The Calgary real estate market is a very resilient market, to say the least.
In the almost 7 years I have had the opportunity to work in this industry we have seen pricing drop with the decline of oil prices, the surge of pricing due to foreign and out-of-province purchases, and now with higher interest rates, we haven't seen the massive spike or decline that most would have expected.
In fact, the last two months have shown pricing to start to return to levels earlier this year.
What that is, is what we will be looking at today in this breakdown.
But first, let's have a quick look at the stats that we have for November.
Calgary Aggregated Absorption Rates
In the month of November, we saw the absorption rate for all housing segments in Calgary surge back up to 50%, which is a 5% increase month-over-month and brings us back in line with rates we were seeing in May and June of this year.
However, even though 1 in every 2 homes for sale currently is sold, the number of transactions has significantly reduced.
In April of this year, we had seen the number of listings hover around 5,000 while the number of sales was around 3,400. Today, these numbers have declined to 3,316 active listings and 1,651 sales.
This decline in activity has definitely been attributed to the higher interest rates. Someone back in May or April of this year could very well be priced out of homes now due to the higher interest rates (and higher qualifying rates) they would be exposed to today.
Month-over-month, we have seen the number of listings decline by 19% while the number of homes sold decline by 11%. This outpacing of declines in listings compared to sales is driving our market to continue to maintain relatively strong pricing.
Compared to last year, the number of listings has declined by 27% while the number of sales declined by 28%, leaving us at virtually the same absorption rate we had at the same time last year.
Calgary Median Pricing Per Segment
This month we saw the single-family segment decline in pricing with a 4% drop month-over-month to $560,500. This is the lowest median price for single-family homes this year, after a rally of pricing the previous month.
The attached (semi-detached) segment saw pricing increase by 5% to $493,000 from the previous months. The last time pricing for this segment was that high was back in April and May of this year.
The townhome segment also saw strong gains in pricing, higher by 5% month over month to $352,500.
Apartments saw no change month-over-month and remain at a median price of $250,000.
The Breakdown - Why Pricing is Maintain?
When you read about higher interest rates, what is your first thought about who it impacts?
You could be thinking that it is impacting new buyers that want to enter the market since rents have increased significantly.
And if this is your first thought, you wouldn't be wrong. But it doesn't explain the big picture.
When a higher interest rate is announced, sellers and homeowners are the ones that are impacted the most. They don't have the luxury of deciding to not enter the real estate market and continue to rent when a new rate hike is announced.
They are the ones that need to adjust their budgets to accommodate higher rates. Or need to decide if they cannot continue to afford their home, should they consider a sale.
Thankfully the homeowners of today that would have recently bought their homes in the last 4 years were qualified at rates much higher than what they received. And can weather the storm at higher rates.
But in doing this, they are also not putting their homes up for sale as most buyers would like.
The pricing we have in Calgary is not solely driven by interest rates. People tend to forget that homes, unlike stocks and bonds, are not readily traded all the time. There aren't corporations and stakeholders in most home sales.
So when a seller is spooked about higher interest rates, they get spooked out of the market. They will decide that selling my home now, although being a hot commodity to the market, need to worry about potentially higher rates and a bigger mortgage than what I have now.
And this sentiment is what is driving our active number of listings to continue to decline each month since our peak in June. Sellers are worried about the uncertainty of the market and for the most part are worried that if they sell, there is nothing for them to buy.
When the number of listings drops, buyers have less selection, leading them to bid on homes that are available, which in turn increases pricing.
With more uncertainty from higher rates, legislation, and not knowing where they can go, sellers are not entering the market as fast as the demand would like, leading to buyers paying higher prices and higher interest rates.
Now you might point out and say that the single-family segment has seen a drop in pricing, as we mentioned above. That is 100% correct. But if you ask any Calgarian, if they feel a single-family home median price should be $560,500, you would get a unanimous response of it still being very high for our city.
As long as our inventory levels are this low, we will continue to see pricing remain strong. And so far this year we have followed the same seasonal trend of 2021, which means the market will continue to see higher prices as absorption rates increase and the level of listings decline into the holidays.
As always, thank you so much for taking the time to review this breakdown. I hope it was useful and provided you with some insight into where things are heading as we enter 2023.
if you'd like to connect, feel free to send me an email at firstname.lastname@example.org or send me a message with the number below.
Have a wonderful holiday and I hope 2023 brings with it plenty of joy and happiness to you and your loved ones!