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Calgary housing market

CREB'S

Annual

Forecast

Have you ever wanted to sit in on the Calgary Real Estate Board annual Calgary housing market forecast? Here’s your chance. This is the calgary market Forecast presentation by Anne-Marie Lurie, CREB’s chief economist. The presentation is about 45 minutes long and I focused on every minute of it. You might like to investigate a couple of specifics and skip the rest so I’ve made it easy for you. Just peruse the caption overview below and turn into the time periods that are of most interest. If you prefer to skip through and catch her charts and high lights I’ve done a wrap-up overview at the end.

Ann-Marie: So, um, 2021 was definitely far better than anyone had expected. Um, if we think about what happened, I mean, no one had forecasted that sale would hit record levels. Um, and, and not, you know, we had expected that sales activity would improve. We had expected that we would also see Calgary house prices rise last year, but just not to the extent. So we had a 71% year over year increase in sales. Um, and this is fairly surprising because we were still in a pandemic out what happened to cause demand to be so strong. Well, obviously one of those main drivers was those ultra low lending rates that we’ve seen. Um, but there was other factors. We knew that there would be some pent up demand in the Calgary housing market, but it was far more than anybody of us that had expected. Um, further to that. We also had thought that, you know, some of that improved savings, um, from people that weren’t as impacted through the pandemic would start to play out in the housing market.

Ann-Marie: Um, I think that happened much more than again, as we anticipated, um, other things that were better, um, the economy, despite having the pandemic, we saw better than expected job growth and a stronger than expected energy sector. All of this contributed to improve confidence in calgary housing market and some of the very strong sales we’ve seen now, when we look beyond that, though, one of the challenges were Calgary new listings, um, and inventory. Now we did see new listings in calgary improve. They increased by 34% over the previous year and were quite high, uh, relative what we’ve traditionally seen, but it just wasn’t enough to keep up with the sales in the calgary real estate market. And that caused further declines in inventory levels. And really what happened is that months of supply, which is that measure of balance. So that, that relationship between the supply and the demand and the housing market tighten into seller’s market conditions that persisted throughout most of the year, and that caused some very significant price gains.

Ann-Marie: So we saw Calgary house prices improve by over a 8% year over year now, um, on a benchmark price, sorry. Okay. Um, so we saw house prices in calgary improve and that actually reflected, um, you know, pretty close to recovery. So I think that’s another thing that’s important to note about our market is it is a little different. I mean, we have been struggling for the most part since 2015, um, since the first energy crisis that occurred. And, and it has taken some time for us to get back there. Now, calgary house prices weren’t quite on full recovery, but that’s in part, um, due to certain segments of the market, which I’ll touch on more. Now, this wasn’t unique. So we did see this activity play out in a lot of other aspects of the country. Other parts of sales were quite strong. We seen price increases. What was interesting is as much as we’ve had a strong price increase, um, year over year, um, it was far higher in a lot of other centers.

Ann-Marie: So we saw markets like Toronto, um, Ottawa, Montreal, all with over 20% gains in prices. Um, year over year, we just weren’t quite, weren’t like that. Now part of that is because going into the pandemic, we didn’t have the same supply constraints as some of those market markets had going into the pandemic, which just made supply constraints even more, um, stringent. And now what’s interesting about this. When I look, um, across the country, um, you know, we are the fourth largest CMA in the country, um, and look at the calgary house price comparison. And I, I think this is important when we think about some of our future prospects and attracting people to this city. Um, I, I’ve always said I’m much more optimistic now than I have some time. I mean, we are at a price of, you know, a single family type home is under $500,000.

Ann-Marie: That is it’s far below any of these other major cities. And I think that is something that will continue to drive our market as we move forward and attract people to this city. Is that relative affordability. Now know if we go back and think about what’s happened in different aspects of the housing market, I wanna point out there were differences. Um, so what, what we saw happen and, and this, again, wasn’t entirely unique to Calgary real estate market, but we saw a lot of the activity was driven by the detached side of the market. So that’s, it really started there. And, and what you’re looking at here is really that months of supply eye pitcher, looking at the difference between the two extremes. So the detached and the apartment condos. Now, what you can see is that, you know, that apartment condominium market, um, it it’s been relatively oversupplied, we’ll say since 2015, um, those levels did start to come down, but they never hit the same sellers market conditions that we saw in the detached market.

Ann-Marie: Um, so when we think about what is, you know, kind of balanced what’s, you know, what is considered a seller’s market with new calgary listings? Well, we had basically under two months of supply for pretty much the entire year in the detached market, that’s exceptionally tight conditions. We just didn’t quite get there on the apartment side. So, but at least it went from a strong buyer’s market into something that was much more balanced. And that was, um, one of the main drivers in terms of how that influenced prices. So when we think about what happened to calgary house prices, um, it was a really interesting dynamic. I mean, we have been struggling with price declines for the better part from 2015, um, until the pandemic. And I don’t think anyone had expected that a pandemic would cause prices to move, um, to recover. Um, but they did, um, at least in the detach in the semi sector.

