Calgary's housing market stabilizing as CMHC lowers risk level

Friday, February 21, 2020   /   by Sergey Korostensky

Calgary's housing market stabilizing as CMHC lowers risk level

After a turbulent few years, Calgary’s housing market is beginning to stabilize, according to the latest report from the Canada Mortgage and Housing Corp.

In its third-quarter assessment released Thursday, CMHC downgraded the level of vulnerability in Calgary’s housing market to “low” from “moderate,” a sign the market is returning to more balanced conditions after a lengthy period of oversupply driven by economic decline.

As recently as the end of 2018, CMHC had warned that the Calgary housing market was “highly” vulnerable, with the inventory of unsold homes significantly outpacing demand.

However, CMHC regional market analyst Eric Bond said in an interview that the situation has steadily improved over the past few quarters.

“We’ve seen lower prices in the resale market as well as increased sales activity, so the sales-to-new-listings ratio is now trending toward balanced territory,” Bond said. “We also have lower unemployment, which is making it easier for potential home buyers to enter into long-term commitments such as purchasing a home.”

The report says Calgary home prices are in line with current market fundamentals, so there is little evidence of overvaluation in the market. Calgary remains a buyers’ market, which has kept downward pressure on home prices. In the third quarter of 2019, the average MLS price was $440,659, a 4.3 per cent decrease from the same quarter in 2018.

In the rental market, Calgary’s vacancy rate sat at 3.9 per cent in October 2019 — unchanged compared with a year earlier and below CMHC’s threshold for overbuilding. This stability has supported an increase in new rental construction, with 2,215 purpose-built rental apartments under construction as of the third quarter, CMHC said.

However, the report said there is still moderate evidence of overbuilding in the Calgary housing market as a whole, with the inventory of completed but unsold units raising concerns that new homes could face absorption challenges.

In the labour market, while Calgary’s unemployment rate continued moving lower to 7.1 per cent in the third quarter of 2019, real personal disposable income gave up some of the gains from earlier in the year and slid three per cent between the second and third quarters of 2019. Additionally, slow population growth among first-time homebuyers (individuals aged 25 to 34) continued to limit housing demand. This cohort has had declining growth year-over-year since the third quarter of 2017, which has contributed to some of the softening in housing demand.

Still, the report is generally positive news as it appears the Calgary market is on a path to balance, Bond said.

“This is a more predictable environment for both home buyers and home sellers,” he said. “Home sellers can expect to take less time to sell their home — meanwhile, buyers still have a good amount of choice.”