The Calgary real estate market remains in territory that I think is best described as a "very much a buyer's market" according to the July 2008 MLS stats. Total Calgary Metro listings at the end of July was 9217, and properties sold was 1848, yielding an overall Absorption Rate of 5.15. (See Chart A and Chart A2) Although the number of listings continues to come down since the "high water mark" of 10,617 in May 2008, there are still far more properties on the market than there are buyers to absorb them. This continues to bring prices down as sellers who are serious about selling adjust to the facts of the market.Single Family (SF) House sales continue to outpace condos. The absorption rate for SF Houses stands at 4.92 at the end of July and for condos it is 5.72 a difference of 0.8. This is a significant gap and something condo owners need to consider when selling. Overall the market is very slow, and for condos it is even slower. This is not a monthly statistical "blip" - this divergence of the SF house and condo markets began in December 2007 and the gap has grown since. I predict condos will continue to lag behind houses in both sales and price for another 12 months or so, until the inventory of new condos coming on stream is absorbed. This bodes very well for condo buyers, as prices are coming down, but obviously bodes ill for condo sellers for the same reason.
Median prices stand at $408,500 for houses, $267,500 for 2-bed condos, and $235,000 for 1-bed condos at the end of July. In July 2007 median prices stood at $435,000, $295,000, $255,000, for SF Houses, 2-bed and 1-bed condos respectively. So the drop in median prices over the last 12 months: $26,500 (6.1%), $27,500 (9.3%), and $20,000 (7.8%) for SF Houses, 2-bed and 1-bed condos respectively. Note that the drop in median price of 2-bed condos is greater than that of SF Houses - evidence that the lagging condo market is already showing itself in fairly dramatic price drops in condos. See Chart C.
So my advice to sellers is the same as last month but perhaps with stronger emphasis; It is crucial that you price your property for the new reality - not just taking into account the price drops of the last year, but that even with those price drops, the market is still no where close to being in balance with respect to supply and demand. So in this market, if you are a seller, you want to get ahead of the curve - if you price your property incorrectly, it will simply sit there, and by the time you reduce the price, the market will have adjusted further and you will still be behind the game. Consider your list price very carefully - you want to be ahead of the curve, not behind it, in this market.
Sellers should also consider spending money to sell their home which they wouldn't in a more balanced market. For example, staging a vacant home or bringing in a staging consultant to "freshen up" a furnished home. These can be expensive services, but with so many homes on the market - a $300 to $5000 staging can often have a greater effect than a further list price adjustment of say, $10,000. Bringing in handyman to do minor repairs and upgrades can also be a wise expenditure in this very competitive market.
My advice to buyers is that if the time is right for you personally to buy a new home then do it - you've got a great selection, and you can get more for money (almost 10% more to be precise) than last year. It is called a "buyer's market" for a reason - this is your market!
I get some buyers asking me if they should wait to see if prices drop further. My answer is that it depends on your personal situation and your priorities. If getting the lowest possible price was the only consideration in when to buy a home then there is really only one time to buy a home - when the market bottoms out before it begins to rise again. But there is problem with that; we never know when this instant in time is upon us - we only know looking back after the market bottomed out. But even more significantly, getting the lowest possible price is just one of the important considerations in when to buy. For example, you also want to consider the selection out there - the more homes on the market, the more likely you are to get everything you want in a new home. Also, if a first time buyer, you want to consider whether the amount you will save by waiting will be more or less than the amount you will save in rent by buying now. Also, you will want to consider your motivation for buying - if you want your own place, for example, to get away from an annoying roommate, then is it really worth putting off this dream for another 6 months to potentially get a better price?
So the answer to the "when to buy" question is a very personal one - it all depends on your priorities. But that is what good Realtors help their clients do - examine your priorities, talk about the pros and cons, and give you all the information for you to make the right decisions. If you are thinking of buying, call your favorite Realtor (suggestion: me) and schedule an appointment to discuss the market and your situation.
Mortgage Rates Steady
Only minor changes in mortgage rates this month. The one-year and five-year closed rates (average of all lenders) stand at 6.18% and 6.38% respectively. The variable rate is 4.35%. In the July, the Bank of Canada declined to change its trend-setting overnight lending rate - the Board of Governors is not scheduled to meet again until early September, so expect no significant changes in August unless there is an unexpected surpise in the financial markets. See my Mortgage Rate Chart here.
Andrew Kyle, B.ASc., is a REALTOR® with Royal LePage Foothills and a Certified Condominium Specialist.