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What you need to know about COVID-19: August 6, 2020
That light we see in Calgary’s housing market tunnel is, unfortunately, not the end of the tunnel.
It’s yet another train, but it’s slowing down, according to the Calgary Real Estate Board’s (CREB) Q2 2020 Quarterly Update Report.
“Calgary housing sales slowed by 35 percent compared to the previous year,” says the CREB report. “This is better than original expectations, thanks to June figures that were far stronger than initial estimates. The pullback in new listings in the second quarter caused inventories to trend down, preventing a more significant decline in prices. The second-quarter benchmark price trended down compared to the first quarter and eased by 2.3 percent compared to last year, just slightly above initial forecasted levels.”
So, yes, that’s still a train a-coming, but, “the extent of the impact may not be as severe as estimates from three months ago. Those original estimates of unemployment levels and job losses have been revised. Job losses and high unemployment rates are still expected, but the magnitude of the decline has eased,” says CREB.
“Furthermore, since May, oil prices have improved. This is not enough to change capital spending plans, but with West Texas Intermediate prices back in the $40 range, the situation has improved significantly from the low levels recorded in May.
“While the situation may look brighter than it did a few months ago, it is also important to note that challenges remain. Our local economy is still facing record-high unemployment rates, with significant job loss occurring not only in areas associated with the shutdown (e.g., accommodation and food, retail trade) but in our professional, scientific and technical services sector. Some of the jobs in areas impacted by closures will start to return as our economy re-opens, but the challenges weighing on the energy sector will likely have a lingering effect on employment.”
Any kind of market weakness and uncertainties are obviously going to pose downside risks to housing demand, especially in the upper end of the market, says CREB.
“Recovery for higher-paid positions will likely take longer than recovery in other areas of the economy. This will cause some persistent challenges for the upper end of the housing market, having a greater impact on those higher-priced homes versus product in the lower price ranges,” says the report. “Overall, we continue to expect city-wide benchmark home prices to ease by just under three percent this year and sales activity will remain weak compared to the already low levels recorded last year.”
Despite the wide range of expectations on home prices, CREB does not expect a stronger price decline in 2020 for several reasons:
• Adjustment in supply. Demand has fallen, but so have new listings and inventory levels. This is preventing significant gains in the months of supply slowing the downward price pressure.
• Support provided by lenders and government is expected to cushion the blow from COVID-19, preventing a more significant price drop this year.
“As we move into the second half of this year and into 2021, there remains significant downside risk. If jobs do not return as anticipated and the support from lenders and government ends, we could start to see a faster rise in supply relative to demand. This may cause stronger price declines in the market entering 2021.”
Calgary’s housing market cooled slightly in July from the previous month’s activity, but June was an unexpected and pleasant surprise, says Jesse Davies, founder and realtor of the Jesse Davies team at Century 21 Elevate Real Estate.
“June surpassed a lot of people’s expectations with the detached market seeing a decrease of 21 percent in active listings from this time last year, which in turn has made for a slim-pickings type of market for buyers eager to take advantage of suppressed pricing and low interest rates,” says Davies, adding there was an incentive to buy before the end of June. “The new lending rules implemented by Canada Mortgage and Housing Corporation on insured mortgages also contributed to the better-than-expected June stats, as buyers rushed to purchase before the July 1 deadline.
“July is trending very similar to June with total sales volume up around five percent compared to last year. The balance of the summer and fall should see similar results and a lot will depend on interest rates staying unchanged, if we experience a second wave of the virus and what unemployment levels taper off at.
“One thing to consider is the net migration and immigration to Calgary, basically coming to a standstill for the last quarter due to travel restrictions from COVID and what type of short- and long-term ramifications this will have on demand and pricing.”
Here are Calgary market stats, comparing July to June this year and July to July last year (based on figures current as of July 27 each year, courtesy of CREB).
|Total market||June 2020||July 27, 2020||July 27, 2019|
Copyright Postmedia Network Inc., 2020