Renzo Real Estate Agents tackle the Calgary real estate market for the month of July 2018.
The Calgary real estate market continues to feel the pinch of the downturn and July was a more significant blow than in previous months. This month, we will take a look at absorption rate and what this means for buyers and sellers in Calgary. Absorption rate (or the inverse per month, "months of supply") is the percentage of homes that are selling over a time period. To be in a seller's market, you will have a high absorption rate indicating that more properties are selling than are sitting on the market. For example, imagine there are 10 homes on the market and 8 sold, this would be an absorption rate of 80%. If only 2 homes sold then your absorption rate would be 20%.
Why does all of this matter and what does it mean to those buying and selling homes in Calgary? Effectively, this statistic is a gauge of your chances of selling. Of course, many factors will impact your chances of selling, but when looking at this statistic, we like to explain to the seller (or buyer) that not all properties are selling.
For Calgary, we will look at detached homes, attached homes, and condos.
In the detached market, the absorption rate is 21% with an average of 48 days on market. The most sales occurred in the $300,000 - $600,000 range.
In the attached market, the absorption rate is 15% with an average of 53 days on market. The most sales occurred in the $300,000 - $400,000 range.
In the condo market, the absorption rate is 14% with an average of 62 days on market. The most sales occurred in the $100,000 - $300,000 range.
Although it is a simplification, this means you have a 14%-21% chance of selling your home in our city.
Your real estate agent or top REALTOR® should be able to explain these values and provide you with an explanation for your individual community. In Calgary, these numbers can change drastically if you are looking in say Renfrew vs Auburn Bay vs the Beltline.
Looking at your individual community is very important. Furthermore, knowing your product type is important as well. You can see that your numbers vary between detached, attached and condos. Your numbers will also vary between communities.
If we observe the market as a whole, there are some other important statistics to pull.
Last month, there were 1,547 sales. It's hard to look at a number like this without comparing it to something else. For reference, this is a 5% decrease from this time last year. It's critical to look at the same months, year-over-year because sales in January will be very different from May.
How has this all impacted prices? Year-over-year, there has been a decrease in prices by 1.89% and a 0.6% decrease since last month. We are always cautious when looking at average prices because a few large sales in Calgary could skew this statatiscis on a month-over-month basis. That said, a decrease in prices by 1.89% coupled with a 5% decrease in sales is a clear indicator that the market is struggling.
Potential reasons for this are the recent increase in mortgage rates. Even small bumps in the mortgage rates impact buying power. If you were looking in the $400,000 range and the rate change forces you to adjust to a new normal of $375,000, you will likely be let down.
Furthermore, Calgary hasn't overcome the economic downturn. There were more layoffs announced last month and we have yet to see this turnaround.
Interestingly enough, there are signs of another year of positive net migration, so this is great to see, but, although positive, it is minor compared to our boom years.
If you are selling a home with a great real estate agent in Calgary, make sure you discuss a pricing strategy and marketing plan. There is not any room in this market for mistakes or over pricing. Based on the absorption rate, pricing above market value almost guarantees that you will be in the percentage of properties that sit on the market. If your home is not properly marketed by your REALTOR®, then you will have fewer eyes on your property and this could have deleterious effects.
If you are buying a home, make sure you understand the statistics and absorption rate. If you are trying to "time the bottom", this could be a real challenge with the uncertainty in the market. That said, the increase in inventory should help put you in a great position with options.
If you would like to speak with a top Calgary real estate agent. Please send an email to firstname.lastname@example.org