Ann-Marie: So, so what we saw is that, you know, while the apartment condo sector did start to see improvements in prices, um, we actually started to see some gains because cuz there were balanced conditions, um, they didn’t necessarily increase at that same pace and on an annual basis, they only improved by two and a half percent. So far less than what we saw in some of the other segments. Now the detached, obviously that was the tightest calgary real estate market. It went into tighter conditions, um, back in, you know, the midpoint of 2020. So we’ve had some steady price gains and extremely strong price gains in the early part of the year. Now we had thought, you know, as we were moving in the second half of the year, we, you know, things were starting to look like it would play out as we expected where things become much more balanced, um, easing that pressure on prices.

Ann-Marie: And then we had a bit of a turnaround by the end of 2021. Now that is in part, um, due to some expectations on interest rates and inflations, which I will cover more late, um, soon. But, but when we look at this, I, I, I do have to stress. There is differences depending on the product type. So while on a whole, our market hasn’t fully recovered in prices. That’s an only really due to the fact that Rowan apartment units haven’t quite hit back to where they were, um, in previous size, back in 2015. So those markets are still recovering, but we have at least have had full recovery on the detached and the semi side. So this is a big change for our market and something that has taken, um, less time than it anticipated. Um, and again, a little bit of a surprise that it caused a pandemic to do it now.

Ann-Marie: Other things that happened that were a little different, um, even looking within the detached market. And I, I, the reason why I focus on the detached calgary real estate market is cuz it is still reflects the majority of our activity in our city. Um, we do have, or detached activity than any other product type. Um, and there have been differences. So if we think about early during that 2020 period, when we first, um, COVID first appeared and, and we had changes, you know, early in the year, things were different. But as we moved throughout that year, we saw that really the calgary housing market first focused on the most affordable side. So the Calgary new listings under 500, that thousand segment of the market really started to get much tighter, closer to that, you know, tighter conditions in those market segments. Um, as we move throughout though, what happened is well as those supply levels really weren’t there in the lower end, especially on the detach.

Ann-Marie: We started to see the calgary housing market shift that those improvements spread beyond the 500,000 and went into upper markets as well. So we haven’t seen, um, conditions this tight, even in a million plus, which is a much smaller segment of our real estate market. Um, while it might seem that four months of supply is fairly high, this is far lower than anything that we’ve seen in terms of that segment of the market as well. So the demand did start to shift to upper price ranges in the detached and all aspects of them are quite tight. Um, you know, to have under two months of supply for anything price below 700,000, that is a significant shift in our market. Um, and that is causing price gains across all aspects. Um, and then if we take it and take a look at it versus, you know, kind of relative to what we’ve seen in, you know, various areas of the city, um, you know, it’s kind of an interesting story.

Ann-Marie: So again, we’ve had very strong price gains, um, across the city. I mean, you know, having things like 10 over 10% increase in price is fairly significant and in, in one year, um, and we can see that the areas of like the Northwest north south, which also are some of the tightest conditions, the market reported the strongest gains and prices. Now, what was interesting is that, um, the city center is one that didn’t necessarily see the market quite as tight as what we’ve seen across other aspects of the market. Um, and it actually is the one district of the city that hasn’t seen prices actually recover to their previous highs. Now some of this is interesting cuz you know, the discussion has often been is well, has COVID changed people’s preferences. Are people moving out of the city center into the, you know, further reaches, especially if commute time becomes less of an issue.

Ann-Marie: Uh, we have seen some of that play out now again, will that continue? We’ll really depend on what does it look like upon reopening? Are we gonna see more hybrid work, um, or are people gonna wanna come back in and it’ll be interesting to see how that does play out, but it is something that we kind of saw in some of the trends with some more of that activity. Now city center’s also the only area that didn’t see prices fully recover. So on, on a detached level, so prices still are below their previous high, um, by about 4%. Um, despite the fact that they had a 6% year over year price growth. Now we also saw some very tight conditions play out in the surround areas. So again, that whole discussion is, did the pandemic cause people to move out, um, you know, the airdrie market, Cochrane, Okotoks, all of those areas saw a tremendous amount of sales activity last year and new calgary listings just were not there to meet it.

Ann-Marie: Um, and we saw some of the tightest conditions that they’ve ever seen in those markets and, you know, following that, you know, exceptional price growth as well. So we did have some very strong price growth in many of those markets. Um, you know, all of them with the exception of the rural areas had seen full price recovery from where they were before. Um, and many of them also saw record levels of calgary house sales. So we, we did see that strong activity play out in the surroundings areas as well. Now what’s interesting about it for some of them while they’re not necessarily priced much different than what you get in the city. Many of them are much more affordable than what you get in the city, as well as offer either more space, larger lots, um, is very similar to Calgary in terms of what that typical home really reflects.

Ann-Marie: Um, but at the same time, their price spread is, is, is one of the advantages that air has and has attracted people to that area. Um, in addition to obviously lifestyle choices and again, what will be interesting as we move forward to see if that trend continues, um, you know, as companies, if it’s becomes more of a permanent shift in what they look like, um, in terms of employment moving forward, now that’s kind of what happened in 2021. Now let’s think about, well, where are we going from here? So what does 2022 look like? Um, you know, we expect that sales activity will come off of those record levels, but remain relatively strong. Um, you know, it is, there’s a lot of factors that are still supporting some of that sales activity and that demand growth, there still is tremendous amount of savings that people have that wanna put housing, um, further to that because, um, supply or calgary new listings have been of a challenge.

