Well the winds of change are in the air! After a blazing hot first two quarters, the Bank of Canada interest rate increases are starting to show small signs of impacting the Calgary real estate market.
Detached homes were the hottest ticket in town for the past couple of years. The previous peak benchmark pricing for this category was back in summer 2014 at $535,100.
This number was far eclipsed this year with a peak of $648,500 in May. This represents a 21% jump from the 2014 peak.
There was a small dip in prices to $647,500 in June. What took a larger drop was the number of sales, dropping from a high of 2,269 sales in March 2022 to 1,483 in June.
It is common to see the number of sales be highest in the months of March, April and May. However, this March was the most we have ever seen and 1,483 in June is still a strong number of sales historically! To put this in perspective, there wasn’t a single month with over 1,400 detached sales from July 2014 all the way through to March 2021.
Detached homes are the preference for most buyers for many reasons and this category also typically fares better during slower markets. In comparison to other big cities in Canada (and the world), this is still a fairly affordable benchmark price for a detached home.
The large jump in interest rates can affect how much buyers are willing to spend on a home and we will likely see detached house prices softening for the second half of the year, especially in the higher price ranges.
As always, supply and demand has a huge impact on real estate prices. We consider 3-4 months worth of inventory a balanced market and anything under 3 months is a seller’s market. We have been in a seller’s market every month since September 2020. The months of inventory actually dropped below one from December 2021 to March 2022. It is now slightly higher at 1.8 months of inventory but this is still definitely in seller’s market territory!
Apartment-condos have also had a good run over the last couple of years. However, they were digging out of such a deep hole that the numbers look very different for this category.
Condo prices last peaked in late 2014 at $306,600. After that, they took a very hard fall for many years, hitting a low of $242,100 in June 2020 – this is a drop of over 20%.
Since then, we have seen a lot more out-of-province investors as well as both international and interprovincial migrants looking at the condo market in Calgary. Some were priced out of their own home cities and made the move here. Others cashed funds out of properties in other provinces that had significantly increased in value and took the opportunity to buy an investment property in a much cheaper market.
In addition, the job market improved and mortgage rates were extremely low so Calgarians that weren’t previously in the market also looked to pick up a condo. After all, they were so cheap!
So finally, condo prices started to rise and the benchmark price is now at $277,400. Unlike detached homes that have far exceeded their previous peak, condo prices are still about 10% below their 2014 high.
Although the number of sales fell from March to June (770 down to 581), the amount of activity is still very strong. We saw many months with just 200-300 sales over a six year period.
Condo prices increased from May to June of this year even while detached prices dropped slightly. I think the prices still look very attractive in this category and will keep buyers buying even with higher interest rates.
There is currently 2.63 months of inventory in the condo market, so it is just slightly in seller’s market territory.
It’s no surprise that the “R” word (recession) is in the news a lot. Even our world’s brightest economists struggle to predict what is to come so I won’t pretend to have a crystal ball for the Calgary real estate market.
I do feel we have passed our peak for this year. The frenzy that we saw earlier this year, with many houses selling in competing offers and no conditions, is over. Don’t get me wrong, some houses are still selling in competing offers today. But there was a time where nearly every house was! And this is no longer the case.
Even when there are competing offers, most buyers are still keeping some conditions, such as financing and inspection, on their offers.
I do see positive signs for Alberta overall and am hopeful that we will weather a global recession without too hard of a hit for our real estate market. Calgary is a wonderful place to live, as evidenced by being recently ranked as the 3rd most livable city globally by The Economist Group.
Making a decision about when to buy or sell a property is a very individual decision, influenced by many factors. If you want to schedule a call to go over some of the key questions to help you make that decision, let me know.