TD forecasts Calgary's 'oil-driven' housing sales will plunge nearly 50% this year
MARIO TONEGUZZI, CALGARY HERALD
Published on: February 17, 2015
Ted Rhodes / Calgary Herald
Calgary MLS home sales are forecast to plunge by nearly 50 per cent this year amid a climate of declining oil prices and an uncertain economy, according to a report by TD Economics.
The report said the “oil-driven” housing market in Calgary has “already experienced a sudden and abrupt turn.”
According to the analysis, “A significant softening in job markets will set the stage for a second major housing correction in Calgary” since 2008.
The report said prices “appear to be on track” to drop by as much as 10 per cent over the next four to six quarters from their peak levels late last year. It also said stability will return to the housing market by mid-2016.
After MLS sales rose by 12.2 per cent in 2014, TD said they will drop by 47.2 per cent this year, with a further decline of 1.9 per cent in 2016.
Gary MacLean, realtor with RE/MAX Real Estate Central in Calgary, said the housing downturn has taken place faster than any he has witnessed in his 28 years in the industry.
“It is, of course, linked directly with the speed at which oil crashed,” said MacLean. “There are layoffs happening everywhere which is taking buyers out of the market. If they have not lost their jobs, they are afraid they might lose theirs, so they have put on hold their buying plans.
“These layoffs or potential layoffs are also hitting homeowners with large mortgages, lines of credit and credit card debt,” he said. “I believe that a large percentage of the rush to market may be caused by this group of people trying to sell their homes.”
MacLean said many people know someone who has been laid off and that causes a ripple effect in the economy, resulting in consumers becoming very cautious about spending. This reduces the number of potential buyers in the marketplace.
“When we have a market like last year with a shortage of inventory for the number of buyers out there, prices are driven up,” he said. ” It is the law of supply and demand. Well, we have started this year with a huge number of homes on the market, up over 100 per cent from this time last year — and with sales down 40 per cent, the same law applies here only in the opposite direction.
“This is a market in which there are a few buyers compared to the number of homes for sale. Sellers have to be aware of this and that they have to price their home competitively.”
According to Mike Fotiou, associate broker at First Place Realty in Calgary, there were only 580 MLS sales in the city between February 1-14. That’s a 35.8 per cent drop from the same period in 2014. Sales are also off by 35 per cent from the 10-year average and by 25.7 per cent from the five-year average.
Fotiou said it’s the lowest February level month-to-date going back to 1996.
The average MLS sale price is down close to five per cent so far this month to $465,861.
Fotiou said the Calgary luxury market has also slowed significantly, with only 15 homes selling for $1 million or more, compared with 36 for the same period last year.
Overall, new listings have risen by more than 14 per cent so far this month.
At the Calgary Real Estate Board’s annual forecast event in early January, the organization predicted MLS sales would fall by four per cent this year but prices would increase by 1.6 per cent.
Also on Monday, the Canadian Real Estate Association released its national data for January MLS sales, showing that transactions were down 3.1 per cent from December and two per cent from a year ago. It was the first year-over-year decline in sales across Canada since April 2014.
The average MLS sale price in Canada rose by 3.1 per cent from a year ago to $401,143, but it was the slowest pace of growth since May 2013, according to Diana Petramala, economist with TD Economics.
“The decline in national sales largely reflects weakened activity in Calgary and Edmonton,” said Gregory Klump, CREA’s chief economist, in a news release. “If these two markets are removed from national totals, combined sales activity remained 1.9 per cent above year-ago levels.”
CREA said Calgary saw a 35.5 per cent plunge in sales in January compared with a year ago while Edmonton’s drop was 22.7 per cent.
The real estate association also said that Calgary continued to lead the country in the MLS Home Price Index, which tracks typical properties sold in a market. Year-over-year in January Calgary prices were up by 7.76 per cent compared with the national average of 5.17 per cent.
But CREA said “the trend for pries in Calgary has been fairly stable since last summer while year-over-year gains continue to shrink.”
Doug Porter, chief economist with BMO Capital Markets, said “with sales sliding further in early February, prices are destined for a further correction” in Calgary.
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Statistics: Posted by yoda — Tue Feb 17, 2015 2:41 pm