Ann-Marie: I think some of that demand hasn’t been met for new listings calgary. So I think we will start to see that continue to play out into our market this year and still continue to see sales be relatively strong, but off of those, those record levels, um, you know, if we think about economic conditions, they, you know, there is some things that are pulling down sales. There’s also things that are supporting some growth. And I am seeing some very positive shifts in our economy in terms of, um, jobs and various other things that I’m gonna go into that in more detail. So, um, still the very strong year in terms of sales is what we’re expecting, but slightly off of those record levels that we have had last year now, what is some of the factors now, first of all, we have to consider the economic activity. Now, if we look at 2021, um, the expectations of GDP growth in the province are better than originally expected.

Ann-Marie: We weren’t expected to be one of the strongest provinces in terms of GDP growth. Now some of that is related to the energy sector. We cannot deny that the energy sector still accounts for nearly 30% of our economy. Um, and those gains and prices that we had in 2021 really did improve some of that profitability, um, in the energy sector. Now, as we move forward, prices are expected to kind of come off a bit from some of those levels, but they’re, you know, when you look at price forecast for energy, um, you know, they, they do range. But when I was looking at the confidence bands around them, they tend to swing on the upside. So there is a lot of expectations that prices in the energy sector are gonna stay relatively high. And with much, most of the risk on the upside. Well, for Alberta, that’s still the good for us.

Ann-Marie: I mean, it still is a large sector. Now, what we’ll be interesting it to see is how much of that is gonna translate into improved investment and improved jobs. Now there is some expected growth and that will contribute to some of our growth in, in our overall economy in 2022. Um, but, um, you know, it still little bit uncertain of how much of that is gonna relate to actual jobs. Now, that being said, though, there still is improvements. Um, and our economy is expected to continue to grow at a relatively strong pace this year. Now some of that is the fact that COVID is expected to be mostly out of this pandemic phase. Um, and we all are expecting that, um, at least most people are expecting that we will be out of the, the stringent conditions and we’ll start to see things return more back to normal at some point this year.

Ann-Marie: Now all of that means that some of that growth that is happening expected in our overall economy will be based off of, um, you know, what happens when the economy starts to reopen and people start to move again and gather and, and spend again on recreation and entertainment and travel. So all of that, um, is supposed to support further growth. Now, what is interesting and again, um, you heard those comments in the mayor is that there’s also that added growth in the tech sector. And that is a really good thing. When we think about diversification, um, and sources of employment for well paying jobs in our city. And I think that is something that I am extremely optimistic about when we think about the future of our economy and where further growth is coming. Um, you know, bringing in those jobs in those higher paid sectors is, will benefit the calgary housing market as we move forward.

Ann-Marie: Um, so I, I actually think that that diversification and those announcements that are coming is a, is a significant positive for our city, um, and something that will continue to support our housing market and our economy as we move forward. Now, when we look at overall what happened employment, um, again, very interesting trends. Now this is a little different Calgary has had a fairly strong rebound in employment. Now we did see that that kind of come off early in 2021, but we did see by the end of 2021, that they were starting to improve. Now, most of that growth was not in just because, you know, pandemic things related that growth was really fueled by employment in areas like professional and technical services. We saw growth in, you know, the finance, the insurance real estate sectors in terms of job growth. Um, we also saw improvements in wholesale and retail trade.

Ann-Marie: So those gains that we saw weren’t really driven by pan. There was, there was some improvements in employment in terms of education and health, healthcare, um, and that is related to pandemic sort of, um, growth, but at the same time, most of those gains were really not fueled by the pandemic. So I find that kind of interesting in terms of how we look at look like moving forward. And, you know, we had over 4% unemployment in 2021 and further growth is expected as we move into next year. Now, um, one thing that has been interesting is what’s happening in unemployment rates. So we’ve had some fairly strong employment growth. We’re kind of back to where we were before the pandemic, not quite back to where we had had some job losses before the pandemic. We’re not quite back to the, but we’re pretty close. So we have had some significant gains.

Ann-Marie: Um, and, and that’s positive momentum. Our unemployment rates are still remaining a little bit high. Now, some of that is expected to be related to, um, a bit of the mismatch that we are hearing a lot about job vacancies. So there, there is some job vacancies out there it’s much higher than we have seen, but not necessarily the, the right people to fill those jobs vacancies. So that’ll be something that we’ll be sort of watching for as we move forward to see if you know, those unemployment rates are starting to come down and, and what that looks like as we move forward. But on the whole, I’m, there’s a lot of positive expectations in employment. So further 5% gains expected in 2022. What’s interesting is when we look at the breakout by sectors. So we are there, they are forecasted to see losses in terms of, um, job losses in education and healthcare.

Ann-Marie: But what I wanna to point out is that even though you’re supposed to see some job losses in those areas, it’s not offsetting the gains that we had in 2021. So on the whole, over that two year period, there still has been job growth in both of those sectors now where we’re expected to see the most gains is obviously the areas that were most impacted by the pandemic. So accommodation in foods are services, transportation, warehousing, um, arts, entertainment, rec. Those are supposed to be the, the largest source, um, of job growth as the economy returns to more normal conditions. Now what I, you know, and that is a good thing. That’s, that’s a good source of growth, but we’re also expected to continue to see that job growth and those profess and technical jobs, finance insurance, real estate manufacturing, um, construction, all of those jobs will help support a fairly strong calgary housing market as we move into 2022.

