When we look at the Calgary market lately, the last thing anyone would expect are price declines. But, funny enough, we have had a few segments start to show some cracks in their pricing due to the higher interest rates and the summer months. 

In this breakdown we look at these particular segments and how price declines can occur in a market that saw sales increase 3% while new listings drop 6%. 

Let’s get to the details!

The Stats

The Absorption Rate - All Calgary Residential Segments

In the month of August, we saw new listings drop by 6% to 3,454 while the number of sales increase by 3% to 2,736. This activity drove our absorption rate back up to 79%. 

This means that nearly 8 of 10 homes that are listing on the market today across all segments are selling. 

Compared to this same month last year, the number of active listings has dropped 48% while the number sales has increased by 22%

This 5% increase in the absorption rate month over month is not uncommon as we have seen in previous years where a tiny increase usually happens around August. If this trend continues, we should see another drop in activity in September before an increase in the later months of the year. 

This is not new information. Our market has been hot. But where the interesting story lies is how this hot market has been sustaining and how the different segments are reacting to the changes in our market conditions and seasonality. 

The Median Price By Segment - Calgary

These segments present a picture of the market still increasing as the months progress, but as you can see in the chart above, two big segments of our market have seen price declines month over month. 

The single-family detached and attached (semi-detached) segments both saw decreases in their prices to bring them to levels closer to March of this year. 

While these two segments have shown a little crack in their prices, townhomes and apartments continue to keep the market as a whole strong. 

While the market has shown some mixed signals so far, we will breakdown the rationale behind the drop in some segments as well as the slight increase in market in our breakdown below. 

The Breakdown

As we have seen this past month, detached and semi-detached homes have seen drops in their pricing while townhomes and apartments have seen a increase. This is understandable once we start to look at a few different factors contributing to these increases.

Rent Increases

In Calgary, rents for 2-bedroom units have ballooned to over 2,300/month, which is only $200 less than owning a 2-bedroom condo apartment with 5% down and a condo fee of $600/month. 

As more people to move to Calgary, rental vacancies are low leaving more and more people to purchasing an apartment (or a townhome if they have a family). This increase in demand has activated our condo market to become more in demand.

Interest Rates and Affordability

Lest we forget the overarching reason for our real estate market being in such a crazy phase. Higher interest rates continue to eat into the purchasing power of potential home owners leading them to afford less and continue to look at more affordable housing options for their home. 

As the rates continue to stay high, we will continue to see this demand of more affordable housing continue until which time that even these segments will be priced too higher for a buyer. 

But we cannot forget that the BOC cannot keep rates high for long. And when a small decline in the rate occurs, this will also lead to more demand as buyer’s purchasing power increases and their appetite to take advantage of the lower rate market will increase. 

This might change the way the pricing increases go. A lower interest rate will increase affordability for a buyer leading them to start looking the other way on the spectrum towards detached and semi-detached homes. 

The market will continue to run at this pace until something significant comes along to change it. This can either come, and most probably from, the BOC next rate announcement in September or a significant change in policy or production speeds for new housing development (which is not likely). 

Forecast

September will be a little bit of drop in the market if seasonality gives us any clue. People are getting back into their routines, school has started, and the focus is no longer into getting the home, but starting to live it in with the family. This might be a great time for a buyer to take advantage of the lack of competition. 

Once that is complete, we should continue to see increases in the demand again as those that would like to move before the holidays will start to be come active. 

My favourite time to list a home is actually December because of lack of sellers during that time. Buyers will continue to look, but most sellers don’t want to inconvenience their holidays. 

If you are currently in the market, the apartment and townhomes market might not be where you want to be looking right now. I would start to focus in on the detached and semi-detached homes to see if you can find some savings. 

And for sellers, if you have a property in the townhome or apartment segments, this when you will get your maximum return. Year over year this same month apartments are up 22%. Definitely a great return on your investment. 

