From today’s Calgary Herald: I was asked for a few comments on the local market, and they were not pretty. The sellers in the picture above need to understand one thing: If your house isn’t moving, you have the wrong price. — Garth
Fiona Warren admits she and her husband, Andy, picked a bad time to sell their house, in the slumping Calgary real estate market. In the past six years, the couple has sold a few single-family homes in a matter of 24 to 48 hours on average.
This time, their 1,900-plus square foot, two-storey home in Regal Terrace has been listed for sale for almost three months and there have been only two viewings to potential buyers. The house was originally listed for $729,000. Now it’s $699,000.
“We did anticipate it was going to be slower, but perhaps maybe not as slow as this,” said Fiona Warren, adding the couple would like to stay in the same area in either a renovated older bungalow or build a new home. “We had also hoped to slide in. I think we missed it by two or three months.”
On Tuesday, the slide was evident as the Calgary Real Estate Board officially released its MLS year-end data for 2008. Total sales are the lowest they have been since 1996. Single-family home sales (13,455) were down 27 per cent from a year ago while the average sale price fell 2.5 per cent to $460,327 and the median price dropped by 2.9 per cent to $409,000.
The condominium market fared worse. Sales plunged by 31.3 per cent to 5,661 compared with 2007 while the average sale price dropped by 4.4 per cent to $302,408 and the median price, at $279,500, was off by 5.3 per cent from 2007.
December was a brutal month for weather in Calgary, but the chill was particularly felt in the residential real estate market.
Sales of single-family homes plunged by 46.9 per cent to 449 compared with December 2007, while condo sales fell by 47.8 per cent to 205.
Also, average and median sale prices continued to drop from year-ago levels. For single-family homes, the December 2008 sale price (at $417,398) was off by 6.2 per cent and the median price of $380,000 was down by 6.6 per cent from a year ago.
Condos had a harder hit as average sale price was down 9.8 per cent to $274,919 and the median price of $254,000 was off by 11.2 per cent compared with December 2007. The market has dramatically shifted from what it was just a year and a half ago. Average sale prices for both condos and single-family homes have fallen by more than 17 per cent from their peak in 2007.
Average sale prices for singlefamily homes peaked at $505,920 in July 2007 and for condos at $332,237 in May 2007. It is also taking longer for people selling their homes. For 2008, it took an average 47 days on the market to sell a singlefamily home in Calgary, up from 33 days in 2007.
For condos, it was 50 days in 2008 compared with 32 days last year. But those numbers continue to climb. In December, it took 61 days on average for a sale in both the condo and single-family home markets. For sellers such as the Warrens, they may be faced with some tough decisions in the near future.
When asked what it’s going to take to sell in this market, she replied: “Some pretty hardcore marketing and maybe some more creative sales approaches.
“The second would be obviously to drop the price, but it gets to a certain point where if you drop the price too much then there’s no point in selling. Real estate in Calgary went beyond the point of affordability and when the average price of a singlefamily home exceeded$ 500,000 in July 2007, it was beyond the ability of the average family to afford it, said real estate author Garth Turner, adding there naturally should have been a correction.
But that correction was delayed for two reasons: the high price for oil and the existence of zero-down, 40-year mortgages. “You had the greatest commodity bubble in oil ever happen in 2008. That gave the illusion of wealth and the illusion of future wealth in Alberta,” he said.
The zero-down, 40-year mort-gages were in full effect until Oct. 15 and many people were able to buy “because of these Canadian subprimes, which is essentially what they were.”
Turner said the Calgary market went beyond the point of sustainability and the correction was only inevitable when people were not able to afford homes on their incomes, oil prices collapsed and cheap mortgages were taken off the table.
“To talk about a rebound in the middle of 2009 is a complete myth. We are in the middle of a North American meltdown, which is not going to be rescued in 2009,” said Turner.
“Many people took their houses off the market waiting for the spring. One of the big surprises of 2009 will be that there is no spring market. It will be dismal.”
He predicted listings are going to explode in Calgary beginning in March, with the greatest number of listings in April and May. He expects local prices will drop a significant 15 per cent but won’t hit bottom until 2010.
In early December, Re/Max released its housing market outlook, which forecast MLS sales in 2009 in Calgary to increase by two per cent from 2008 while there would be no change in the average sale price. An outlook by Canada Mortgage and Housing Corp. forecast MLS sales in the Calgary census metropolitan area to increase by 2.8 per cent in 2009 while the aver-age sale price would increase by less than one per cent to$406,000, which includes both single-family homes and condos.
“The marketplace was oversupplied,” said Lai Sing Louie, senior market analyst in Calgary for the CMHC.
The residential real estate market will likely be slow in the first part of this year as consumers are hesitant to make big-ticket purchases, said Todd Hirsch, senior economist with ATB Financial in Calgary, adding the market should pick up in the latter half of the year. “At a certain point there will be so much pent-up demand that people will pull the trigger.”