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Calgary Bull or Bear Real Estate Market? January 22, 2008

Posted by DustinRJay in short term real estate trends.
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For those looking to buy or sell in the near term it is worthwhile to understand the current trend so that some forecasting or predictions can be made about the real estate market.  This is a complementary post to my Long Term Trends in Calgary Real Estate.  

The primary factor affecting the near term trends is the supply & demand balance.  The absorption rate is the (current inventory)/(sales in the last 30 days).

For example, as of yesterday:

Active listings: 3882
Sales last 30 days: 777
Absorption Rate: 3882/777 = 5.00 months

CREB defines a balanced market as anywhere between 2.0 to 3.5.  The following graph illustrates the relationship between the absorption rate and the price change per month.

 Calgary Bull or Bear Real Estate Market?

If the absorption rate was:  

Below 2.0 = 79% of the time there were price increases
Above 3.5 = 100% of the time there were price decreases

The equation that can be used to roughly predict the price increases or decreases per month is:

Price Change Per Month = -$4,594 * (Absorption Rate) +$14,141

Based on the current absorption rate of 5 months, it appears that price decreases in the near future are likely.

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Comments»

1. bwolf - January 22, 2008

Excellent blog. exactly what people need. the simple truth on market stats.
thanks.

2. mohican - January 22, 2008

Nice display and interpretation of the data. Bang on what I’ve been saying regarding the Vancouver / Fraser Valley markets for a while now.

3. Jimmy Varga - January 22, 2008

Nice Blog. I will book mark this. Lets hope

4. BearClaw - January 23, 2008

man-bear-pig

5. Shane - January 23, 2008

Great information!

I would have to agree that in the short term house prices may take a beating.

I’m most concerned with the 299 listings over a $1,000,000 currently active in Calgary, with only 1.65% sold last month.

I’ll be bookmarking your blog.

6. the squid - January 23, 2008

hey radly great blog..fantastic graphs..since your site is so new
i hope you wont be offended by a bit of critism lol
your text is to small and when i enlarge it using the view button it gets realy big..dont know if you can fix it..also words like absorbtion rate and p/e realy need to be explained in the simplest form
remembering that most people arnt very versed in financial terms
what we take for granted some people havnt the foggiest idea
its a style i used on the contrairian and bubble site and it seems to work …realy simplifying things without insulting people helps people understand the basics at work
i look forward to reading your posts but unfortunatly will be over in the middle east from tomm on for 3 weeks..good blogging and cheers

7. the squid - January 23, 2008

jimmy varga..time heels all..i know we got into it pretty good a year ago but its nice to read your post..calgary realy did need a housing bear blog and now we have one in the bubble..let by gones be by gones..cheers

8. paul - January 24, 2008

Great site Radly. I will be here daily to read the posts. It will be interesting to see if the listings explode this spring.

Check out my site. Extensive stats for Vancouver updated daily!

Paul http://www.nvcondos.ca

9. West Toronto Realtor - February 22, 2008

According to the actual absorption rate the prices shold decrease, but I´m no sure it will happen in the next few months. A market is showing a strong growth at the moment and that´s why I´m thinking, that prices will remain stable or will even increase, because, according to the experts, prices haven´t reached their peak yet.

Experts are also predicting, that due to U.S. real estate market crisis, there will be a slowdown in some business sectors related to real estate and that may impact Canadian consumer confidence.

10. Inventory Zenith « Calgary Real Estate Market Blog - March 3, 2009

[…] I think that absorption rate provides a good estimation of how the market will behave in the near term.  However, a comparison of year over year inventory changes will provide a better estimate of how […]


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