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Detached homes drive Calgary sales growth in October

With strong gains in the detached sector, October sales in the city reached 1,764 units. This is a 23 per cent increase over last year and well above longer-term averages.

The gain in citywide residential sales outpaced the growth in new listings, supporting tighter market conditions and improving prices.

“Over the past several years, higher lending rates and the stress test pushed many out of the detached housing market. However, recent declines in rates, combined with prices that are lower than several years ago, have brought back some of that demand,” said CREB® chief economist Ann-Marie Lurie.

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New listings in September improved over last month, but levels remained comparable to the previous year. The increase in sales relative to new listings did prevent any monthly gains in inventory levels, but supply in the market is still down 12 per cent compared to last year. “The recent rise in new listings, combined with low lending rates and softness in prices, has helped support some of the recent upward trend in sales,” said CREB® chief economist AnnMarie Lurie.

“However, conditions vary significantly based on the price range and property type.” The adjustment in supply relative to demand has caused the housing market to move toward more balanced conditions. The current 3.7 months of supply represents the most balanced conditions seen for September in over five years. This has helped support some of the recent monthly gains in prices.

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Total residential sales in August were relatively stable compared to last year with year-over-year gains in the detached and row sectors.

These gains offset declines in the apartment and semi-detached products. 

With 1,573 sales in August, this is consistent with levels over the past five years. Year-to-date sales activity remains nearly 13 per cent below last year.

“Recent national reports have shown a bounce back to new record levels over the past several months. Calgary has seen improvements over the lows recorded during the lockdowns but is far from record levels,” said CREB^® chief economist Ann-Marie Lurie.

With higher sales for both detached and semi-detached product, July sales totals rose above last year’s levels. Despite the improvements in July, year-to-date sales remain 15 per cent lower than last year’s levels.

“There have been improvements relative to the lowest sales levels caused by COVID-19, but it is too early to say things are shifting back to pre-pandemic levels,” said CREB^® chief economist Ann-Marie Lurie. 

“We are still facing record high unemployment rates, significant government aid, and uncertainty throughout the business community. This will continue in the coming months.”   

After the first full month with social distancing measures in place, the housing market is adjusting to the effects of COVID-19.

April sales hit 573 units, a decline of 63 per cent over last year. 

“The decline in home sales does not come as a surprise. The combined impact of COVID-19 and the situation in the energy sector is causing housing demand to fall,” said CREB^® chief economist Ann-Marie Lurie. 

“Demand is also falling faster than supply. This is keeping the market in buyers’ territory and weighing on prices.” 

Sales activity eased across all price ranges, but the largest declines were for homes priced above $600,000. 

With a greater share of the sales occurring in the lower price ranges, the average price decline was more than eight per cent. Prices for the average home are also declining, reflected by the benchmark price, which fell by nearly two per cent compared to last year.

Homebuyers, real estate investors and industry commentators alike are grappling with the many ways the COVID-19 pandemic will impact Canada’s housing market and the path ahead as economic activity across the country cautiously resumes.

One approach in the search for clues on both the short and long-term market implications of the pandemic’s disruptive effects is to look at how the 2008-2009 global financial crisis played out.

While there are several quickly identifiable similarities — home sales falling dramatically, cuts to interest rates, evaporating buyer confidence — there are a couple of key differences to keep in mind as the pandemic wears on and the market adjusts to the challenging new environment.

In a report published earlier this month, BMO Senior Economist Robert Kavcic highlighted that Canada’s resale market “has effectively frozen itself in time.” New home listings, he wrote, are sharply declining alongside home sales which likely means that “the deterioration in prices should be contained for now.”

“Contrast that to 2008/09, when sales fell by almost 40 percent from the end of 2007 to the 2009 lows, but new listings rose by 15 percent through the early stages of that period — that’s how you get a quick and meaningful decline in prices,” Kavcic wrote.

So even though home sales figures looked bleak in the second half of March and entirety of April, there’s reason to believe that this strong economic shock will differentiate itself by not leading to a sharp fall in home prices.

“We suspect that sales and listings could both come back in rapid fashion, leaving broad prices steady through this challenging period,” Kavcic wrote.

That prediction has, so far, played out in the data published by real estate boards in major markets across the country. Average Toronto home prices rose a marginal 0.1 percent in April over the previous year even as sales declined by 67 percent. Meantime, Vancouver’s real estate board reported a 2.5 percent increase to its benchmark home price in April with sales hitting a 38-year low for the month.

Home prices tend to respond slower to changing market conditions than monthly sales volumes, but as businesses reopen and homebuying activity creeps back up, Canada’s housing market may resume activity closer to where it left off than the bleak April data would suggest.