Cool runnings

Supply gains contribute to inventory rise in soft housing market: CREB®

Calgary's residential resale housing market continued to exhibit signs of softness last month, according to CREB®.

The real estate board noted in its most recent housing summary that inventory levels continued to rise in May due to an increase in new listings and decrease in sales.

As a result, the benchmark price in the city decreased for the eighth consecutive month to $439,700. May's price represents a 0.3 per cent decline from last month, and four per cent from last year.

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"While recent oil price gains may have some feeling optimistic, weakness in the labour market continues to impact housing demand," said CREB® chief economist Ann-Marie Lurie.

"Job losses are spreading into other sectors, wages are declining and unemployment levels remain high. At the same time, we're seeing housing supply levels rise in the rental, new home and resale markets."

"While recent oil price gains may have some feeling optimistic, weakness in the labour market continues to impact housing demand."

Sales for the month totalled 1,923 units, a 12 per cent drop from May 2015.

New listings, meanwhile, continued to increase, rising by five per cent to 3,319 units. Combined with slower sales, inventory levels ended the month up by 14 per cent to 6,148 units.

CREB® noted every product type experienced inventory gains, but the largest growth was in the apartment and attached categories. Together, these sectors represent half of all resale inventories in Calgary.

Apartment inventory jumped by 23 per cent from last year to 1,608 units in May. Contributing factors included a 23 per cent decline in sales for the month to 275 units and a 12 per cent increase in listings to 686.

Oversupply in the sector forced the benchmark price down to $278,500, 0.7 per cent off last month and 5.6 per cent lower than the same period in 2015. CREB® noted the apartment sector has experienced buyers' conditions for 10 months, so the impact on pricing is more dramatic, compared to the detached and attached sectors.

"The resale apartment market has been the most difficult for sellers," said CREB® president Cliff Stevenson. "They are competing with improved selection in the lower price ranges of the detached and attached markets, and facing increased competition from the new home sector, where builders are offering incentives to attract potential buyers."

While apartment resale supply remains 22 per cent below the May high of 2,055 units in 2008, the combination of rising supply in the apartment sector and steep declines in sales activity elevated months of supply to over six months, added CREB®.

"The resale apartment market has been the most difficult for sellers."

The attached sector exhibited signs similar to apartments. Attached sales declined year-over year by 7.3 per cent to 431 units, while listings increased by 15 per cent to 781 units. Inventory, as a result, ended the month up 31 per cent to 1,522 units.

The attached benchmark price in May fell by 0.4 per cent from last month and 4.3 per cent from the same time last year.

Declines were more moderate in the detached sector, which typically represents more than half of all housing market activity, reported CREB®. Sales slipped by eleven per cent, year over year, to 1,217 units, while listings fell by one per cent to 1,852 units. Inventory by month's end was up three per cent from May 2015 to 3,018 units.

Regional statistics

Outside of the city, the resale residential housing market reacted similar to previous months.

In Airdrie, the benchmark price last month decreased by four per cent from last year to $359,100, and overall remained nearly five per cent below the highs recorded in 2015.

Sales in the city north of Calgary eased by five per cent over last year's levels to 145 transactions – a trend that's been consistent this year. Last month, CREB® reported year-to-date sales had eased by nearly eight per cent over last year's levels to 405 transactions, but remained higher than long-term averages.

In Okotoks, CREB® reported sales levels improved in May compared to last year, but remain well below long-term averages for this time of year. Benchmark prices in the town south of Calgary totaled $435,000 in May, a slight improvement over April, but 0.7 per cent lower than prices last year, to $435,000.

Cochrane sales levels, meanwhile, declined year-over-year by 12 per cent in May to 58 units. This comes one month after CREB® reported that Cochrane bucked the regional housing trend in April when the town's housing market posted no change in sales levels compared to the same time last year. CREB® attributed the slight bump at the time to gains in the $300,000 – $400,000 detached segment.

Overall, benchmark prices in Cochrane increased by slightly more than three per cent from April, but decreased by 2.3 per cent from the same time last year, to $432,700.

Sales activity in Chestermere reacted similarly to previous months, with transactions decreasing by 39 per cent to 28. While the benchmark price increased by 3.6 per cent from April it decreased by one per cent from the same time last year, to $488,800.