Weekly Real Estate Update: Mon Apr 20 – Mon Apr 27

Calgary
6001 homes for sale in metro Calgary
1818 homes sold in the last 30 days
3.30 months worth of inventory
30% of the homes statistically to sell in the next 30 days
Market Conditions: Balanced
Average List Price : $477,272
Average Sale Price : $463,704
Average days on market : 40
Average list to sale price ratio : 97.2%

Calgary Market Watch

Calgary Market Watch

Oil Prices VS YYC RE

Can you time the bottom of the real estate market in Calgary?

Everyone always wants to buy real estate at the bottom of the market and sell at the top.  The question everyone wants to know right now is – When are we at the bottom and how do we know?

Most people rely on gut instincts.  They listen to the media or wait to hear their friends and coworkers assuring them that things have gotten better.  Sadly, if you wait for that moment, you are already too late to reap the rewards of low real estate prices.

Let’s make sure we understand the fundamentals of real estate pricing in Calgary, consider the following.  Then we will move on to the BIG question.

How is value determined in real estate?

Real estate markets are fueled by supply and demand.  Specifically, the supply of homes and the demand for them, are what informed buyers and informed sellers agree to buy/sell a property for.  Do we sometimes get uninformed sellers selling homes for far less than what informed sellers would?  Yes.  Do we sometimes get uninformed buyers paying far more than what an informed buyer would?  Yes.  That being said, it is not the one offs that determine price, the consistent actions of informed buyers and sellers do that.

Demand

In Calgary, it is believed that the price of oil affects the demand for homes.  This manifests through people’s willingness to buy homes or what value informed buyers feel is fair.  In the past 30 years we have seen oil prices drop significantly five times.

February 1986 – December 1986 (10 months)                  49% drop in oil prices.
August 1991 – January 1992 (5 months)                           29% drop in oil prices.
September 1997 – February 1999 (17 months)                 27% drop in oil prices.
June 2001 – March 2002 (9 months)                                 27% drop in oil prices.
November 2008 – September 2009 (10 months)               50% drop in oil prices.
December 2014 – current (4 months so far)                      50% drop in oil prices.

So what did this mean for the price and demand for homes.

1986               49% oil drop             8% increase in real estate prices
1991               29% oil drop             2% decrease in real estate prices
1997               27% oil drop            7% increase in real estate prices
2001               24% oil drop             7% increase in real estate prices
2008               50% oil drop            7% decrease in real estate prices
2015               50% oil drop             7% decrease in real estate prices

(Please note all increases or decreases are based on averages.  Each community, style of home, type of home, etc. will have it’s own influencing factors).

As you can see, to simply say that every times oil drops, home prices or demand drops, is inaccurate.  Oil certainly can affect our markets but so do exchange rates, employment levels and interest rates.  A 2005 study by Mercedes A. Padilla, Master of Entrepreneurship from MIT shows that these four factors explain 98% of the ups and downs of Calgary home prices.

Supply

The supply side of real estate is also complex.  When it comes to new homes, Calgary developers are wary of overdeveloping new stock, if it’s not demand driven.  Developers tend to build when prices have already gone up, not in anticipation of it.  This greatly minimizes the risk of Calgary seeing an oversupplied market and keeps a steady increase of stock throughout the years.

That being said, Calgary has been in a supply shortage since the end of 2012.  This is partially due to the city’s need to upgrade the NW sewer lines and NE water treatment plants.  This infrastructure deficit has caused the developers to ration lots and the City to be extra cautious in approving new home permits in developing suburban communities.  (The NW sewer line upgrade is not anticipated to be complete until 2016-2017).

At the time of writing this, the Calgary is sitting at an inventory level of approximately 6080 homes for sale.  This is the similar inventory levels Calgary had in 2005.  Considering the City has increased by roughly 400,000 people since that time (even more if you account for growth in the bedroom communities around Calgary) you can clearly see that our inventory levels are not keeping up with our population increases.

Additional Factors

In 2008, when we saw the last decrease in Calgary real estate prices, we had a multitude of different factors at play that we don’t this time.  We were in the midst of a global economic downturn, credit was significantly cut off, the United States was in horrible economic shape and Calgary was already in a downward spiral from bubble type condition from the housing market of 2007.

