CREB Forecast for 2020: A Breakdown of the Data

The Calgary Real Estate Board annual forecast conference and trade show took place on January 14th and as always, the chief economist Anne-Marie Lurie delivered her state of the union.

There are some very interesting data points that she covered and that are laid out in more detail in the report which you can download here.

Some of the takeaways you should be looking for in the report are the state of the market and how our economy is playing a role in housing prices and in-migration. Also be mindful of pricing and what the trend has been in the last 5 years and where the Calgary Real Estate Board feels we are headed not just this year but beyond.

The Last Five Years

The past five years in Calgary with respect to the Benchmark pricing and the market overall, has not been kind. The market including all segments is down a total of 7.8%, which has been good news for buyers the last half decade, but not so much for sellers especially if you bought in between 2012-2014 and were looking to sell within that timeframe.

Let's look at each segment and see where things shook out the last five years in Calgary. If you're interested in knowing the top 5 neighbourhoods to invest in Calgary then click here.

Detached Single Family Homes in Calgary: This segment of the market is down a total of 5.6%, not quite as high as the total residential but still just over 1.1% per year decline in benchmark pricing.

Semi Detached Homes: This part of the market has seen a lot of growth in the inner-city and perhaps why it has the lowest decline of each of the segments coming in around 3.4% lower over the last 5 years.

Apartment Condos: Out of all three segments, apartment style condos have been hit the worst, the market in this sector is down a little over 3% per year the last five years with the benchmark pricing coming in 15.1% lower. This is mainly due to a massive oversupply in the market with new builds flooding the market as well as a lower demand for this product.

Row Townhouse: This sector of the Calgary real estate market is second in declines to the apartment segment coming in 11% lower or a decline of 2.2% over the last 5 years.

The declining market has to do with a number of factors:

• Drop in oil prices in October of 2014
• Loss of oil sector jobs
• Massive decline of in-migration into Calgary specifically
• Bumps in overnight lending rates by the central banks 
• Adjustments by government to the lending rules

The last five years in Calgary have been tough, the economic climate has certainly had an impact but also consumer confidence has been down these last 5 years which puts a lot of pressure on the market. 

The Path Ahead

There is still a lot of turmoil in world oil markets with what is happening in the middle east having a global impact on the price of oil. 

Global stock markets are seeing some volatility as a result of trade wars leading to investor anxiety.

Look to the central banks (Bank of Canada) to hold their overnight lending rates steady moving in to 2020, there is a lot of uncertainty in the marketplace right now and they are going to keep a close eye on economic growth as well as inflation rates.

Prices in Calgary are not expected to be any worse than they have been the last year or so, in fact, the forecast suggests only a slight decline in pricing of below 1%. If we take the positive from that we could actually say the housing market locally is set to improve.

Only dropping .89% versus a decline of 3% would in my books suggest an improvement. Some might say the bottom won't hit this year if we are still expecting the market to drop and they could probably make that arguement. However, if we see an increase in in-migration to Calgary this year (which is expected) we could see further pressure put on the rental market pusing vacancy rates down from the 4% that they are sitting at right now.

What we know about the correlation between vacancy rates and prices in Calgary is as the vacancy rates drop, prices increase due to a demand on housing. We could also see this demand create pockets of seller's markets in certain neighbourhoods, as inventory levels have been on a downward trend and sales are on an upward trajectory.

This is of course the 'perfect storm' type scenario, so the chances of this playing out in 2020 are probably slim but there's always a chance.

Advice for Buyers and Sellers

Sales are looking to maintain where we were at the end of last year, up over the previous year. So for buyer's depedning on your price point, be ready to pounce on that property that is well priced in the area that you desire.

Iventory levels will also be on the rise with expectation of around 600-800 new listings in January and February with as many as 2500 new listings by the end of the 1st quarter of 2020. Meaning, you will have a good selection of homes in areas that you desire.

For anyone that is looking to sell, keep in mind that there hasn't been a price point or a neighbourhood in Calgary that hasn't been impacted by the downturn. Make sure your expectations are realistic and also ensure that your property is going to appeal to buyers.

That means making all the minor fixes, maybe having the home staged, pricing it right and making sure you hired the right Realtor to help with the marketing and sale of your home.

The market is going  to improve, we are going to see an increase or at least a maintenance of the sales we saw in 2019, inventory levels will be manageable in relation to demand. Overall, the real estate market in Calgary will be looking to balance out by the end of 2020.