Ann-Marie: So again, one of the, the factors behind why we think that, you know, calgary house sales are expected to remain relatively strong, despite coming off those record levels is because we still are expected to see some fairly strong job growth coming from a lot of different industries. Now, another positive is migration. So this has been an area of concern for some time. And we finally started to see a turnaround in the third quarter of last year. We finally started to see, um, a shift from that loss of inter provincial migration. So when we look at what’s kind of happened since 2015, for the most part, we were losing people to other provinces in the country. Um, now what was offsetting? It was international migration. Now, obviously when COVID came through and restrictions on travel, we actually saw migrations shift. So we actually had a loss of people in general through that period.

Ann-Marie: Um, and we have continued to struggle with some, some weak inter provincial migration into at least the first half of 2021. Now, what was interesting is where those people were going. Um, you know, we saw most of that loss go to either BC or the Atlantic provinces that could reflect people who are retiring out of the market and moving into those areas. Um, but what we are start to see at least that trend, that shifted in the third quarter, which again, gives me a lot of optimism that we’re finally seeing those migration numbers come back is we did see that turnaround and a lot of those people were coming from Ontario, Saskatchewan. And so we did see a bit of a shift there. Um, and again, I, I think this is a good sign when we think about what it means for calgary housing market, um, it’ll help support, um, at least on the initial aspect, um, a better rental market, which has been struggling with some excess vacancy.

Ann-Marie: So it should help to see those vacancy rates come down in the rental market. And eventually that should start to translate into stronger calgary new listings demand as well. So, um, I see this as a positive as well. Now, Calgary has been a little different in the way that we didn’t necessarily see, um, well we outperformed prevent activity. So, um, unfortunately Calgary doesn’t do their, their annual census anymore. Um, I feel like it’s a really loss in data. Um, you know, but so when we look at the population estimates, um, for Calgary, um, they generally were outperforming the province. Um, so again, that is a bit of a sign that things in our city are in proving. Um, you know, we were probably the city that was hit the most well, other than Fort McMurray, we were hit fairly hard, um, from the energy crisis back in 2015.

Ann-Marie: Um, but we are seeming to be rebounding on a, on a great pace. And again, um, that is important thing in terms of when we think about sustaining higher levels of new listings calgary demand as we move through this year and beyond now, the one area that has been more on the downside or the risk, and is top of mind for everyone has been inflation and rates, um, lending rates now to a certain and extent inflation was expected. Um, you know, there, some of this has been related to supply disruptions that have been caused by COVID keeping inflation, uh, levels relatively high. Um, and the challenges though is when we do have these higher inflation rates, I mean, other than the fact that it increases people’s cost of living, um, there is a tends to be that response from bank of Canada. This is what have everyone talking about the interest rates now on the whole interest rates are expected to rise.

Ann-Marie: Um, so they have been relatively low. Um, I, I think a first rate decision comes tomorrow. Um, you know, I think the general expectation before was that rates wouldn’t probably start to rise until, um, maybe spring into the summer. I think we could start seeing rates rise a lot sooner than originally expected. Um, but it is the intention that as those rates start to rise, it should start to cool off those inflation levels and start to bring us more into more normal levels, as well as the expectation that some of those supply distractions will start to ease as things start to move into more normal. And some of those, um, restrictions placed will start to ease. So now this is something that tends to, to slow down housing demand. I mean, when you have rate increases, um, that naturally changes what people can afford and it should slow.

Ann-Marie: It is one of those main factors why we don’t expect that sales continue to maintain that record pace. Um, now that being said, um, we could continue to see a fairly strong spring market as people are wanting to get into the market before, um, for the rate gains income. I mean, and, and the rate forecast in terms of how much that increase will be, have varied significantly. We, I have seen forecasts that expect, you know, um, a 1% increase by the end of the year. Some that have ranged to a 2% increase. Now there is some challenges with that. I mean, um, and, and the bank candidate is very aware that, you know, depending on how they increase rates, they don’t wanna overshoot it because that could impact the overall economy. So I think generally the expectation is that rates will rise. That will cool off some of the demand, but we should continue to see some of that strong demand and housing play out, especially earlier in the year as people wanna get into the market before, um, further hikes come.

Ann-Marie: So this is one of those factors that’s slowing demand. Now I’ve talked a lot about demand. Now. I think it’s important to also look at the supply side of the market, because this is, it it’s really the relationship between the two that tends to influence prices. So, you know, when we think about what’s happened, um, you know, I talked about how new listings calgary were, were rising and they improved. And it did look like our market was starting to see some inventory gains early in 2021. And then that shifted, um, demand just stayed exceptionally strong. And even though calgary new listings were higher, it wasn’t enough to keep pace and take a look at what happened to inventory levels. So inventory levels have just consist trended down throughout 2021 are, and are we’re heading into this year with exceptionally low inventory levels. Now, again, as I mentioned before, there are differences between product types.

