Housing Market and Stock Market Forecasts

Calgary Real Estate Market Forecast

 

Calgary Housing Market and Update

Oil prices are rising and the pandemic may be on its way out, and interest rates are expected to remain at record lows for another year.  There’s still some uncertainty about where Calgary home prices are headed this year.

With housing starts in Calgary down 19% so far this year, the economy rebounding with above $60 a barrel oil prices, we should see rig counts growing and revenues growing quickly.  Demand will grow and begin eroding the available supply.

 

That news has a lot of buyers in Calgary out house hunting in February and increasingly in March, April and May.  House prices are jumping and sellers are seeing the market swing their way, as they begin to list.  Finally we’re seeing Calgary beginning to follow the same path as Toronto, Vancouver, Kelowna Vernon, Montreal and Mississauga.

March Home Prices

Listings, sales, and prices are all on the rise in March.  The quick upsurge in oil prices has buyers felling a little more certain of the oil patches future.  Energy prices are on the rise, and global demand will pick up later in the year, but pundits believe supply will increase to moderate price growth. CREB believes supply will come from economic turbulence which might force homeowners to sell.

 

A study of the Canadian real estate market and forecast has offered no insight into the Calgary market.  Both Calgary and Edmonton have suffered greatly during the pandemic as global oil demand has fallen.  Travel, commuting to work, and manufacturing are expected to grow, but despite the vaccinations, progress is slower than most have hoped.

 

Some real estate observers believe Calgary real estate price rises will moderate in 2022 and 2023.  Many economic and political factors will be in play.

In a post in Business in Calgary, CIR realtor Sarah Scott is seeing real growth in is investment real estate in the last few months. “I really first noticed it in October (2020), but it ramped up in my own business by the end of November and is still moving. These types of buyers are out looking to supplement income and they are taking advantage of the low mortgage rates.

The economic forecasts for Alberta are quite rosy.  RBC economics predicts Alberta’s GDP will grow 4.5% this year based on a $47 forecasted price for oil. Oil of course has been trading well about $60. It’s welcome boost and is energizing the Calgary real estate market. CREB expects job grow to improves 5.44%.

Alberta’s greatest asset is rising gasoline prices which Canadians will have to pay. That will ease their objection to allowing Alberta crude to flow.  Once gasoline prices to unbearable levels in late summer, Alberta may see progress in pipeline development.

It will be interesting to see how home prices and gasoline prices play out for the rest of 2021.

March House Prices and New Listings

Daily/Weekly March 19 March 18 March 17 Mar 13-19, 2020 Mar 13-19, 2021 % change
Total Sales 112 64 67 201 414 106.0%
New Listings 177 114 107 304 630 107.2%
Active Listings 2,395 2,338 2,301 3,061 2,395 -21.8%
Median Price 538,250 567,500 530,000 457,000 534,500 17.0%
Average Price 590,573 601,985 585,306 514,746 593,584 15.3%
Days on Market 25 31 37 47 31 -34.0%

 

Calgary Alberta February Detached Home Sales Stats

Monthly Feb. 2020 Feb. 2021 % change March 2020† March 2021† % change
Total Sales 678 1,124 65.8% 502 1,130 125.1%
New Listings 1,339 1,571 17.3% 1,059 1,745 64.8%
Active Listings 2,748 1,922 -30.1% 3,061 2,395 -21.8%
Benchmark Price 478,400 502,500 5.0% N/A N/A N/A
Median 466,000 512,000 9.9% 470,000 525,200 11.7%
Average Price 526,084 573,170 9.0% 551,788 595,140 7.9%
Days on Market 53 37 -30.2% 48 31 -35.4%
Annual/YTD 2019 2020 % change 2020 YTD 2021 YTD % change
Total Sales 9,898 9,949 0.5% 1,695 2,986 76.2%
New Listings 17,347 15,375 -11.4% 3,608 4,430 22.8%
Median Price 465,000 470,000 1.1% 465,000 510,000 9.7%
Average Price 535,896 539,109 0.6% 537,807 578,133 7.5%
Benchmark Price 482,575 483,566 0.2% N/A N/A N/A
Days on Market 54 50 -7.4% 54 39 -27.8%

 

In February, CREB reports total detached house sales grew 65% while attached sales grew 58% year over year. YoY growth for apartments and semi-detached grew about 30% each.

