Robyn Moser’s 2015 Real Estate Opinion
The Calgary Real Estate Board came out with the 2015 Real Estate Forecast on Wednesday. That forecast predicted we would see a 4% drop in sales yet a 1.5% increase in home prices. They felt some of the influencing factors in 2015 could be; volatility in the energy sector, lack of employment growth, lack of investment, leveling off of net migration, increase in rental vacancies and weakening consumer confidence. I couldn’t agree more.
CALGARY HAS A SUPPLY PROBLEM
Real estate runs on supply and demand. Calgary has a supply problem and has since Feb 2013, if not longer. This supply problem has been caused by our inability to service new lots in the northern parts of the city due to lack of infrastructure. The City of Calgary has been limiting new lot permits in these areas for a few years now. The new home market in previous years allowed our supply to match or exceed demand. Being cut off from this supply has allowed Calgary’s prices to inflate into unsustainable inflation. We knew once the infrastructure could be put in place that our market would stabilize. We expected this to be completed around 2017.
LOW OIL PRICE EFFECT
Since February 2013 Calgary has been sitting in a sellers market. This means we had low inventory, high demand and above average inflation of home prices. This course was unsustainable. Low oil prices will cause our energy sector to pull back on growth allowing demand to ease on an over heated market, allowing us to find a balance of supply and demand. This is good thing. This balance was expected to not come until closer to 2017. The ability of home buyers to slow down and make an educated, rational choice is important when buying the largest investment of their lives.
There is no such thing as a bad market. All markets and conditions have different opportunities. Sometimes those opportunities fit into your financial/life plan and sometimes they don’t. The market we are entering into will be similar to the market we saw in 2012. Right now we are all sitting back wondering how long these low oil prices will last. It is true the longer they go on the more worrisome it becomes for the Alberta economy due to our heavy dependence on the energy sector. 2015 will be more of a wait and see approach by most of the general public especially over the first half of 2015. If your real estate sky didn’t fall in 2012, then it shouldn’t fall this year.
ARE HOUSE PRICES OVER INFLATED?
Yes, by 0.5% in accordance to my inflation graph and trend line based off statistical data from the MLS.
No. This is what I like to call a hesitation. Since 1995 Calgary real estate has increased at an average amount of 5% per year. Anything between zero to four percent is the market hesitating, anything over six percent is above average inflation. Anything less than 0% is deflation. I expect a hesitation. I will only become concerned if we do not see the oil price recovery in/by the last quarter of 2015. If we enter 2016 with $40 per barrel oil I will expect to see a consistent buyers market.
HOW DOES THIS AFFECT YOU?
The question “is now a good time to sell or a good time to buy?” is a case-by-case basis. To say there is a blanket answer to that is irresponsible. If you want to invest, the question is what rate of return are you looking for in what time frame? If you want to buy a home to live in, the question is how long do you want to live there and what do you need out when you move again? If you need to sell, when did you purchase, at what price and where are you going? If you want to flip a house, what time frame will it take to complete the renovation and what return are you looking for? You can see how this answer could never be the same for all in the same moment when all needs, wants and goals are different. If you want to know if this is a good time to buy or sell for your specific needs and timeline, talk to a licensed professional that has a passion for knowing and understanding this industry. Someone who can talk to you with statistical data and interpret how that data translates into a path to your real estate goals
2015 ITEMS OF IMPORTANCE
1) We expect to see interest rates increase .25% in the last quarter. Usually a raise in interest rates will speed up a market due to people trying to get into the market before rates rise further.
2) Doom and gloom sells better. Make your market decisions based on fact, not emotion and 10 second sound bites.