Seeing the “correction” of the market this time was not unexpected.  In fact market corrections occur all the time.  Calgary had seen above average inflation since the beginning of 2013.  This inflation had placed home prices about 4.5% over our trend lines.  This above average inflation also explained why Calgary was one of the top three cities in Canada to watch for in real estate investment.  The only thing that came unexpectedly was the massive dip in oil prices.  Before that, the school of thought was that once the sewer line upgrades were complete, more new homes would hit the market and even out our supply.

Another factor to consider is the current municipal political climate.  Given the direction being taken by City Council, there is still uncertainty that even with the completion of the sewer line upgrade whether new lot permits will be made available.  If municipal administrators continue to restrictively release new home permits, this will continue the shortage of inventory and home prices would continue to increase at great rates of return.

So is this the bottom of the Calgary real estate market?

I think it is as close as you are going to get to the bottom of the U pattern real estate markets travel in.

Right now we are really in a “We’re not sure what’s happening so we are just going to hold off” period.  We do have a supply issue.  And the low oil prices have caused some short-lived uncertainty causing a temporary demand problem.  But when you look at the numbers, as we do week by week, you see the following.  At the beginning of 2015, Calgary’s average home price was $500,000. The lowest point came in March when we saw average prices lower to $459,000. Since then we have seen the average price slowly climb to $466,000.

Oil prices slid from $75 a barrel in November 2014 to the lowest point of $47 in March 2015. Currently oil is sitting at $55. If this continues, this will elevate the feeling of uncertainty and demand will most likely return, leaving us only with the supply shortage we had before the oil price downturn started.

To say anyone can predict the economic future of our city, province or country with 100% accuracy is irresponsible.  All investments come with risk, and the best you can do is make informed decisions.  The nice thing with real estate is there is never a bad time to buy, just a bad time to sell sometimes.

Don’t worry it’s not all doom and gloom.  Calgary was fortunate to have a soft landing this time due to the improving economic US market, low interest rates, an improving dollar against the US green back and an employment shortage of skilled labour.  Although we are sensitive to economic shocks, we are resilient and will feel confidence and demand return very shortly to the Calgary real estate market.

 

crude

Weekly Real Estate Update: Mon Apr 13 – Mon Apr 20

Calgary
6085 homes for sale in metro Calgary
1743 homes sold in the last 30 days
3.49 months worth of inventory
29% of the homes statistically to sell in the next 30 days
Market Conditions: Balanced
Average List Price : $477,405
Average Sale Price : $464,367
Average days on market : 40
Average list to sale price ratio : 97.3%

Calgary Market Watch

Calgary Market Watch

Weekly Real Estate Update: Mon Apr 06 – Mon Apr 13

Calgary
6048 homes for sale in metro Calgary
1632 homes sold in the last 30 days
3.71 months worth of inventory
27% of the homes statistically to sell in the next 30 days
Market Conditions: Balanced
Average List Price : $483,089
Average Sale Price : $469,660
Average days on market : 40
Average list to sale price ratio : 97.2%

Calgary Market Watch

Greener Pastures

green grass

Want a yard that’s green in more ways than one? Follow these eco-friendly tips for creating and maintaining an outdoor area that’s easier on the environment.

Go Native: Reduce – or even eliminate – the need for watering, fertilizing, and pesticides by planting species of trees, shrubs, flowers, vines, and grasses that grow naturally in your regions climate conditions. There are more choices than you think!

Go Chemical-Free: If you’re going to use fertilizers and pesticides, buy natural alternatives or make your own. Turn organic yard and kitchen waste into compost, for example, or mix pesticides using ingredients you like already have in your kitchen.

Go Natural: For your yard’s landscaping elements, opt for natural, sustainable materials. Think patios and pathways made of natural stone, like slate, and decks made of reclaimed wood, bamboo or a composite of wood and post-consumer recycles plastics.

Go Solar: Solar energy is renewable energy, and it powers landscape lighting for every application you could want: floodlights, string lights, steak lights, deck lights, or lamp posts. You can even incorporate solar-powered water features into your landscaping.