Average detached house prices rose 2% to $502,500, while sales-to-new-listings ratio rose to 71%.  Days on market fell 16 to 37 days on average. Active listings rose about 1800 units compared to February of 2020.

Year to date stats are about equal to that of last year.

 

The Vancouver housing market, Kelowna Vernon housing market, and Toronto Housing market are in the same spot. However the rising price of oil, if it continues is a big break for Alberta. The development of the TransCanada pipeline could be an additional boost for the Western economy, yet the resistance to oil transit will become a bigger issue as oil demand increases.

Canadian Housing Prices compared. Courtesy of homepriceindex.ca

Sales activity in Airdrie, Cochrane fell with prices rising, and in Okotoks, prices fell while sales improved.

 

Forecast for the Calgary Real Estate Market

CREB forecasts a 5% increase in Calgary home prices in 2021. They note that a reduction in supply kept prices moderate in 2020.  They also mentioned lower unemployment rates as easing up buyer fears. CREB believes supply issues are important, and that is supply levels remain low, prices could head up.

Screenshot courtesy of CREB

This is all common sense forecasting. If we want to forecast correctly, we have to be a little bolder and consider some likely scenarios.  The pandemic isn’t over and most provinces are seeing a Covid 19 variant outbreak mar the expected spring surge.

Housing construction will likely lag because builders aren’t certain that oil prices will rise much even if demand increases. Fracking oil producers are increasing their rig counts so supply will grow too.  Oil producing nations are experiencing extreme financial problems (Russia) and will under pressure to let oil flow.

THERE IS SIGNIFICANT UNCERTAINTY surrounding how long it will take for the economy to fully reopen, the pace of economic recovery, and the long-term impacts of the pandemic in relation to business bankruptcies  and job losses. This could result in both slower-than-expected sales and stronger-than-expected supply gains, impacting the pace of price growth… THE HIGHER RATE OF MORTGAGE DEFERRALS in Alberta compared to other provinces could start to turn into supply pressure in the housing market. — from the CREB 2021 Calgary housing forecast report.

 

Screenshot courtesy of CREB

Home Construction Starts Outlook

For builders, it is a risky business environment.  Housing starts in Calgary are expected to fall. Materials, financing and labor will all rise in price. New housing may not help to stop price rises in 2021.

New Housing Starts Calgary. Screenshot courtesy of CREB.
Calgary Housing Supply Chart CREB. Screenshot courtesy of CREB.

Oil Price Discount Hurting Alberta

The WCS discount isn’t a problem anymore and the oil pipelines are looking like they’re more likely going to happen (President Trump). The BC transmountain pipeline is hampered by the fact the BC Premier is entrenched in a pride position and likely won’t let the pipeline happen. Gas prices in Vancouver however are climbing to ridiculous heights and Vancouver’s own housing market is hurting bad. Something will have to happen.

Oil Price History. Screenshot courtesy of Statista

Oil production in Alberta is growing, however profit isn’t rising as much as people believe as this chart below reveals. The net effect is that there is growing revenue and it will lead to more activity in the Calgary housing market.

Chart courtesy of economicdashboard.alberta.ca

This forecast below from CREB doesn’t take into account the resurgence of the Alberta economy. With price stability, and a booming US economy, the picture for Calgary looks rosy.

Oil Prices and OPEC

Expert’s forecasts of oil prices and proving to  be understated.  Oil prices have far exceeded what most experts said would happen, now at an unexpected US $66 per barrel.

Currently the US has applied an embargo on Iranian oil, however they issued passes for some nations, which means Iran oil gets to flow.

