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Glut Today, Excess Demand Tomorrow January 3, 2009

Posted by DustinRJay in Calgary real estate, supply and demand, Uncategorized.
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A review of inventory trends and prices is useful for helping to understand what the future price trend will be for the Calgary market.  From the following graph, some conclusions can be made:

  • Falling levels of inventory generally lead to higher prices and vice versa.
  • Inventory is dropping at the fastest rate since the Spring 2006 bull market rally.  Inventory has fallen 41% since the peak inventory in May 2008 to December 2008.
  • Inventory rose most dramatically in 2006, by a smaller amount in 2007, and even smaller amount in 2008.  The implications is that resale inventory appears poised to fall on a year over year basis for 2009.  As of September 2008, single family home housing starts are at the lowest levels since 1986.
  • Recent major market events including the oil price decline, and Lehman Brothers bank failure have not increased inventory levels.
  • Major sources of supply were in response to high prices, not foreclosures; that source of supply now appears to be tapped out.
  • Calgary real estate market has crossed into a state of excess demand, after several years of excess supply.
  • Current high levels of inventory require risk management to bring inventory in with long term trends.

Here Today, Gone Tomorrow

Click above image to enlarge.

Data: CREB, Bob Truman – First Place Realty

Game Over for First Time Home Buyer? March 18, 2008

Posted by DustinRJay in Calgary real estate, supply and demand.
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Single family home sales have dropped off dramatically in Calgary year over year.  Therefore, it’s difficult to determine if averages and medians are representative of the direction of the market or reflective of changes in composition of the sales mix. 

The following graph illustrates the year over year change in sales volume by price range:

Change in Calgary SFH Sales Mix

 It illustrates that:

  • For the first time home buyer market, single family home sales volumes have experienced significant deterioration
  • Higher-end ($600,000+) single family home sales volumes have held steady
  • Average and medians, although extremely useful, are not reflective of the health of the entire real estate market due to changes in the sales mix

As an aside, things in naturally occurring populations typically lie in a log normal distribution (including distribution of reserves in oilfields).  Hence, it comes as no suprise that things like household income and also house prices also lie in a log normal distribution.