The Calgary Real Estate Board recently released its monthly resale figures for August 2018, reporting gains in new listings, easing sales, and high inventory levels.
The oversupply is driving prices down. The benchmark price in Calgary dropped 2.4% compared to the same period last year. The detached home supply is sitting just below five months, which is great compared to Toronto, but still not ideal. The average price of a detached home in Calgary fell 0.74% compared to July 2018, and 2.6% year-over-year.
Though new listings in the condo apartment market moderated, there is still an oversupply issue, driving prices lower. Year-to-date, there have been just 1,892 condo sales in Calgary.
Overall, there were 1,490 home sales in Calgary in August 2018, which is a 7% year-over-year drop, and it’s 14% below the long-term trends.
“Calgary’s employment market has persistently high unemployment rates at 7.9% and recent job losses in full time positions. The struggles in the employment market are one of the factors weighing on our local housing market,” says CREB chief economist, Ann-Marie Lurie. “A slow recovery in the energy sector combined with tighter lending conditions and competition from the new home sector are also contributing current housing market conditions.”
When there’s oversupply in the resale market and the new home market is also an attractive option, buyers will take longer to decide, potential sellers will sit and watch the market, and prices will inevitably drop. What’s to be done? In an ideal world, there’s a healthy balance between supply and demand in both the resale and new home markets, but that’s easier said than done.
One of the most important takeaways from the Calgary market is how important employment is for a housing market to flourish. This is not brain surgery. People need jobs to afford a down payment and qualify for a mortgage. The more people who are unemployed, the fewer homes will trade hands.
According to Statistics Canada, Toronto’s unemployment rate has hovered around 6% for the last few months. Without question, if Toronto’s unemployment rate fell another 2% to where Calgary’s currently sitting, we’d see a significant blow to the real estate market.
It was recently announced that Ontario led the country in job losses, dropping more than 80,000 jobsin August. A lot of students go back to school in September, so that probably accounts for a good chunk of the job losses.
As the municipal election campaign is underway, let’s keep in mind that while increasing new home supply is essential to improve housing affordability, it is also extremely important to ensure there is an abundance of job and career opportunities.