Screenshot courtesy of Statista
Russia and Saudi Arabia desperately need higher prices. Photo courtesy of oilindustryinsight.com

OPEC is driving prices especially with Iranian supply out of the picture.   And there’s no reason why US shale oil producers would want to plummet the price anymore than Alberta Tar Sand producers would.

Does oil have a future in the overhyped world of green energy and high tech?

The Turnaround in Calgary Canada is Coming

The growth in the US oil wealth is obvious with Texas post hurricane development. And western shale oil producers are ramping up oil production which means they feel positive about demand and price. If the democrats gain increasing power, that could darken the picture for Alberta.  They stopped pipelines before and would do again for powerful lobby groups in Washington.

The uncertainty of Calgary’s housing market makes it a gamble however buying in this vibrant young city is more preferable than rolling the dice in overregulated and overpriced Vancouver or Toronto.

Recent improvements: Unemployment has dropped in the last 2 years and many believe the recovery is well underway — powered up by rising oil prices in US dollars x rising production numbers. Calgary’s economic growth lead Canada at 6.9% and that’s when oil prices were lower.

The Conference Board of Canada predicted Calgary will lead the nation at 2.4% growth in 2019 however given recent developments, it’s unlikely.  If Alberta oil is shut in, the CAD loonie should stay low. Some are still predicting a 70 cent loonie by the end of 2019.  Toronto, Vancouver and Montreal are doing well, but not enough to raise the loonie.

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OPEC Was Willing to Throttle Output to Raise Oil Prices

Yes, Calgary is more than oil, but oil money is hard to ignore. Alberta needs the investment funds that flow in when Oil prices rise.

With OPEC cutting oil production output, and oil prices jumped past $71 a barrel (WTI) it awakened the oil patch. Since then investment money is almost non-existent. Alberta can’t get its product to market and surrounding neighbors won’t let its products across their borders.

Some are still forecasting very high oil prices, yet Alberta may not get to enjoy the bounty until 2020. If prices fall, less political pressure and effort by oil producers in the province means the pipelines could be delayed indefinitely. At this point, we’d have to say house prices could fall much further. The carbon taxes are more nails in the coffin.

 

Even the experts are voicing caution, probably because they’re not sure themselves who has control of oil prices, and whether the BC pipeline issue will be solved. And BC doesn’t seem to be batting an eye, as gas prices there rose above $1.50 a litre.

Rachel Notley pointed out the BC premier’s ironic and hypocritical stance on Alberta oil with his new subsidies for LNG projects in BC.

Gas Price shock – Photo Courtesy of CTV.ca

And besides the BC carbon tax, and the investment killing removal of the corporate tax rate cut, there’s also the matter of how much Vancouver’s housing market  and economy can take as interest rates rise too.

This is a text book test of the merit and wisdom of government regulation. BC’s government run auto insurance sector for instance, is already in deep trouble, rumoured to be on the verge of bankruptcy.

Not only does Alberta ease the prices BC drivers pay for gasoline, the Federal taxes on oil production are steep and distributed to the other provinces. Everyone benefits when Alberta’s energy sector thrives. It’s vital for Canada.

The WTI WCS price differential is a painful loss for Alberta Oil producers and of late it’s gotten worse due to pipeline bottlenecks. Will it get worse this year?

Alberta’s production capacity is impressive and has recovered by 7,000 m3 from 2 years ago. The issue is getting it to world markets.

 

With the US and global economies looking good (the recent tariff issue with China should be resolved), demand for energy and oil is forecast to be strong. BP forecasts a strong demand from developing countries.

International investors with a long term investment strategy should compare what you can buy in Calgary for $400,000 vs what you’ll get in the Vancouver market or Toronto market or Montreal housing market and you can see the long term investment advantages.  Calgary is a much easier place to do business and buy real estate.

Which are The Best Neighbourhoods to Buy a Home in Calgary?

