Calgary’s housing market is quickly heating up again and barring a sudden drop in oil markets, home prices have further to run and home builders will get busier in the year ahead, but a throwback to the frenzied pace of the 2006/07 boom is still a stretch, says new report released by BMO Capital Markets on March 14/2014.
But it said Alberta was bound for another housing boom.
Robert Kavcic, senior economist with BMO Capital Markets, said that the main difference today from the previous boom is that time was a “pretty unique situation and I don’t think we’re going back there.“
The economy was stronger then, even though Alberta today is head and shoulders above the rest of the country now. The pace of growth is not comparable with what was experienced in 2006. Today growth is in the 3.5 per cent range. Back then growth was four per cent to five per cent.
“The last energy boom came on the province pretty quickly and there was really a lack of housing supply back then. You saw a real sudden pick-up in economic growth and an influx in population and homebuilders were really scrambling to get homes built fast enough to satisfy that demand,” said Kavcic.
“So the market was a lot tighter back then too. Now we’ve added a good almost 10 years of strong economic performance in Alberta so the market is much more well supplied this time around.”
The BMO report looked at various aspects of Calgary’s housing market today comparing them with 10-year averages and the peak of 2006/2007.
- The average house price of $443,000 (the latest three-month average) is higher than the 10-year average of $369,000 and $437,000 during the peak.
- The sales-to-new listings ratio today is 75 per cent, up from the 61.5 per cent 10-year average but down from 90.3 per cent at the peak.
- Month’s supply, which measures the number of months it would take to absorb the inventory with current sales activity, is 3.8 today, down from the 10-year average of 4.3, but way up from the 1.2 during the peak.
- The price-to-median income ratio is 4.1 today, just slightly up from the 10-year average of 3.8 and just slightly down from the 4.7 peak.
- BMO also measured the mortgage payment as a percentage of median family income. It is 24 per cent today which is the same as the 10-year average but down from 35 per cent at the peak.
- The completed and unabsorbed inventory for new homes is 511 today, way down from the 10-year average of 895 but up from the peak of 481.
- Calgary’s apartment rental vacancy rate is 1.0 per cent today. It’s 10-year average is 2.3 per cent. During the peak it was 0.5 per cent.
- In February 2006 there were 2,601 MLS sales or 40.3 per cent more sales than the 1,854 this February, he said.
- In February 2006, 841 or 32.3 per cent of homes sold above asking, compared with 364 or 19.6 per cent this February.
“The sales-to-new-listings ratio in 2006 was at 96 per cent which meant nearly a home sold for every one that was listed. Last month the ratio was ‘only’ at 68 per cent – still a seller’s market but not at extreme as back then.”
It said the province sits head-and-shoulders above the rest of the pack on a variety of measures including GDP, employment and retail sales growth.
“Alberta’s rapidly-strengthening market which, like the province’s broader economic performance, is quickly decoupling from the rest of the country,” said the report. “For policymakers, this is clearly a case of superior economic and demographic fundamentals at work, not a bubble rearing its head.”
“The stark economic outperformance is magnified by the pull it is having on population from other regions of the country. Population growth in the province has surged to 3.5 per cent year-over-year, the fastest pace in more than 30 years, with nearly 50,000 interprovincial migrants flocking to the province in the latest year, or a hefty 1.2 per cent of the population. Every province in Canada is now seeing a net outflow of migrants to Alberta,” explained the report.
In Calgary, 16,302 single family homes changed hands in 2013, an eight per cent increase, and 4,007 condos were sold, a 14 per cent rise. The benchmark price for a single-family home was $472,200 in December, an 8.6 per cent increase from the previous year.
“Two consecutive years of elevated levels of net migration, combined with an improving job outlook and confidence surrounding long-term economic prospects, supported the demand growth,” said Ann-MarieLurie, chief economist for the Calgary Real Estate Board.