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

Posted by DustinRJay in short term real estate trends.
Tags: , , , ,

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.