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Calgary Resale House Price Model April 22, 2009

Posted by DustinRJay in Calgary real estate, short term real estate trends, Uncategorized.
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16 comments

The following graphs illustrate the historical relationship between absorption rate and house price changes in Calgary.  As the absorption rate decreases, demand exceeds supply, and house prices rise.  When the absorption rate is high, supply exceeds demand and house prices fall.  While I do not believe this metric is useful for determining long term price point, I do think it is useful for determing the near term price trends.

Calgary Absorption Rate Correlation

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Calgary Resale House Price Model

[click above for larger view]

Recent history indicates that an annual absorption rate of 4 would be a market that is roughly balanced.  In 2008, Calgary had record amounts of resale inventory and these inventory levels have dropped in 2009.  Also, sales dropped dramatically following the credit spread crisis, but have since improved on a seasonally adjusted basis.   If the current inventory glut continues to decline at it’s current annual rate, and sales stay flat seasonally adjusted, it is possible that the Calgary housing market will bottom in December 2009 after falling further in autumn.  I think there are upside risks and downside risks to this forecast.  I believe it is prudent for all market participants to err on the side of caution both when formulating business plans and household budgeting.  It’s probably also worth noting that house prices are likely to increase by only in the zero to very small single digits for a number of years after bottoming, so there is no rush even if you are trying to time the bottom.

Data:  Bob Truman – First Place Realty

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