June 5th, 2024 marks the date of the first Bank of Canada interest rate cut since March 2020. Experts are saying this rate drop may not have an immediate effect on demand but it will start to build confidence for buyers to get back into the market. If that’s the case, more demand means more competition, more competition means higher sales prices, higher sales prices means… well, you get the point. So, yes a drop in interest rates can be seen as a positive, but, if rates continue to drop and prices increase, what happens to our market?
Lowering interest rates may have helped spur some buying activity in other markets throughout Canada that were experiencing a slowdown, but in Alberta, we were already in a hot market and the rate drop is just contributing to these conditions.
As mentioned in our last quarterly update, the spring market is typically the busiest season in Calgary real estate and that stayed true. We’ve continued to see strong sales numbers from April to June and for the fourth year in a row, the Q2 stats have continued to outperform previous years.
Inventory levels are almost identical to the second quarter of 2023 but the benchmark price for a home in Calgary is 9% higher this year and homes are selling 1.5% above list price on average this year compared to 0.7% last year.
As a result of the extremely high demand and low inventory, the sellers continue to run the show in most negotiations. Over 40% of homes sold in June sold above the asking price. Keep in mind that some properties are strategically listed at a lower price to attract the most buyers which generally creates a bidding war. It also helps to talk to your realtor about what your expectations should be when offering. Gone are the days of negotiating 2-4% off the list price in most cases. There are some exceptions for certain properties or price ranges that aren’t as hot but the priority in a lot of offer situations now is simply trying to be the successful bidder.
At this point, we are seeing some buyers shift their expectations. A few years ago before the market really picked up you could buy a detached home in Calgary for under $600,000. Today, the benchmark price for a detached home is $767,600. As people get priced out of the detached market, they look at semi-detached or townhomes. We are also seeing that the lower price ranges in each housing category are the most competitive – for example, detached homes under $700,000, semi-detached under $650,000, townhomes under $500,000 and apartments under $350,000.
In January, Amie and I attended the Calgary Real Estate Board’s annual forecast where we learned the projections for the year to come.
Detached home prices were projected to increase by 4% this year. As of June, they have increased 9%.
Semi-detached home prices were projected to increase by 5.5%, they have increased by 8%.
Townhome prices were projected to increase by 9% this year. As of June, that 9% increase already happened.
Similar to townhomes, apartment prices were projected to increase by 9.5% this year and have increased 10% since December 2023. The benchmark price for apartments is now $344,700 which is 17% higher than this time last year and 18.5% higher than the 2014 real estate boom.
Out of 978 apartments active on the MLS as of today, only 200 of them are listed below $300,000. Even in the three and a half years that I’ve been working in real estate, I’ve seen a huge difference in what you can buy under $300,000. There used to be many options for 2 bedroom units and now that category is extremely limited. A lot of the buildings left in that price range have some concerns, such as post-tension buildings.
These price increases are happening in all areas of the city with the most drastic increases happening in the north-east and east districts.
In order to combat these rising prices, we need inventory. Inventory has increased slightly year-over-year for 2 months in a row but we’ve got a long way to go before we see a balanced market considering our inventory levels are 40% lower than long-term trends.
The consistent question we get is should I buy/sell now or wait? The reality is that the answer is different for every individual. For personalized advice, give us a call 🙂
-Parker