Ann-Marie: Um, a lot of the tightest conditions are in the detached side of the market, um, versus the apartment condo. Um, but what this means is that it’s to take some time for the market to rebalance. Um, so what are those sources of calgary new listings? Well, we know that, you know, tends to be that as prices improve, we start to see some more new calgary listings coming on. Um, but that’s just one piece of the puzzle. We also have to consider what ha what’s happening in the new home market, because that also adds, um, supply and choice to the over old housing market. Now we did see in 2021 that starts improved. We had a 65% gain in starts. Um, you know, there was some pickup not just in multifamily like other years, but we also saw that improvement on the detached side of the market. Now, that being said, inventories are still exceptionally low in the new home side as well.

Ann-Marie: The, the new home sector has faced some struggles with some of the supply chain issues. Um, and that has impacted that pace of, um, how long it takes them to complete properties now. Um, and it’s also caused increases in their prices as well as they’ve seen, um, higher costs and in many of the inputs, as well as some of the labor costs now, now, so overall their starts are forecasted to kind of come off in 2022. However, some of these increased starts that we did have in 2021 should help to support at least some supply as we move into 2022. So, um, it should be enough that as this product is completed, it should add some new calgary listings into the market and help ease some of that supply pressure that we’re currently seeing. Um, but it’s not exactly gonna remove it completely. So it’s gonna take some time for our overall resell market to balance off.

Ann-Marie: Um, and other thing that we saw that was interesting is even though the starts, the new home market has improved significantly, um, they weren’t hitting record levels, so they didn’t see the, so a lot of that tells us that some of that demand that was before entering into the new home sector, we saw some of that shift into the resale market. Now, as we move forward, again, one of, of the key things that I’ll be looking for is what will happen with supply. Um, again, pointing out, just looking at that months of supply and that impact relative to calgary house prices. Um, you know, we were in seller’s market conditions, you know, pretty much for the entire year in 2021. Um, we started to see things kind of look like they were moving to more balanced conditions, which what we had originally expected at the start of that year.

Ann-Marie: And then there was that drastic change and it just didn’t happen. Um, and look at that impact on price. So calgary house price has basically increased, um, you know, they went from that and this is overall citywide, total residential. Those house prices went from four 20 to almost 406 over 460,000. So that’s a fairly significant over the year. Now, as we move into this year, it’s gonna take some time for new calgary listings to catch up. Even if demand comes off, those levels are still expected to remain strong enough that, you know, we do expect that these conditions will remain relatively tight, um, into this year and into the spring market. And that’s gonna support, um, further price gains. So we do expect that prices will continue to improve this year. Um, not necessarily at the same pace as what we had last year. So we don’t expect another 8% gain in prices.

Ann-Marie: We do expect those still relatively strong price gains of over 4%. Um, on the whole, we do also expect that the price gains will be much high in the apart, uh, detached sector in part, because it’s gonna take longer for that market to hit into more balanced conditions. Um, as we move through the year and as those rates start to rise, we do expect to see that we will start to move into much more balanced conditions in the second half of 2022. So that should start to slow that pace of price growth, um, in the second half of the year. But I think we’ll continue to see some strong price gains, um, throughout the first half of the year now, in terms of, um, you know, overall risks and what we think are gonna happen. Um, I have talked about these and I’ve touched on them throughout the presentation.

Ann-Marie: Um, but I would say like, there’s a couple things, obviously the inflation, the interest rate, COVID how those things all play together, um, is really the, still creating a lot of uncertainty in the market. So we do, we are through fourth wave. I, I, I don’t know if I’m even losing track of how many waves we’ve been through. Um, you know, is it gonna be over? I mean, most of the expectations moving forward is that we are through the worst of the pandemic, um, and things are gonna start to shift into a more normal sort of open, open market again. So that is still to be seen. So we’ll see if that kind of can continues as we move forward. Um, obviously that kind of needs to happen to ease off some of those supply pressures that we’re seeing and those supply disruptions that we’re seeing in the overall market that’s causing some of the inflation.

Ann-Marie: So I think that is, um, you know, those play very closely together. Obviously if inflation and interest rates, we know there’s that relat up as inflation tends to rise, we see that the interest rates have to adjust. Um, now as we move forward, um, you know, what will be interesting. And I think one of the biggest downside risks is that rate of, um, increase in interest rates. So if those rates tend to increase sooner, faster and higher, um, then we, that can have more downside risk in terms of sales. Now on the other side of things, um, you know, our energy sector, again, as I said, um, it’s nice to see growth in other areas, but it still is an important sector for us. Um, you know, those higher energy prices could start to, you know, really impact jobs. We could see more and employment growth, um, that can, and, and frankly, in our city, when we tend to see higher energy prices, it also improves confidence.

Ann-Marie: So that’s something that actually can support, um, some of those higher demand levels. Um, the biggest challenge in terms of, you know, what we see will be related to calgary new listings, will those new listings come on to support more balanced conditions. If we don’t see that supply adjustment happen or start to happen this year, then we could see far stronger price gains than we forecasted. Um, and that is something that’ll be continuing to watch throughout the year to see where we’re at, um, in terms of supply, uh, I think it has been a bit of a surprise. Um, you know, we expected to see that that supply adjustment start to happen at the end of 2021. And it just never really happened. Demand was far stronger than we expected. Um, and it still remains something of the risk in terms of what we’re looking at as we move forward, um, is, is, is that calgary new listings gonna meet that demand? And are we gonna see more balanced conditions cause prices to really start to level off and slow that pace of growth, um, with that said, um, I think that’s the main part of what I have, and I’m happy to invite up Robin to answer some of your guys’ questions.

