I am a Realtor, so by nature I am an optimist. Every day I get questioned about how bad the re-sale home market is in Calgary. Every day I respond that while it is pretty rough out there, it’s not as bad as some pessimists would have you believe. Here are some of my opinions on where the market is and where it is going. I will strongly caution that anybody who tells you that they KNOW what the market is doing is a charlatan, delusional, or both.
The re-sale home market is not nearly as bad as it feels. While home sales are off by over 25% year over year and almost 40% November 2007 compared to November 2007, the average selling price has only dropped by 2.5% year over year and 5.7% compared to last November. To me this indicates that there is significant resilience in home prices in Calgary, that the bottom has not fallen out of the market. It also indicates that there is an acceleration of price reductions happening, with the economy suffering and nobody seeming to know how to go about fixing it, no wonder people are running scared. There are a lot of price reduction and distressed selling situations out there, that is fact. The problem is that the bad news makes news, the good news gets buried.
Here is the rub, we don’t generally buy Real Estate as a short term investment. The vast majority of people buy a home to live in, raise a family, and so on. Our statistics indicate that the average length of time to own a single home is approximately five years. We must think longer term or we are in danger of scaring ourselves insane.
- The average single family home in Calgary in November of 2008 is $461,497
- The average single family home in Calgary in November of 2007 was $473,153 (+2.5%)
- The average single family home in Calgary in November of 2006 was $408,581 (-6.2%)
- The average single family home in Calgary in November of 2005 was $303,160 (-30.4%)
- The average single family home in Calgary in November of 2003 was $245,658 (-43.6%)
By this logic, if I had bought five years ago and sold today my home has increased in value by 43.6%! Nothing to be ashamed of, as a matter of fact the only owners really taking a hit are those that bought for the short term (flipping) during mid-2007 and now have to sell, they projected a continued increase in property value that has no yet materialized, but their carrying cost are killing their bottom line.
I am an optimist, as I said earlier. I believe that with so many smart people focused on the economy, they will find solutions for the current malaise. While I do not think that we are going to get back to a market like 2005-2007, I do think that the market will fairly quickly return to a sustainable level of activity and growth. Calgary was affected more by over-enthusiasm (read as speculation) than by outside markets, leading to an extreme number of available listings which are now being absorbed back into the marketplace as building activity slows. My prediction is that we will see a stabilization in prices and return to a balanced market by the end of the first quarter of 2009.
We may have already seen the bottom of the market, a hard thing to do is recognize a bottom, since you have to be past it to see the change in trend. One week into December I can tell you that the prices and number of sales are off by less than November was, and may indicate the start of a reversal in the market, but it is still early. December is traditionally a slow month, and this year the conditions are ripe to make it a great time to buy, I believe that if we are not at the bottom, we are very close to it and a buying decision made now could pay huge dividends down the road a little. The one caveat, buy longer term, think in five year terms, not one year.
The Real Estate Market in Calgary is not really that bad, it just requires more thought and planning than in the last couple of years.