Go Old School: Hand-powered gardening tools like push mowers (which are now much lighter and easier to use), rakes (as opposed to leaf blowers), and pruning saws are not only eco-friendly, they’re cheaper and give you a bit of a workout, too!

Looking Inward

Needs vs. wants lists aren’t just for first-time home buyers. What are you looking for in your next home? To start thinking about your answers to that question, ask yourself these questions:

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How have you used your current home, and how would you ideally like to use your future home? Maybe your current home has also served as your home office, but you’ve retired and want to do more entertaining. In that case, you’ll no longer be looking for a home with office space, but rather one with a big eat-in kitchen.

What do you love about your current home? What do you wish you could change about it? Your home might have the perfect amount of storage space – a feature you definitely want to take with you – but if the poor layout has been a daily inconvenience to you (your definition of) a good floor plan should be high on your needs list.

What do you love about your current neighborhood? What do you wish you could change about it? A home’s location is every bit as important as the home itself. Maybe your kids have really enjoyed the local rec center, but a long commute time has been preventing you from being to take them there as much as you’d like it.

What does your life look like now? What will it look like in 5 years time? 10 years? How long do you plan on staying in your next home? For example, proximity to good schools or heath-care facilities might not be important to you now, but as you expand your family or enter retirement, they’ll become more of a priority.

Cabinetry Cures

Kitchens and bathrooms are arguably the most important rooms in a home, and their cabinetry is their focal point. Do you have cabinetry that’s looking worse for wear or is just plain outdated? If so, rest assured there’s a makeover method to suit every budget and need.

If your cabinetry is structurally sound (solid joinery, doors and drawers open and close as they should) and there are no signs of water damage or excessive wear and tear (rot, cracks), then there’s likely no need to spend your money replacing it entirely, as your cabinetry is a good candidate for refurbishing. Lets look at your options:

Refinishing: This is a great option if you like everything about your cabinetry but the color or finish. It’s certainly the cheapest way to give your cabinetry a face lift, but as it involved stripping, sanding, and painting or staining, refinishing can be labor intensive, time consuming and messy. Keep in mind your cabinetry must be in great shape (surface prep is key!); not all materials take paint well (wood is good, laminate isn’t); and it’s harder to lighten cabinetry than darken it.

Refacing: This involves installing new (or veneering over) door and drawer fronts, and veneering the visible parts of cabinet boxes. Even if you hire a professional for the job, refacing is substantially cheaper than replacing your cabinets. Unlike refinishing, you can completely change your cabinetry;s style, giving you greater freedom to shake up the look of your kitchen or bathroom, which can remain functional while the work’s being done, making refacing a less intrusive process.

Replacing: If, on the other hand, your cabinetry has simply seen too much wear and tear, was never good quality in the first place, or you’d like a different layout (maybe one with more storage space), replacement makes the most practical sense. If money is no object, go for custom cabinetry, but if it is, opt for unfinished cabinetry and finish it yourself. Be warned: the replacing process is relatively long and disruptive, as all contents must be removed, and appliances and plumbing need to be disconnected.

Rejuvenating: After all the effort and expense of refinishing, refacing, or replacing your cabinetry, it would be a shame to use the same old hardware. Installing new knobs, pulls, and hinges is an easy, inexpensive way to update your cabinetry. In fact, if you do nothing else to it, do this! In addition to aesthetic appeal, hardware can add functionality. Take self-closing hinges and drawer guides – by preventing slamming, they help preserve your cabinetry’s finish extending it’s life.

Speaking of functionality, consider outfitting the insides of your cabinetry (which, by the way, can also be veneered, painted, or stained for a new look) with accessories that save space and make your kitchen or bathroom more user-friendly. Drawer organizers, lazy Susans, roll-out shelving, pull-out garbage bins – there is no shortage of options!

Weekly Real Estate Update: Tues Mar 31- Tues Apr 07

Calgary
5951 homes for sale in metro Calgary
1683 homes sold in the last 30 days
3.54 months worth of inventory
278% of the homes statistically to sell in the next 30 days
Market Conditions: Balanced
Average List Price : $485,241
Average Sale Price : $471,593
Average days on market : 33
Average list to sale price ratio : 97.2%

Calgary Market Watch

Calgary Market Watch