https://postmediacalgaryherald2.files.wordpress.com/2020/02/67938166-111318sunset2-w.jpg?quality=80&strip=all&w=840&h=630&crop=1
The City of Calgary's Housing Review shows the housing market is starting to improve.File / Postmedia

Calgary's housing market shows growing strength

by

The market is in better shape than you might think.

The latest housing market update from the City of Calgary points to improving economic conditions that put Calgary’s housing market in balance and even potentially moving toward a sellers’ market.

That’s after several years of declining prices following the downturn in the energy industry that began in late 2014.

“For the first time in five years, we have a situation where people are seeing positive wage growth, plus, north of 26,000 people found jobs (in 2019),” says Oyinola Shyllon, economist with the City of Calgary.

“These are all people who would be looking at buying a home or renting, and that all bodes well for the housing market.”

The city’s Housing Review for the fourth quarter of 2019, published late last month, shows the Calgary Economic Region added 26,500 jobs for the whole year, up from 8,200 jobs in 2018. It’s even an improvement over 2017 — one of the better years recently, economically speaking — when 23,300 jobs were created.

Unemployment also fell to 7.1 per cent, the lowest in recent years. The average annual wage growth, after inflation, grew by 1.4 per cent, higher than 2018 and 2017 when wages shrank after accounting for inflation.

Shyllon adds these statistics point to growing housing demand. The report further notes 2019 sales were 6,979, compared with 6,845 the year before. As well, new listings fell to 13,263 down from 14,723 in 2018.

Perhaps most telling is the sales-to-listings rose to 54 per cent in 2019 from 48 per cent in 2018. A ratio of 50 to 60 per cent is an indicator of a balanced market.

Still Shyllon notes falling listings point to homeowners remaining leery about getting into the market.

“If I’m the average person looking at the market and see prices trending down, I would always wonder if it’s reached the bottom.”

Last year, the average price fell to $442,000 from $458,000 and $463,000 in 2017, the report cited.

He argues prices may have reached their bottom as affordability is as favourable as it has been since 2003.
But there’s a catch.

“If you’re a first-time buyer and struggling to come up with the down payment, then affordability is more challenging because of the stress test rules,” he says, referring to federal lending rules stipulating buyers must qualify at a higher rate to prove they can afford their mortgage if interest rates rise.

Coupled with the new economic reality, the mortgage stress test is reshaping the city’s market, he adds.

“Starts are up, but more are multi-family than single family.”

Of the 10,600 starts in 2019, just 26 per cent were single-family homes, the lowest share since 2006 (as far back as comparable data goes).

The uptick in starts overall speaks to builders forecasting better economic conditions ahead. Shyllon is cautiously optimistic, noting that even though the market is in balance, conditions can bounce around month to month. A clearer picture of the market’s health should emerge as 2020 progresses.

“Are we going to see this balance continue?” Shyllon asks. “That’s what we’re waiting to see.”