Thank You

As always, thank you for time and checking out this update and market breakdown. I hope you found it useful. If you’d like to set some time aside with me to chat about your questions or needs in the market, please feel free to click here to access my calendar directly. 

I have some great resources if you are looking to buy, sell, or invest. Set up a time with me above and lets talk about how I can help you achieve your real estate goals. 

Thanks - Aly

I’ve been keeping an eye on these stats for some time now and in each of the years, regardless of what the external factors tend to do, there is seasonality to our market.

It ebbs and flows with the consumers' interest in it.

And despite this being one of our busiest years, we are still entering into that lull of the summertime. Albeit a little bit later than usual.

But let’s look at the numbers and what’s been happening this past month.

THE STATS

In the month of July, our active listings declined by 2% to 3,654 from the previous month while the number of sales declined 16% from the month before to 2,655.

These declines have led our absorption rate to drop from the second straight month to 73%. If you recall, we consider a seller market to be in place when the absorption rate is higher than 40%. This is also the first time the rate has dropped for two consecutive months this year.

Year over year, at this same time, the number of active listings has dropped 51% while the number of sales has increased 15%.

In terms of pricing, we have seen either prices maintain or slightly decline depending on the segment you are looking at.

The median prices month over month have remained steady in the detached segment, showed declines in the semi-detached (duplex) and townhome segments, and slightly risen in the apartment segment.

However, year over year on average we are still in a market of stronger pricing from 8-11% depending on the segment.

At this same time last year, we are up in price in the double digits across all segments.

THE BREAKDOWN

The absorption rate declining by 11% is a significant cliff we have seen in our market this year. This is the first time we have seen it decline and the first time we have seen two months of consecutive declines.

However, this isn’t the first time our market has seen this drop. In the chart above, you will see in both 2021 and 2022 we see declines right after the spring market as more and more people start to focus on summer activities rather than looking for or preparing a home for sale.

This year is a bit different in that we saw this “cliff” come slightly later in the year than usual. This can be attributed to the bond yields that dropped earlier this year with the bank failures in the US. This event sparked lower interest rates, which created more purchasing power for buyers, leading to more activity.

But that has come and gone, rates are higher and the BOC is scheduled to make an announcement on their overnight rate in September.

Now we are seeing the decline due to seasonality taking hold. Usually, these declines occur over a 3-4 month timeframe before we see a slight increase in September.

And this is where we might heading as we continue through June to August or September.

This is also where buyers that are looking to purchase a home in a less competitive market might want to start thinking about purchasing now rather than later.

When September comes, and depending on the BOC announcement, if rates remain steady or even decline, a buyer that purchased in August or September with a closing a bit further down can take advantage of a quieter market and revisit their rates prior to closing with the lender they are working with.

That could potentially turn into a win-win for buyers.

For sellers, the market is still in your favour, but the activity might be slowing slightly depending on which price point and segment you are in. Apartments, specifically 2-bedroom, 2-bathroom units are in high demand while homes that are priced north of $700,000 will be sitting a bit longer.

If you do have an apartment or townhouse currently and have been thinking about selling, we should chat about your options and what the pricing might be. It might surprise you. A perfect example of this is one we just sold in Royal Oak in NW Calgary. 1 bedroom, 1 bathroom, and just over 605 sqft sold for $240,000.

The lull of the summer is as short as our Calgary summer and if the rates stay firm or decline slightly, another frenzy could be on its way come the fall. Being prepared is the best thing you can do if you are looking to buy or sell, and I’d love to be the one to help you through our market.

THANK YOU

As always, I hope you find this article helpful. Some of you might not know this, but my advertising budget solely goes toward the listings I receive to market. My entire pool of business comes from referrals and this newsletter.

I truly enjoy writing these each month and providing you with this insight. I also cannot thank those of you enough for sharing it with your networks and allowing me to grow my business solely on referrals.

That is a badge of honour in our industry, and I love telling new clients my business is built on the wonderful referrals of my network. 

So, thank you once again.

Aly