A Tale of Two Markets August 23, 2008
Posted by radley77 in Calgary real estate, supply and demand.Tags: Calgary real estate, inventory overhang, MFH, overbuilding, SFH
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A split has occurred in regards to the single family home and multi family home construction environment. The following article address the differences in supply-side characteristics for each market.
Calgary single family home market:
- Correction in starts largely historical, capacity to overbuild looks minimal, last couple data points may point to a bottom approaching as housing construction returns to historical rates, orderly unwinding likely
Calgary multi family home market:
- Construction has continued unabated, capacity to overbuild in place, projects such as Gateway Midtown being suspended point to major trouble signs ahead, long way to drop for construction starts to return to historical rates, disorderly unwinding possible
Interesting stats. I think that in some of the other SFH metrics we’ve seen indications of more stability, or at least more predictability in terms of the future.
Sounds to me like MFH’s are going to be in the doghouse for a long time yet, and SFH’s may or may not follow. As MFH’s become cheaper and cheaper, it is only logical that many buyers will choose them over SFH’s unless SFH’s become cheap enough to lure buyers away from cheap MFH’s.
I think you’re right the condos will be the most overbuilt.
However, the vast majority of middle class purchases depended on capital appreciation from their condo or starter home to buy the “median priced” Calgary home. If condo prices tank, it is likely that that prices will have to drop on SFHs in order for “move-up” buyers to purchase.
House prices are a pyramid on the way up, and I don’t think it’s fair to say that prices for sfh’s and condos are unrelated. I agree that the relationship is not linear, but it clearly exists.
Show me a market contracting in the US where condo prices are dropping but SFHs are going up.