As a long time resident, I can tell you there are many excellent neighbourhoods, with great schools, shopping, and recreation. All of it is accessible.

If you enjoy exercise, you may find the communities along the Bow River best. There is a cycling/walking trail on both sides and the mountain biking park at Canada Olympic Park is on it too.

If you like beautiful views, Calgary has plenty. The northwest area of Calgary including those communities near Spy Hill, Coach Hill, and Nose Hill Park offer amazing views, some of the Rockies and foothills. Be ready for matching prices. The neighbourhoods on the northwest outskirts of the city offer unbelievable panoramic views of the Rocky Mountains to the west. Expect million dollar prices here. Homes on Spy Hill and Coach Hill offer incredible views of almost all of Calgary and the spectacular downtown skyline.

If water sports like sailing and windsurfing are important to you, Calgary has a number of man made lakes in the south end. The South has the largest selection of homes, with the Northwest next in number.

If you like cosmopolitan, the neighborhoods near downtown Calgary will appeal to you with the shops and walkability. And downtown’s plus 15 walkway system is close by too.  Downtown city centre is where the condos are and virtually everything you need is here on 7th, 8th and 9th Avenue . The Bow River pathway is adjacent and Calgary’s convenient light rail transit can whisk you away to shopping in the south end of the city.

With the recession now largely in the rear view mirror, and with the price of oil rising steadily, homebuyers and property investors will be looking at Calgary homes differently.

 

With house prices so low, the expectation for buying residential properties in 2018 will improve. For speculators, the Calgary market is tantalizing, given that home prices in Toronto, Vancouver, Los Angeles, Bay Area, New York, and Miami have peaked.

In-migration to Calgary is rising and mortgage rates remain low. Although “made to depress” Canada housing policies will constrain the market, the outlook for Calgary real estate is for growth. The extent of that growth of course depends on the price of oil, incoming energy sector investment, and the value of the Canadian dollar vs the US dollar.

 

The Price of Oil – Already Above Expectations

(This section written in winter 2018) Oil Prices were never expected to rise near $50 yet are above $55 now. The Saudis have proven they control the price of oil, not markets. Tough to predict what they’ll do however their recent actions show some resolve and purpose. The fact prices have reached $55, well above the limits predicted by all the experts has to indicate something.

The production of shale producers in the US however is changing the oil markets. The US is now the number producer of oil in the world at about 11 million barrels a day.  This is something no one considered possible.

You can check all the oil price predictions for yourself.

Economic Predictions for Calgary

If oil continues to rise steadily in price, Alberta stands to recover economically. Businesses have pared down their costs and are better able to profit from growth. Although not officially a big component of the rosy Canadian economic forecast, Alberta and Calgary are keys to the future.

Screen capture courtesy of CREB.com. Stats courtesy of CMHC.

Total house sales were precisely forecasted to be 600 higher in 2017 than 2016 with a price similar. Dead on accurate. New listings will total 32,731, 400 for the full year. Sales of apartment will rise slightly over last years numbers at about 2800 units.

The loonie remains around 78 cents CAD vs USD, maintaining an excellent premium on exports from Calgary, and exports of Alberta oil. Forex experts believe the US dollar forecast is upward, while the Canadian dollar forecast is downward.

If new construction starts are constrained, then the resale market may grow in the neighbourhood of 1% in 2018, 2% in 2019 and perhaps 3% in 2019.  Of course, all predictions rest on the price of oil which as mentioned, the Saudis and OPEC control.  And US shale production and drilling rig counts seem to moderate upward increases in oil prices.

The last word on Calgary and it’s oil-driven housing market is volatile. Statistical fundamentals are useless in predicting the movement of pricing and supply. Oil is a weapon, lever, and carrot used by politicians and sheiks, and they determine what prices will be.

Note: the preceding post is not meant as specific investment advice, but rather as a comparison of real estate investment or home buying opportunities. Please ensure you discuss all investments with a licensed professional.

 

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