Are Your Fears About the City Housing Market Justified?

Written by Posted On Tuesday, 09 June 2015 03:08

The Canada Mortgage and Housing Corporation, otherwise known as the CMHC, has released their 2015 housing market outlook forecast for Calgary. The news was going to be bad when it came to the local market, many of those in the real estate business feared, but in fact the news wasn’t as bad as most believed. As expected, the forecast shows lower new home construction and MLS sales than last year, but those who were expecting numbers to rival the low point reached in the last ten years were pleasantly surprised to find that they weren’t anywhere near the lowest numbers of the decade.

The new home starts are predicted at 13,200 this year, comprising 7,500 multi-family homes and 5,700 homes for single families. Those are the numbers from Richard Cho, who is the top market analyst for Calgary for CMHC. He says that the good things that are happening in Calgary will probably continue. “Positive net migration and low mortgage rates will continue to support housing demand in the Calgary region,” said Cho. “However, increased economic uncertainty, coupled with rising existing home supply, will slow new home production through 2016.”


Last year, there were a total of 10,637 multi-family homes, but the reduction in that particular area this year is definitely going to be followed by another one the following year. That's because the total number of units being built is up but that causes pressure on inventory levels when the new builds are completed. Says Cho: “Combined with moderating demand and increased selection in the existing home market, this will reduce multi-family starts to 6,000 in 2016.”


In April of this year, there were a total of 14,614 homes that were under construction according to the Calgary census, and more than 12,500 of them were inside the Calgary city limits. The homes that were inside the city limits were made up of 2,305 single-family jobs, 1,396 row homes and 8.122 apartments as well as 882 partially attached homes.


So, to put the in 2015 numbers in perspective, the 10 year average is 12,308 and in that decade there are two starts that are 17,000 and then three years that are less than 10K. CMHC is saying that 2015 will be a slightly slower start and then in 2015 it will rebound a little. “It's partially because of the economy,” says Justin Havre at Justin Havre & Associates. “It slows the growth of new jobs and the migration into the area. That means that MLS sales will be down in 2015.”


Also, listings have been rising since the very end of last year, which meant that buyers had more choices when it came to the homes that they were going to purchase. They could choose the neighborhoods that they live in and they could hold out for homes that they really wanted, because they were an attainable goal rather than something that wouldn't have been able to be achieved in a thinner market.


Low mortgage rates are also a big factor right now, and they'll continue to influence sales. But the economic shock that the nation experienced because of the oil prices might have balanced that out somewhat. So, that means that the market hasn't really changed significantly from the interest rates, which are quite low right now, with averages of 4.5% for fixed rate mortgages and even lower numbers for the adjustable rate mortgage.


Next year, if oil prices don't have the effect that they have now, and customers feel better about their financial situations, the numbers are likely to increase. In fact, MLS sales forecast numbers are expected to increase to 24,900 units. Even though there are a large number of listings, CMHC is predicting that the MLS average for lived-in homes will decline only slightly. The percentage is 2.7%, which becomes $448,000 this year, in 2015. Next year, the number of new listings is predicted to drop some.


 “Active listings will follow suit, which will allow a marginal rate of price growth in 2016 as sales are expected to experience a slight uptick, “says Cho. “In 2016, the average MLS price will increase to $453,000.”



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