Monday, December 5, 2022 / by Viktor Boraczuk
DECEMBER 2022 MARKET UPDATE
Calgary - Canada's Real Estate Bright Spot
The November Real Estate Data is in, and our market is showing continued strength, security and has been nearly completely spared from the national housing price crash concerns. If you scour your favourite news sources, you’ll be sure to find articles such as this:
Special report: five top towns for real estate investors in 2023
Job-generating, affordable Calgary tops our annual list
Alberta Housing Prices Are Predicted to Rise in 2023 as more people move to the province
These areas are about to get pricier
Beginning of the end for Canada’s housing market downturn? Calgary the exception to the rule
So, the secret is out! The national news has finally caught up with the times and people are taking notice. It all breaks down to this: Amidst this continued ‘market shift’ hitting North America, Calgary is proving to be the one place that could avoid all of it. Not only that, but it’s also more likely we will see an increase in prices in 2023 versus any chance of a downward slide. What we know is this:
Interest rates at their new highs are here to stay and stay for a while. It may bump up a little more with the December 7th rate news, and it may come down a little at the back half of 2023... but, more or less, what you see is what you are going to get for the foreseeable future. And Canadians are now getting accustomed to it.
Real estate deals happen because life continues to happen despite the changes to the global economy, rate changes and stock market swings. Babies continue to be born, kids graduate from high school and college, marriages happen, deaths happen, divorces happen, investment happens, retirement happens, etc.
So... real estate will, no doubt, continue to be traded just as often as it ever was and more people are choosing to live in the Greater Calgary area than ever before (and this trend won’t be slowing down for a long time). Couple this with the latest news...
- The lowest inventory levels we’ve had since 2005 (and here is the kicker... our greater Calgary population was only at 1,056,000 then and now it’s 1.6 million+!)
This means we’ve added 50% to our population and our inventory levels right now equal that of a market with 600,000 fewer people. So, the inventory story isn’t just that we are low, it’s that we are incredibly low especially when we factor in our population growth and corresponding needs.
- Sales are down from last year, sure – the data shows -20% from last November – but sales are still flying high at 12% over our 10-year average. But there is another story brewing here yet to be talked about...
- While our sales have pulled back due to rapidly rising interest rates, net migration & overall in- migration is ballooning to all-time highs for our city. So, in that situation what do you think tends to happen?
- We have a huge number of people stepping into the rental pool, driving rents up to new highs (and we are seeing that right now).
- But as those people take a moment to assess or get accustomed to the new city they just moved to; they are in essence preparing to make a home ownership decision.
- As people get settled and as rates begin to flatline or slightly decrease in the coming year, this will result in sky-high demand in our market, driving another spike in house prices.
- And, finally, our benchmark sales price has nearly held on to its 2022 peak.
So, yes, despite all these crazy changes, the only market that’s seen a little bit of a price decline is the Detached market (down about 4% from our March/April high). All other property types have either seen a pure flatline or a slight increase in their value.
If you are a homeowner reading this, you can feel confident that your equity hasn’t eroded much at all, and your real estate has been the been the best asset to hold while the world shakes and shutters here for a bit. So, as a result, as I write this on December 5th, I’m going to plant a flag here – something I rarely fully stick my neck out and do – and say that this, right now, is our bottom.
December’s numbers, as they always are, will be very light, which means not a lot of sales and we will see another massive reduction in inventory (probably to levels we’ve not really seen since the turn of the century). This, despite being in the slowest part of the year, will keep pricing flat (not declining).
And then, as we open back up from January onward, Greater Calgary will see a rise in its pent-up demand, buyers will come off the fence as life plans start to take hold, and we will see 2023 drive a pretty significant year-over-year price increase once again (just as our November data showed a 9+ percent year-over-year increase, or an extra $50K+ per average household, give or take)
So, what does all this mean?
Right here, right now in December will be the best prices you will ever see again in the Calgary housing market. So, if you can grab a deal now, go for it! Do it with confidence.
Some builders have gotten a little antsy as sales have slowed because they have true costs now on the table (staffing, payroll, overhead, lending costs & debt on nearly completed projects for which they need to get rid of), so to keep their machine rolling it’s quite likely you’ll see a little give from them right now.
But I predict that will go away very quickly as we roll past the Christmas holidays and the market fully awakens in the new year. So that’s really it for this month. I felt there was no point hitting you with all the data from last month’s results – the picture I’ve just painted is the most important thing for you as you look to make your real estate plans and decisions.
As always, this is an overall summary, not advice to be taken for each satellite market, each price point, or each property style. Be sure you consult with your agent to build your strategy utilizing this summarized message I’ve provided.
Happy Holidays, and I hope you have incredible month of December.
See you in the new year!
Calgary House Guide