CALGARY REAL ESTATE MARKET UPDATE

Second Half Of 2023 Is Looking Strong

BY ERLYNN GOCOCO

In recent years, the Calgary real estate market has experienced fluctuations, with factors such as a pandemic and increased mortgage rates contributing to these changes.

Today, the market is experiencing a “significant boom,” says Plintz Real Estate realtor, broker and owner Dennis Plintz. “It’s like nothing we’ve ever seen before. It’s like a wild stallion where buyers and sellers alike are struggling to stay in the saddle. But don’t let the excitement and frenzy fool you, there are still important things to keep in mind when navigating a booming market.”

Plintz says that inventory levels are at their lowest in almost two decades. “It is unequivocally a sellers’ market. Despite higher interest rates, real estate prices in Alberta are still on the rise and expected to continue on an upward trajectory. In fact, more people moved to Alberta in 2022 than any other province in Canada, topping out at about 160,000 people.”

He adds, “At the end of 2022, we saw some of the lowest vacancy rates in a decade at about 2.7 per cent in Calgary.”

Calgary Real Estate Board (CREB®) chief economist AnnMarie Lurie agrees that it is a sellers’ market and says, “The main challenge has been related to supply levels. New listings were expected to ease as higher lending rates would make it more difficult for the move up buyer. However, the pace of decline in new listings has exceeded expectations.”

CREB®’s most recent housing market report reveals a decline in sales activity in the first quarter (Q1) of 2023. New listings in Q1 declined by 40 per cent, preventing any significant shift in supply levels given the relatively strong sales. Calgary inventory levels averaged 2,812 units in Q1, 21 per cent lower than last year’s levels, and over 42 per cent below long-term Q1 trends.

“With a sales-to-new-listings ratio of 71 per cent and a months supply of under two months, conditions continue to favour the seller,” says Lurie.

PLATEAU AND HAVE SEEN SOME NOMINAL DECREASES.”

The report also indicates that the real estate market experienced extremely tight conditions in the beginning of last year, resulting in significant price increases that peaked at $544,733 in Q2. Although the supply and demand balance remained tight throughout 2022, prices did decrease in Q3 and Q4, partially correcting for the rapid rise earlier in the year.

However, a further tightening of the supply-demand balance in Q1 halted the declining trend in prices. The quarterly benchmark price rose by almost two per cent compared to Q4, reaching $531,200, but remaining below the peak in Q2.

Sales activity at the start of 2023, says Lurie, has performed as expected. “Over last year’s all-time record high performance in Q1, sales activity has slowed by 43 per cent. The steeper decline in Q1 was expected, given the upswing in sales last year that occurred as buyers were eager to get into the market ahead of expected rate gains.”

So far this year, Lurie says that no further rate gains have occurred, however, higher lending rates have affected sales, somewhat. “Despite the decline, sales activity has remained well above pre-pandemic levels, thanks to recent gains in migration coupled with a stronger employment market.”

Calgary-based Mortgage Connection Broker Skye McLean says, “Variable mortgage rates have increased by about 4 per cent since February 2022, with the Bank of Canada holding the overnight rate steady in their April 2023 announcement. We are seeing the variable mortgage rates offered by banks start to stabilize but not decrease or have deeper rate discounts yet.”

She adds, “Fixed mortgage rates, mainly the standard five-year fixed rates, have more than doubled since the fall of 2021, but since peaking in March 2023, these fixed rates have started to plateau and have seen some nominal decreases.”

McLean also points out that the Canadian mortgage market has become, over the last few years, increasingly more competitive. “Various lenders and banks offer more specialized products. With all these competing lenders and options to choose from, leveraging a mortgage broker to navigate the mortgage market is more important than ever to get the best product and rate.”

“For the second half of 2023,” says Plintz, “prices will rise, and inventory will slightly increase. Not necessarily because of new home construction, which is more expensive than ever relatively speaking, but because of the number of clients potentially moving outside of Alberta and/or resurfacing to go on the market now that we have a stronger market. Demand will outpace supply for the remainder of the year.”

Given what happened last year, Lurie says some of the fluctuation in price was expected.

“However, price growth to date has been stronger than expected. Given the limited supply currently on the market, we could expect to see some stronger price growth through spring, potentially supporting a modest annual gain in 2023.”