HORSE modified

Guess where single-family home sales dropped last month? Yeah, Calgary. And whether you wear pointy-toed boots like me or not, this should concern you. We’re teetering on the edge of change.

After all, six of 10 regional real estate markets in Canada are already seeing declining sales or soggy prices. (Sellers in places like Halifax and Regina grow more desperate by the day.) Up to a few weeks ago, we had just three cylinders firing – Van, Cowtown and 416. Now you can start writing off Alberta as a bottomless pool of housing horniness. Calgary listings just shot up 22%. No doubt about it. Change.

The catalyst is oil, as you might imagine. And while the price of a barrel has bounced off the low-sixty-dollar mark in the past couple of days, nobody sees a quick recovery. Obviously. US production remains at a 30-year high while Europe fights deflation, Japan and China battle recession and OPEC decides to keep pumping. It’s classic. Too much supply, too little demand. Plus, a strong US dollar. The result? Just be glad you didn’t buy a Calgary McMansion last month.

Even the Calgary Real Restate Board, bastion of cowboy machismo and realtor hyperbole, admits it. “It was a relatively strong month,” says CREB’s fetching chief economist Ann-Marie Lurie, “but definitely one that’s moderating.”

There’s a lot more moderating to come, if history’s any guide. Past oil prices drops have brought near-panic to the market, with a corresponding plop in sales and prices. This time, after an historic and nearly-hysterical run-up in prices since 2009, the odds of a meaningful drop seem higher.

Adds Ann-Marie: “If an energy downturn forces companies to cut jobs, Calgary’s housing market will take a hit. It has to be a prolonged period of low oil prices before companies start to change some of their investment decisions. So if falling oil prices continue, there’s no question it will start to influence employment growth … and that will start to influence our housing market.”

Some see that happening sooner than later, since it’s people – not oil – that buy houses. Soon there will be fewer of them, at least fewer newcomers. BMO’s Bob Kavcic says Alberta’s economy will be no star next year, and immigration into the province could be chopped by 50%. At the same time, other provinces (like Ontario) are likely to grow stronger (cheap gas sure helps), also cutting the urge to fly West.

This isn’t good news in Calgary or Edmonton where developers have been throwing up new housing as fast as possible, and even rock star carpetbaggers like TO’s condo king, Brad Lamb, have been blasting ahead with massive new slabs. Looks like a lot of that could come to market just as demand is shrinking faster than a gelding’s desire.

And then there are those who are screaming at Calgarians to get the hell out. Now. Which brings us to ex-realtor and outspoken housing analyst Ross Kay. His latest analysis is dire enough to have Calgarians hammering in the For Sale signs.

“Calgary is in a classic over-sold condition where more and more buyers are purchasing their future home without having their existing home sold under contract,” Kay warns.  “Calgary has been in over-sold territory since July 2013, the longest period in its history.  Calgarians’ previous unfaltering faith in the housing market appears impacted by concerns of leading economists about the Calgary economy.   While it is outside our area of expertise to comment on anything outside the Realty Market, evidence has surfaced that Calgary’s bull market in housing may have come to an end. Calgary remains under our NO BUY warning and SELL NOW recommendation.”

And here is his handy summary:

Realty Market Status – Over Sold
Pace of Sales – Decelerating
Current Pace versus Peak Pace – 89%
Year End Projection – 25,705
Year to Date Fail to Sale Ratio – 51.3%
November Fail to Sale Ratio – 49.9%
Buyer Risk – EXTREME
Seller Risk – Low
12 month Price Prediction – Negative

Now here’s more to worry about (this is a full-service blog, after all): the Bank of Canada and interest rates. While there’s a meme that the cost of money will never go up again because the government couldn’t afford it or the real estate market would croak, it will. As mentioned, the US Fed will begin to tighten next year, the bond market will react and fixed-rate mortgages will bloat.

But it also appears the BoC may pull the trigger next year, causing the prime, lines of credit and variable-rate loans to pop. This week boss Poloz says the economy is stronger than expected and excess capacity is being reduced at a faster clip. “Canada’s economy is showing signs of a broadening recovery,” the bank sayeth. “The hoped-for sequence of rebuilding that will lead to balanced and self-sustaining growth may finally have begun.”

To Bay Street economists this sure sounds like stage-setting for a rate hike. The betting: it all starts in the third quarter of 2015, which would be several months after the Fed pulls the trigger. So, get ready.

By the way, the bank also says the amount people are borrowing, “poses a significant risk to financial stability.” So higher rates will curb it. Guess what that does to real estate?

Call your agent.