At the end of January, the Absorption Rate (AR) for SF houses was 4.0, and for condos it was 4.56, yielding a combined market AR of 4.17. (See Chart A - Absorption Rate Trend) This is another significant improvement over the average AR of 4.54 in December - the overall market continues to move toward a balanced position. But virtually all of this increase in market activity was due to the SF house market - the condo market actually slowed slightly from December to January, the AR going from 4.43 to 4.56. The bottom line for Buyers: this is still a good time to buy, especially a condo, but I would not wait too much longer as the market appears to be warming up. The bottom line for Sellers: it is a good time to sell your house as you should benefit from the balanced SF house market; it's a less favourable time to sell a condo as it is still a "Buyer's Market" for condos.
Speculating as to the reason for the emerging deviation between the SF house and condo markets... there seem to be two major factors at play:
1. The large number of new condos and conversions being constructed. December 2007 saw more multi-family homes (apartments, townhouses and attached homes) under construction than at any other time in calgary's history (see chart below), a total of 9,610 units under construction (Source: CMHC). There has been talk in the condo community for some time that this high construction level cannot be absorbed by the market without effects and I believe we are seeing the emergance of this. I think we might be at the front edge of a moderating 1 to 2 year condo-specific market glut.
Source: CMHC
2. Fewer condo buyers. Net migration to Alberta dropped from 25,794 in the year ending April 2006 to 25,794 in the year ending April 2007, mostly to the benefit of BC and Saskatchewan (Source: City of Calgary Civic Census, April 2007). Part of this was due to booming economies elsewhere in Canada, but what I am hearing on the street is that quality of life concerns (a strained public transit system and increased crime as examples) are also a factor particularly in the inner-city core where the vast majority of Calgary's condo owners and buyers live. In the fall civic election, Ward 8 Alderman Madeleine King was dethroned by John Mar on these same issues.
The median price for one and two bedroom condos respectively is now $242.5k and $284k. For SF houses the median price is now $410k a $4k increase from last month. (See Chart C - Median Price Trend)
The average Days on Market (DOM) appears to have peaked - for the first time since March of 2007 it decreased, going from 51 to 50 days from December to January (See Chart B - Days on Market Trend).
Mortgage Rates Continue to Inch Upward
The average 1-year and 5-year closed rates are now 6.44% and 6.50% respectively (See Chart D - Mortgage Rate Trend) after inching up in January. Most economic indicators are solid, inflation seems to be under control, and bond yields are down so mortgage rates should really be declining. What appears to be happening is that Canadian lenders are passing on their loses on the US sub-prime debacle onto consumers.
Andrew Kyle, B.ASc., is a REALTOR® with Royal LePage Foothills and a Certified Condominium Specialist.