Robin: Thank

Robin: You, Amarie, uh, great presentation 2021, certainly an unexpected year. And it was wonderful to hear that 2022 is shaping up to be positive in nature. So, so thank you lots of great information there to take away. Um, many of you have, uh, been asking questions through our Q and a, uh, so we wanna encourage you to keep those coming. I’m gonna read a few of Emory’s, um, uh, questions to her now. So thank you for your questions and thank you for your presentation. Um, what the first question will we have a large integration to Calgary this year?

Ann-Marie: Um, we are, so there is forecasted growth in immigration levels in Calgary, um, kind of in that really 20,000 range in terms of how many migrants we get. Now, what’s interesting about it though, is while it’s improving, we’re not back to where we were. Um, if we think kind of pre pandemic preen energy crisis, we’re not quite at those levels, but it is at least a significant gain and a source of improvement for our real estate markets. So we did see Calgary numbers, and again, we don’t have those census numbers anymore. So, you know, it’s much more of an estimate. Um, but we did see that those levels, um, you know, did start to improve in 2020 are, are expected to be much better in 2021 and 2022.

Robin: Great to hear great to hear, do we have a rough idea of the magnitude of mortgage rate increases that we may see for the bank of Canada? And I know that bank of Canada has been, there’s been some, some stuff in the media talking about the bank of Canada, raising those interest rates, trying to combat the, the inflation. So, so what thoughts do you have around raising the interest rates? Well,

Ann-Marie: There’s couple things. So first I wanna note the bank of Canada rate versus a lending rate can be different. So, um, we’ve already seen a lot of the banks raising their rates in anticipation of the bank of Canada raising their overnight target rate. So we’ve already seen some of that movement happen. Um, now in terms of what’s expected for bank of Canada, I think the minimum expectation is to see a least a 1% rise. Um, gradually like, so in 25 basis points increases is what’s generally expected this year in terms of what bank of Canada will do now. Um, obviously the first decision is tomorrow now for the most part, most expect most people aren’t expecting that they’re gonna raise rates tomorrow. Um, however, um, you know, really the jury’s out on that one, if it’s gonna be by tomorrow or if they’re gonna wait for the next rate decision.

Ann-Marie: Um, but they are, um, expected to increase at that rate. And I have, and, and again, one thing we have to consider is that while that’s what the bank of Canada does, it’s also what our actual lenders gonna be doing and how much will they to be increasing their rates. And like we did see through that pandemic period that that spread in terms of that discount rate came down significantly. So we saw really low discount rates cuz there’s that posted rate, which frankly, nobody really pays in the market and then there’s whatever people are getting on the discount rate and that had come down quite a bit. Now we did see that those discount rates, that level discounts started to shrink. So what will be interesting to see is how much, um, your lenders out there will actually start to raise their rates. And if they’re gonna do it ahead of what the bank of Canada does,

Robin: That’s so true. I think our next question sort of ties into that are interest rates going to go up this week? And I know that in your report, you talked about if those rates go up too soon or if they go up too many times, you know, throughout the year, what that impact will have on our housing, um, and our real estate industry. So to the question, are interest rates going to go up this week, glad crystal ball, right? Well,

Ann-Marie: That decision comes tomorrow and in your, and I think that, um, you know, really, you know, most people are expecting that they’re not gonna go up tomorrow. Um, but when you have inflation as it is, it’s really difficult to say if they’re gonna start that first increase. Um, I think the general expectation is that they’re gonna wait and they’re not gonna have it on this first increase. I mean, we have to keep in mind, bank of Canada was expecting that inflation would be running higher in the beginning of the year. It’s more about if this inflation pressure continues to persist into several more months. So I think that’s something, um, to be seen. I think a lot of the banks have already started to move up their rates

Robin: Though. Right. And anticipation. Yeah. Great. Um, so Anne, the next question we have is what are your thoughts on, on purchase prices going 30 and a hundred K over list prices. This we’ve seen happening recently and even on homes in the 500 and $600,000 range, do you anticipate that this will continue?

Ann-Marie: Well, this is the challenge when you don’t have enough supply in the market. Right. So, um, when you’re in these really tight conditions, so under two months of supply, um, just haven’t seen that since 2006, um, that’s a good thing. And well, I, there there’s pros and cons to it. Right. Okay,

Robin: Sure.

Ann-Marie: I’ll do that. So I don’t, um, for me, I look at that and go, that’s also makes it very difficult for buyers in this market, um, to find product and dealing with this. Now of course, if, um, you know, you’re in this scenario, it’s gonna take, you have to get into much more balanced conditions to see that really stop that type of activity stop. Um, and that’s gonna take time, unfortunately, we’re just not seeing that calgary new listings come on, especially in the detached market, in the lower end. Um, you know, we talk about two months of supply for the overall city. Well, when you start breaking into those lower calgary house price ranges, it’s the even lower, like you’re talking one month of supply, so there’s just not enough Mar uh, product in that market. And it’s gonna take some time for rebalancing. And unfortunately I just don’t think that that shift is coming soon. Mm. Um, it’s gonna take time for that supply response. We just haven’t seen enough of it. Um, so those conditions will likely remain relatively tight as we move into the spring market. Um, as the rates start to rise though, then that will start to change, um, some of the demand as well. Um, it will naturally, it causes some people to be pushed outta the market. Um, so we’ll see how that types influence it. Um, but unfortunately I think these seller market conditions are gonna be here to stay for at least several more months.

