Calgary Housing Recovery Already Underway? October 20, 2009
Posted by DustinRJay in Calgary real estate, supply and demand, Uncategorized.Tags: Calgary real estate, supply and demand
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It’s been awhile since my last post, so I thought I would share some interesting information.
The first graph illustrates the historical supply and new listings on a seasonally adjusted basis. Sales and new listings have been adjusted on a seasonally adjusted basis so that it gives a leading edge indicator of of how the resale market is performing. For example, December is typically the worst month of the year for sales and May is the best and there is a fairly consistent seasonal pattern to resale volumes. This adjustment also allows one to determine whether price movements are caused to to changes in supply or changes in demand. In the past few years, sales volumes I believe soared well above demographic demand, and in early 2009 were well below demographic demand. I believe future sales volumes will fall moderately from here due to what has been described as demand driven overbuilding (premature buying) that occurred in 2006.
Looking at new listings, one can see that supply is not the problem that many blogs had predicted would happen due to high foreclosures. Supply is much lower than it was in 2007 and 2008 and this is I believe because a much lower percentage of loans was granted to debtors of poor credit quality as compared to the US. I think there is also a rational component to the ebb and flow of activity in the resale market.
The series of events that occurred over the last few years may be as follows…. In 2005\2006 as rental vacancy dropped to 1%, and perceived slowness to bring new product to market, buyers reduced their personal time horizon to buy. This is driven by a belief that if they do not buy now, then they risk further price appreciation occurring or waiting a long time for house prices to drop. Potential sellers also recognize that there is a lack of supply, and put off selling. Speculators also enter the market to drive up demand in the short term, but do not immediately cause an increase in supply. In mid 2007, when inventory is increasing, and new construction was high, it is apparent that supply can satiate demand at that price point. Potential sellers and speculators that were delaying selling rush to the exits to cashout. Also, buyers suddenly realize that there will be a price correction, and now instead of reducing time horizon to buy, they increase the time horizon to buy as they realize that in the near term there was going to be a price correction. This causes a very sharp and sudden shift in both the supply and demand balance. In 2009, when housing construction nearly ground to a halt (especially with MFH starts) buyers have now begun reentering the market once again as inventory depletes. Potential sellers may also now be once again delaying selling purchases due to perception that the market has turned the corner, and less risk from a wave of supply coming from foreclosures.
In summary, I believe the price correction in the resale market is over for now as indicated by the graphs below… Although, I do not see why a relapse into a bear market is not possible if sales were to drop again. Housing corrections typically occur over a period of several years, and historically taken at least 4 years to unwind so I would not be surprised to see further price drops if the supply\demand situation shifts once again. There are reports that the Calgary commercial office space is overbuilt and vacancies will rise to 20% in the coming years and will halt commercial construction in Calgary for several years. The good news is this will provide stability and growth opportunity for businesses in Calgary as they can better keep a lid on operating costs.
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[...] growing amount of mortgage arrears in Alberta, but how much does that impact supply? As shown in previous graphs on this blog, the resale market has generally been rising whenever sales/new listings is greater than 50%. [...]
[...] Estate investors, Realtors, Developers and other in closely-related fields. It would seem that we’re now on our way out of the recession of the past two years and brighter days are ahead. These more financially-based factors aside, [...]
The Montgomery Triangle
The community of Montgomery was named after a famous British General, Field-Marshall Montgomery, 1st Viscount Montgomery of Alamein, who was born in London. The Montgomery Triangle refers to a small part of Montgomery on the South side of 16th Avenue NW. There are less than 45 lots in the Montgomery Triangle and currently the trend is to knock down the old 1950′s bungalows and build modern chic side by side infills. The next community to the East is Parkdale and Parkdale has a similar triangle of homes called the Golden Triangle. In the “Golden Triangle”, home prices have appreciated massively as Parkdale has become more trendy.
Montgomery Triangl
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This area is going crazy!! New Childrens Hospital, $ 90 MM expansion to market Mall, $12MM development at Shouldice Athletic fields, new million dollar infills being built everywhere. Chef Michael is no dummy, he is very smart to locate here. Expect others to start showing up in this area.
Montgomery Triangle is Awesome!!
I just found this blog. It is very informative. I find that the media are so busy saying how rosy and great things are that it is really difficult to gauge current market sentiment and market conditions. I know that in July and August 2010, it is very difficult to sell a house. Nothing is moving except the amount of listings is increasing. I keep track of the markets in Calgary’s North West and I have to agree with the other poster about Montgomery. It is an area that is in Upward Transition, major renovations throughout community and new high end stores and restaurants are popping up. I would like to find some cheap deals on homes in Montgomery but it is difficult.
October 2011–Tings not toooo gooood out there,…
Stock mkt has an underlying optimism but every couple of days, we see bad economic data from Europe(Greece) or the US. Bad housing environment and terrible unemployment. More listings showing up in Calgary and everywhere else–people just have too much debt. In areas like Bowness and Montgomery and Parkdale: good deals get bought quick, but some at 1999 prices! WhoooHoooo!! Lookin for bargains in Bowness or Montgomery
Montgomery triangle is Awesome!!
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Cold November here in Calgary. This site is very informative–I find some of comments very informative to read. Much better than local newspapers who make everything sound so positive, even when it is not positive.–Real estate pays for newspaper advertising, I guess.
Montgomery is awesome! And so is Bowness!–it is a no-brainer, if you are able to buy a 50 foot R2 lot in either of these communities. All you have to do is look at Parkdale or HIlhurst to witness the development and price appreciation. As the city expands to the West(which it is like crazy): then Montgomery and Bowness become more inner-city and more desirable.
Ze West is the Best!!