Hello Team RED,
What's Happening in the Market?
We have experienced the third highest number of sales in July in Calgary's history! The sales in July were 14% higher than what we normally experience in the month, with record sales over $600,000. Regardless of the increased sales activity, we are still seeing the listing inventory climb. We are currently sitting at 65% of the listing inventory that we would normally have this time of year, which is helping our months of inventory creep towards a balanced market.
With a large demand from buyers, and listing inventory climbing, our showing volume has remained higher than other years. We can anticipate this to decrease in August, the same it does every year as families squeeze in the last of summer vacations.
Will there be a crash?In short, there are no signs of a bubble or crash in the near future for Alberta. As inventory levels climb, buyers may hang on to some hope that prices may come down, however we have to remember the lessons of economics, when supply is low and demand is high, prices rise and when it is the reverse, they go down. Let's take a look at some key indicators that show there are no signs of price corrections any time soon.
First, the months of supply are climbing but you will see in the graph below, we are substantially lower than average and have a long way to go before the supply catches up to the demand!
Next if we look at demand and where it is coming from. The net migration to Alberta is through the roof and greatly exceeding any year prior. Below you can see in the graph that the population increase is providing the demand so even if we look at previous years months of inventory, there is no comparison to the demand we are currently experiencing.
The only other solution to adding more supply to the market is by building more homes. Our Housing Starts through the 1st quarter are amongst the highest they have ever been in Alberta. However, if you look at the historic months of inventory, and the population growth and then the housing starts, you will see that in previous years construction was able to help bring supply up to meet demand. This allowed the months of inventory to climb and we saw prices adjust accordingly. There are no signs of builders catching up to the demand in the near future.
Summary
You will see in the charts above that we have a long way to go before the supply is able to catch up to the demand. This is also apparent with some of the decisions the Government is making to try to increase multi family buildings and densify areas. Are some of the policies the best they could be? Probably not, but in times when growth is occurring so rapidly there have to be decisions made to try to accommodate that growth, even if it isn't the way it could be handled better in more normal circumstances.
Steve Phillips
Broker403.618.6984
1210 20 AVE SW T2G 1M8