Calgary real estate market at low risk of overheating: CMHC
Calgary's real estate market is showing a moderate vulnerability, says a new report assessing its risk. But its home ownership market is still at low risk of overheating and accelerating price gains, the report also notes.
Canada Mortgage and Housing Corp. recently released its first-quarter housing market assessment for the year, finding Calgary's market poses a moderate risk of negatively affecting financial stability in the city.
Senior analyst with CMHC Michael Mak says the assessment shifted to moderate overall risk from the previous report at the end of 2020 that rated the overall risk as low.
“The change reflects high risk in the excess inventories measure based on levels of new unsold home inventories and vacancy rates for apartment rentals,” he says.
New home inventories fell in the fourth quarter of 2020, the data used for the most recent report, which would reduce the risk. But vacancies for rentals increased.
“The vacancy rates were high enough over the threshold that they triggered a shift in the rating.”
Yet from the home ownership side, the market is showing low risk of overheating, price acceleration and overvaluation, the report found.
Mak notes the sales to new listings ratio, seasonally adjusted, was 68 per cent in the final three months of 2020.
“That's below our threshold that we consider an overheating market, which is 85 per cent.”
While 60 per cent and up is typically considered a sellers' market, Mak notes CMHC still sees the market as balanced.
“Yet there are fewer homes on the market and being listed, and that is driving more competition among buyers,” he says. “And it is pushing things toward hotter market conditions.”
Calgary realtor Lowell Martens says while the CMHC report still accurately reflects the Calgary market, sales and price gains since the start of the year show the market now clearly favouring sellers.
“It's really good market conditions right now for sellers,” says Martens, broker/owner with RE/ MAX Mountain View. “As for buyers, it's gone a complete 180 from a buyers' market over the last few years.”
The CMHC report reflects growing demand among new homes, but it does not fully show how much supply of new homes has come down in recent weeks, Martens adds.
Dwindling new inventories have led to demand spilling into the resale market, driving up prices particularly in the $350,000 to $650,000 range for single-family homes, he says.
Still, Martens agrees with the assessment that the market is at low risk for overheating.
“There is some feeling out there that we're seeing (an upward) correction in a market that has been down for several years and coming up to speed again,” he says, noting many home prices are still below 2014 levels.
More product is slowly making its way to the market as prices rise in the city — although some areas are seeing more price gains than others, he says.
The coming weeks, however, will determine the direction of real estate in the city.
“The big question is when more product starts coming on in the spring market,” Martens adds.
Only then will it be clear if prices will keep gaining strength, or whether growth will moderate as more supply takes some steam out of demand.
“But for right now, it's really a wait-and-see where the market goes,” Martens says.