Robin: Wow. Several months. Great. Um, this is an interesting question. This next one, if there is war in Ukraine, how will this affect it? All financial markets, inflation interest rate, energy prices. Is it a risk factor for the entire world? Thank you. Is that something that you can see impacting us here in Alberta? Um, and in our housing market here?

Ann-Marie: Uh, it’s an interesting question. I, I really haven’t given a lot of thought to what influence that can have, um, primarily on Alberta. I think it’s a matter of, um, what does that do to the overall economy? Um, there’s a lot of things to unpack there. When does that happen? How does it influence, um, like, will it, how does it influence energy markets is, is my first thought is exactly what will that do to energy prices? Um, especially if you think about Russians influence in terms of, um, them in Europe and the,

Robin: The oil supplies

Ann-Marie: There and the supply. Yeah. Because, because they provide a lot of natural gas. And so, so I think, um, that has some interesting implications on energy prices. And I think that’s something that’s gonna be kind of key to see, um, when we think about what risk that might pose, um, in terms of calgary house prices and how that could influence our market.

Robin: Great answer. Um, what can we expect in the luck tree market over 2 million?

Ann-Marie: Um, that’s a really niche market, so I’d have to say you’re dealing with a very small pool of buyers now again, um, you know, when you’re dealing with 2 million plus it’s, you know, there’s just not much of that activity. Now, what I can say is for a million plus we have definitely seen that that calgary real estate market has improved. Now. It’s not necessarily the case that prices have, um, fully come back to where they were, um, that does depend on your location. And obviously so many more factors when you’re dealing with that higher end of the market. Um, but at least we are starting to see much more transactions. And I think, um, what will be interesting is all also looking at how our migration pattern comes in, because we are much more affordable than a, like, I mean, $2 million in some of those other markets. Right.

Ann-Marie: Um, when you look at that typical home and the benchmark price in Vancouver, you’re at 1.7, so that’s almost at so, so there is some of that advantage that Calgary has in terms of, we think about that and, and pricing and for what you get. Um, you know, but I think as rates also rise, that is something that influences all aspects of the market. And I wouldn’t expect any different in the upper end. Um, but at least we’re seeing much tighter conditions. So, um, there has been, you know, much stronger demand in that segment of the market than we have seen for some time.

Robin: It’s an interesting comment. Uh, Vancouver being benchmarked, I think you said 1.7 Ontario, like 1.2, some of those, those markets where people, and, and we’re hearing about migration into Alberta, you know, it’ll be interesting to see if those markets are impacted by people that are coming to our province with perhaps the sale of their home to purchase something in that market here.

Ann-Marie: Well, and we’re starting to see some flow from Ontario. Yeah. So I, and, and that’s actually an interesting to see if that trend continues. Um, and I, again, it’s one of those things that I see as a very positive for calgary real estate market is that, you know, again, being one of the largest cities in the country, um, our detached home price is still in that 500,000 range. Yeah. Um, so that is something that I view it as, um, it’s an opportunity for our city. Um, absolutely. You know, it’s something that we are relatively more affordable. Um, and it’s a way that we can help attract people here who frankly can still buy a detached home that you might not be able to get into some of those markets

Robin: Affordable, great cost of, of living great things to, to do here. I feel like I’m on a marketing platform here for Calgary. What are your thoughts on the 2022 condo sector of the calgary real estate market, particularly, especially downtown condos? Well, the city has all these plans for redeveloping vacant office buildings.

Ann-Marie: Um, well, there’s two parts to that. So I, I think first down, when we think about the first sector, when we think about just what’s happening in the condo market, um, again, it’s much more balanced than it has been for some time. And I think that as, especially as prices continue and calgary new listings is a lot more limited in the lower price ranges. We’ll see, I think much more of that activity happen in the condo. So we’ll continue to see some demand improvements in the condo sector. Um, so still relatively strong sales. Now there are still a lot of new calgary listings there. Um, so again, but I do think we’re gonna see much more balanced conditions and that’ll start to support, um, continued price growth. Now that being said, it’s gonna take some time before things become, um, you know, till you see full recovery in prices, we have to keep mind that prices are still, um, significantly lower in the apartment condo sector.

Ann-Marie: But I do think we’re gonna continue to see that slow, modest improvement in the apartment condos. Now, in terms of that redevelopment, I think there still is to me a lot of unknowns in terms of, um, what price point mm is that product coming on at? Um, what does that look like? And I don’t know if that’s really been hashed out quite yet. Um, you know, there’s been a lot of talk of, is it gonna be student housing? Well, that’s a very different thing. So, so what I’ll be looking for when we hear about that redevelopment of some of that vacant office space is what type of units are they putting on? Are they coming out with affordable units? Are they coming out with, um, different style of apartment condo? So that’s really, um, and what price point, because that will influence the market, um, in terms of what that overall looks or is it gonna be rental. Right. Um, and I think that there still is a lot of unknown with what that redevelopment looks like at this stage.

