Bucking the Trend

There were 1,936 residential units sold in Calgary in July representing a 21.3 per cent increase over 2011, a testament to the fact the city continues to buck national housing sale trends.

"Recent mortgage rule changes prompted much discussion of a national housing correction," said Ann-Marie Lurie, CREB® economist. "While the two largest cities (Vancouver and Toronto) have started to witness declines in home sales activity, Calgary continues to record improving sales and prices."

The Canadian Real Estate Association (CREA) stated home sales in Canada between May and June were down 1.3 per cent and attributed Greater Toronto and Vancouver with contributing most to the small decline. However, in Alberta, and Calgary where the economy is doing very well, that isn't the case.

"The gains were supported from the economic growth in the region," said Lurie. "Last year, Alberta led the country in economic growth and — with Calgary being the energy capital of the country — the city has benefited from growth in full-time employment, migration and overall improved confidence."

As of May, Statistics Canada reported employment in the province had increased 3.9 per cent in a year, the best percentage across the nation. In the Calgary Census Metropolitan Area the increase was 0.2 per cent or 1,300 jobs. The Canada Mortgage and Housing Corporation reported unemployment in Calgary declined from 5.7 per cent during the second quarter of 2011 to 4.7 per cent during the second quarter of 2012. In its Daily Economic Comment July 25, ATB Financial reported 6,000 people moved to Alberta in the first-quarter of 2012 thanks to international migration, almost double what was recorded five years ago.

Year-to-date City of Calgary sales totaled 13,684, a 16.5-per-cent increase over the same time in 2011. Other sectors within the city limits have also recorded significant growth. The single-family market recorded the largest gains at 18.9 per cent, while the condominium apartment posted a 9.4 per cent increase year-to-date.

"The housing growth positions us with sales activity that is more consistent with long-term trends, of which we significantly fell short of since the recession," said Bob Jablonski, CREB® president. "Consumers have been cautious of the housing market coming out of the recession, but with home prices still below peak, favourable interest rates and bullish forecasts on the local economy, housing sales have improved."

Consumers have delayed adding listings to the market in the city, and, as a result, there are 7.5 per cent fewer single family listings and 3.1 per cent fewer condominium apartment listings, compared to this point in 2011. July sales activity showed seasonal slowing over June's level, providing some relief on the balance between supply and demand and months of supply citywide is around three months. Single-family inventory levels were 3,646 units in June, nearly 20 per cent lower than supply levels recorded in 2011.

In June, the federal government announced some rule changes concerning mortgage lending and borrowing. Rules include the reduction of the maximum amortization period was from 30 to 25 years and the amount Canadians can borrow when financing a home dropped from 85 per cent of the value of the home to 80 per cent.

Because of those tighter mortgage rules and a tighter housing supply, homeowners planning on upgrading might have to reevaluate their budget. This may cause some homeowners to delay listing their homes further contributing to the decreased number of listings. However, if supply levels remain low it will encourage consumers to turn toward the new home market.

Lower inventory, combined with increased sales, has resulted in stronger than anticipated price gains. The single-family benchmark price reached $432,400 in July, a 7.8-percent increase over 2011, but on average only five per cent higher on a year-to-date basis. The increase in price has narrowed the variance from the peak of the market, but a four per cent price gap remains.

Both the condominium apartment and townhouse market recorded year-over-year benchmark price gains of nearly two per cent in July, for respective prices of $247,600 and $277,400.

"While the economic risks continue to weigh on the market, many consumers continue to see employment opportunities in the city," said Lurie. "They have a better sense of job security and are taking advantage of a stable housing market."