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Calgary Real Estate Update
by Frank N. McCullough, BBA, M.Eng. REALTOR October 2010 Edition # 43
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Dear Friend,
Calgary, end of September 2010: The newsletter is back after a summer hiatus which was partly due to the slow summer market and partly due to my busy schedule building my dream house. The statistics below give you the big picture of fizzled spring demand, slow summer and my anticipation of a better coming market.
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| Graph 1 - No. of Avail. Listings at Month End |
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Supply Analysis: Inventory rose dramatically in the first half of the year in the same patten as 2008, but did not reach the same levels as the infamous year of the financial crisis. It did, however, increase substantially from 2009 levels as a result of the Euro crisis and faltering American economy. The talk of the "V" recovery was replaced with "double dip" worries. Looking back we can see the result of the "V" recovery thinking after June 2009, when the market inventory moved back into normal levels. This year started off with high hopes, but as inventory levels show, 2010 has mostly been a reflection of 2008. However, I believe within the next 6 months we are ready to break out of this pattern and move to more normal annual levels, maintaining within a range of 5,500 - 7,500 listings.
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| Graph 2 - No. of Sales per Month |
Demand Analysis: Demand is the big story this year. This spring Calgary's market started reasonably well and had fizzled by March. It seems that buyers were spooked by the Euro crisis and since then simply decided to wait it out. This is interesting though: In 2009 we can see how demand recovered from exceptionally low levels, broke through average sales in June and stayed pretty excited for the rest of the year. Then spring 2010 continued that stronger demand, but the Euro crisis stopped the spring market in its tracks by March. Since then property sales have dropped to levels lower than we have seen for more than a decade (the last time September was below 1,640 sales was September 2000 with 1,565 sales). I believe a relative low point has been reached in August, and we can see potential of a returning demand in September.
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| Graph 3 - No. of Sales vs. Average Sale Price |
Price Analysis: Price averages and medians in a stable market will have greater relevance than in the recent past market. The average according to the graph has both increased and decreased significantly. From the contrast of increasing inventory and decreasing sales, one would expect prices to drop, and quite possibly significantly.
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| Analysis and Opinion |
We currently are in a very slow market, with low demand and high inventory levels. At the big picture level, this is not very surprising: we have weathered a worldwide financial crisis and after a premature upturn have faced a second impact on financial confidence in the Euro crisis. We are, I believe, now beginning on a path of recovery. Canada is one of the resource counties that will provide the fuel for the emerging economies. As such, it relies somewhat less on the US for economic stability each year.
The US is on a road to repair of confidence in its economic system, however it faces many challenges, and these can be expected to take more time yet, especially if the result of mid-term elections is to take apart proposed legislation to reform the banking system. We will be happy once the new regulatory system is working and allows the world to believe in the US dollar again.
In Canada we have strong banking, and increasing exposure to world markets. As Canada's 4th largest city and centre for energy resources, Calgary has a great future. While we were carried along and were part of our own booming mentality in the time leading up to the economic crisis, we are very likely among the first to recover. My opinion is that we are now just passing the second, less violent eruption that stemmed from the corruption of the US banking system. Regardless of whether the US financial system is sorted out, there will be a recovery and it will involve Canada. I don't expect any further shocks to the world economies. For this reason I'm calling the bottom of the market in Calgary. What this means is that I expect that we will see a relative decline in inventory month over month for the next 6 months and a return toward normal inventory after that . Also that we will see more confidence from buyers, who rightfully have been skeptical, and that again over the next 6 months we will see relatively increasing year over year demand.
Frank & Mitzy
Copyright © Oct. 12, 2010 Frank N. McCullough
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Frank N. McCullough
BBA, M.Eng
ABR®
Associate Broker
403-542-1799
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FOR SALE
Garrison Green SW
$585,000
Elegant Townhouse ~ 3 Finished Levels. Double detached garage and backyard patio. Spacious with 9' ceilings and large rooms. Kitchen has island with sink, gas range, granite counter tops, maple cabinetry, and walk-in pantry. Basement has basic Master Loft with deluxe 5-pce ensuite bath and "dance-in" closet. Clean and tidy and just painted in pleasing tones. Simply move in and enjoy!
Full details
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Mitzy Molberg
Certified Condo Specialist, ABR®
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