Each day I spend in real estate I get asked the same question.
How’s the market?
And the way we answer this question is critical to how that person or client perceives us and our business. If we say, “I’m super busy!” The person might take that as we are too busy to speak to them and their needs.
If we say, “Things are a bit slow”, the interpretation is that this agent isn’t successful and might not be able to service my needs in real estate.
But over the years, my answer to this question has really become,
“It’s interesting, to say the least!”.
And the reason for this answer has been because of months like May.
The month of May has been some shocking results across the board. The market is no longer just interesting but now has evolved to the definition of being busy not being the number of transactions we complete but finding the right buyer and sellers for the few deals that are happening.
In the month of May, we saw our absorption rate (ABS) skyrocket to 92%, which is the highest rate in the past 2.5 years. This is also the highest it has been since I started this breakdown in 2019.
This means that for every 10 listings that were available for sale in May, at least 9 of them would sell in the same month. A rate this high is completely sided towards the seller and will leave more and more buyers vying for the same property leading to continued multiple offer situations and competing offers.
This unprecedented rate is solely attributed to our supply and demand in Calgary. Listings in May only grew 2 % from the previous month and are still down 61% from the same time last year.
Sales on the other hand increased 16% month over month and only improved 2% from this same time last year.
The number of buyers in the market has increased to the same levels as last year in the summer market whereas the inventory available has not.
This drive in the demand has led to pricing continuing to grow into May.
All segments of the market have seen a nearly 10% increase from this same time last year. A detached median-priced home in Calgary currently sits at $656,000.
Although the pricing continues to see inclines from last year the saving grace for buyers can come from the lack of change month over month with all segments relatively the same in pricing from April.
However, this slowing in price may only be short-lived.
We are now going against the last two years' trends of following ABS rates which usually show the number of listings starts to increase as we get into the summer. With the number of listings coming on continuing to stay flat (gold colour on the graph), we can expect the ABS rate to main or increase as we head into the summer months when inventory is seasonally low.
Getting 92% on an exam is amazing. I would be over the moon when I would get one of these (usually because they weren’t that common L). But when the kids get it, I’m absolutely thrilled.
I’m not so thrilled when I see it in our ABS rate and our market activity.
These high rates mean those buyers that are challenged with finding a home are getting squeezed out. Those that rely on mortgages for funding their purchase for example.
I represented a buyer last week that needs the conditions of financing to proceed with the sale. Once we submitted the offer, we were one of 10. I received a note from the selling agent that the seller is only considering unconditional offers now and all others are not going to be considered.
The above scenario is scary.
Most buyers that are Millennials haven’t had the luxury of saving the amount needed to buy a home outright and will continue to lose to other generations that have the wealth to do so.
Not to mention that rents continue to increase in Calgary. The last rent I heard for a basement 1-bedroom suite was close to $1,200/month. 2-bedroom, 2-bathroom apartments are closer to $2,200/month.
So where are they supposed to go? It’s truly a difficult scenario to see and work in.
But there are solutions. They come with compromises but there are ways of being competitive with other offers and putting money aside that can help you win.
Working with the right professionals like a realtor and mortgage broker can build this path.
The increase in activity from buyers significantly increased in May. And I don’t think it has anything to do with the weather or them just realizing they want to find a home.
It has everything to do with the rates that were offered in May. Especially the fixed insured rate.
There were some lenders that we work with that were offering rates as low as 4.39% on a five-year fixed term.
In today’s climate, this is very low. Especially considering the prime rate is currently sitting at 6.7% and the best variable rates I’ve seen are 5.5%.
So when the purchasing power increases because of a lower rate, you have to pounce.
And oh did they ever. 16% increase in buyer activity month over month is not by accident.
But rates are on the up now. The best I have seen is currently 4.89% for a five-year insured. It is a small increase but can have significant effects on the purchasing power of a buyer that needs to be tested at 6.89%.
This increase will slow buyers slightly, but the lack of inventory will continue to increase prices through the bidding wars each home will demand.
If you are a seller or even someone that has bought a home in the last two years that would like to downsize, now is your time to sell and move to what you want. As the summer continues you will continue to see your favourability in the market increase.
Buyers, I feel for you and want you to know there is a path. Understanding your numbers, getting pre-approved, working with an agent to find you homes faster than the MLS and having a mortgage broker that understands the ins and outs of the constantly changing lender requirements is critical.
Knowledge is power in this market. Relying on the MLS and realtor.ca to find your next home is too slow. Hoping to find a deal by working with a listing agent instead of having your own does not help.
If there is anything I can do for you to achieve your home ownership goals, I hope you know it would be my pleasure.
Sellers, the same for you. I want to try and get in front of as many homeowners as I can to show how much they can get from their investments. Calgary and Alberta homeowners have waited a long time to take advantage of the real estate market, I just don’t want you to see it slip by.
As always, thank you for your time and I hope you found the information useful. Take care and please connect with me any way below. I’d love to hear your thoughts on this piece, your real estate or mortgage goals, and really anything else you’d like to chat about.
Take care and thank you,