Robin: Well, it certainly would be nice to see our city, uh, active, downtown and, and vibrant et again. Um, what do you think is gonna happen to the rural market in the small town and acreage and farm, uh, communities? Um,

Ann-Marie: Well, again, those areas, so if we looked at just what’s happened in, you know, the rural Rocky view areas and, and rural foothills, um, around our city, um, they have seen exceptionally strong sales, um, and they’ve seen very strong price growth as well. And then again, part of that is, is some of that driven from the fact that people are looking for more space. So we’ve seen a, a tremendous amount of growth in those areas. Now their prices are still below that pre high now in part, because again, they were one of the hardest hit. Um, especially if you think about those higher priced acreages, um, just outside of the city, they, they were fairly hardly hit through the, that, that energy sector, that six year period that we went through. Um, but we are starting to see a turnaround. And I think that trend will continue, continue to see improvements in those markets and, and people looking for space. And especially as that commute time becomes less of an issue for people. Um, it is something that has, I think, supported some of that growth.

Robin: Great that commute time. Sure. Makes a difference too. Yeah. Great. Thank you. I think, um, that is it, uh, that’s the time that we have today for question, what I will share is that, uh, we do have a list of all these questions that you’ve provided, the ones that we’ve not gotten to. And I would like to share that Amber’s gonna be joining us for a podcast in the next couple of weeks. So any of the questions that we didn’t get to here today will be included in the podcast. And, uh, if you just wanna keep an eye on CREB talk, uh, you’ll get the details. We’ll have the details up to you there shortly.

Cole’s Notes:CREB Member’s Forecast meeting. Q4 20

We have more data now about Covid. 1:30

Jumped back from desperation to 200k Alberta jobs lost. 2:00

Alberta is impacted more than the rest of Canada 2:57

In Alberta Lethbridge and Medicine Hat are the best markets because they are not as dependent on energy sector jobs. 5:20 Analysts are saying markets could go down by as much as 20%. 6:10

We have not dropped as much as Ann Marie expected because supply has dropped off in balance to sales. 6:45

Activity is not as bad as what was expected. 8:20

If things don’t change the economic fundamentals will continue to weigh on our market. 8:50

August this year was similar to August of 2019 although last year was fairly down. 9:15

In some ways our supply/sales adjusted numbers are (at this point) better than pre-Covid. 11:10

We have a market that is temporarily better than what we expected. Prices are solidifying and in fact going up. 11:55

Most of the improvement is solely in the detached single-family sector. 12:35

The apartment condo market is off the charts. 13:05

Covid has caused the Calgary detached market to become balanced. 13:25

As commute times become less of a factor due to Covid satellite towns are seeing an upswing. 14:40

While we are seeing market stabilization it is dependent on which segment of the market you are talking about. 15:40

While the detached market has a long way to go to get back to the 2014 market we are beginning to see a trend reversal due to pent up demand of Covid-19. 16:30

The apartment market is seeing a price adjustment of 18% since 2014. 17:00

Market trends are different depending on the sector or market zone you are in. 18:10

The city center and west zones are seeing the least amount of market resilience. Partly because these tend to be the most expensive areas. 19:05

The lower end of the detached Calgary housing market forecast surprisingly has seen somewhat of an upswing during Covid -19 shut downs. 20:30

The lower priced homes are selling well. They are limited by supply more than buying activity. 21:10

Upper price ranges( $600k plus) are seeing price declines. 21:30

The $500 to $700 range is seeing a reduction in the absorption rate. 22:15

Other regions in Canada have seen record high real estate sales prices. Calgary is not experiencing that because our job losses are more focused in the energy sector. 23:40

We were just starting to get back and now they weigh on our market again. 25:35

The market pressure that we are seeing on the top end of our market will persist. 25:45

Higher density product has been the most challenged market sector. This is partly due to new product keeping inventory high. 28:55

According to the Calgary housing market forecast Alberta’s economy is expected decline by 8.7%. Making it one of the worst recessions that we’ve seen. 29:43

Oil prices are expected to remain low with the optimistic projection of energy industry recovery being 2022. 31:37

Western Canada Select is down 27% – Active rigs -66% – Oil production -12% 32:08

Provincial migration numbers are not nearly as negative as the early 1980s recession. Migration is a determinant of real estate market buoyancy. If migration levels hold, we should not see as dire a housing market as we did then. This is yet to be seen. 33:32

Alberta employment forecast are better than it was earlier. Job loss expectations are to be in the 135,000 range of jobs lost in 2020. 36:45

Employment recovery is not anticipated until 2023. 37:00

Unemployment in Calgary is expected to remain over 10% for the next two years. 37:22

If the current rate of unemployment is sustained over a long period, we could see percentage price adjustments similar to the early 1980s. 38:40

In the 1980s it took several years for prices to reach bottom. 39:55

In 2020 many of the jobs that have been bolstering the numbers have been part time positions. 40:55

The economy was forecast to be worse off than it is. That has been primarily due to the significant amount of government support. 41:52

The concern is that once CREB and EI benefits and mortgage deferrals stop there will be an increase of defaults leading to supply gains. 42:51

Low interest rates are helping to buoy up the market. 44:37

Considering the employment numbers there is a significant amount of downside risk. 44:48

Question period. 46:15

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