real estate market. Of course, forecasting is not an exact science, especially with a global pandemic still lingering. For example, the prediction from CREB for 2021 was a 1.5% price increase for detached homes, but the reality was nearly 10%.
While the pandemic may still be in uncertain times, it is expected that our economy will begin to improve. Calgary employment saw growth of over 4% since 2020 and it is expected to increase by 5% in 2022. Oil prices are on the rise and a number of tech companies including Neo Financial have announced the opening of offices in the downtown core.
We are also seeing quite a shift in people moving from Ontario and other jurisdictions to Alberta for affordable housing and a great lifestyle. Alberta Premier Jason Kenney spoke at the forecast about his marketing plans for Alberta as “the place to be” to drive both interprovincial and international migration.
Calgary remains extremely affordable compared to other greater metropolitan cities such as Vancouver and Toronto. Vancouver’s benchmark price in 2021 was $1,766,499, Toronto’s was $1,238,183, and Calgary’s was $493,916. More and more people are recognizing this and are looking to call Calgary home.
Job and immigration have been big driving factors in real estate growth throughout Calgary’s history. With international net migration of over 23,000, this may help strengthen our condo market, which has been lagging behind detached and semi-detached homes and unfortunately still has prices well below the 2014 highs.
The threat of inflation and rising interest rates has buyers rushing to get into the housing market and is one of the factors driving housing prices up right now. It will be interesting to see if the reopening phase has a softening impact on demand as people begin to spend their money on travel and recreation again. Mortgage rates are expected to rise by 50-75 basis points which could also contribute to a drop in demand as housing prices continue to rise.
Overall, most factors are looking very positive for the year ahead in Calgary and area real estate, but the predictions are tempered by these factors potentially softening demand.
The specific numbers forecast for 2022 are:
Detached prices: +5.2%
Semi-Detached prices: +4.7%
Townhome prices: +3.2%
Condo prices: +2.5%
Speaking from experience these first few weeks of the year, there are a LOT of houses selling in competing offers for above list price, sometimes as much as 10-15% above list price (specifically in the detached and semi-detached markets). We predict house price increases could be quite sharp in the first few months of the year, since we are a long way away from having enough supply to balance out the market. Interest rate increases may have more of a softening effect later in the year.
Market conditions like this don’t come around often so if you have been considering selling, now may be the time. I would suggest that specifically for properties that are a “tougher sell” – maybe something that is on a busier road or a house that isn’t in great condition. Buyers are much less picky about these things when there is so little to choose from!
The condo market is in a balanced position, not a buyer’s or seller’s market, so if you are selling a condo, it’s still important to have it present as well as it can and be priced strategically for the current market.
For buyers, you need to weigh out the timing that works best for your life with the potential higher monthly budget you could be faced with later in the year. If both house prices and mortgage rates increase this year, your monthly costs could jump in a significant way.
For example, the monthly payment for a house that is $600,000 now, with 20% down and a 2.75% interest rate, would be $2,210. If that house increased in price by 5% and interest rates rose by 0.5%, the monthly payment would be $2,450.
It is a very prudent idea for buyers to get a mortgage rate hold in place as soon as they can to mitigate some of this risk.
Buyers in the most competitive markets (detached houses under $700k) need to be aggressive and quick in making decisions to try and get a house. This is where a relationship with a professional realtor comes in – we are working in this world every day and can give you advice to help you have the best chance at realizing your home ownership goals!
For a full PDF of the forecast package, please drop us a line!
– Parker & Amie
