If you haven’t been paying close attention to real estate or watching the 6 o’clock news lately you may not have seen the latest headlines or know about all the activity and commotion that is currently taking place in the Calgary real estate market.
We have gone from the absolute doldrums of the initial lockdown a little less than a year ago to an incredibly hot seller’s market where multiple offers, sales over list price and line-ups to view properties have returned with a vengeance.
The numbers from last month are in and they reached some rather lofty heights with 1,841 total sales representing a dramatic 58% increase year over year and marking the busiest February since the peak of the market in 2014.
The initial sales momentum originated in the affordable detached single family home category and it is still the busiest segment of the market however the activity has started to spill over into other categories, except for apartment condominiums that are still dealing with inflated inventory and continued downward pressure on pricing.
The very valid question that begs to be answered now is “How is this happening?” We are in the midst of record-breaking levels of government debt, ultra-high rates of unemployment and an unprecedented number of business closures and bankruptcies…how are we setting real estate sales records at the same time!?
There is not a single smoking gun culprit that produced the conditions we are experiencing right now, rather, it is a combination of factors that have created a ‘perfect seller’s market storm’ of sorts. This is certainly not an exhaustive list given how many variables play into any given market, however it covers the primary drivers we have researched and experienced first-hand that have led us to where we are today.
This is one of the more obvious sources of momentum behind the increase in sales activity and demand, banks and lenders are offering historically low mortgage interest rates which makes home ownership more attainable. Buyers who are taking advantage of sub 2% rates are able to obtain the homes they want at a far more affordable monthly rate.
This is a simple case of supply and demand. Inventory levels are lower due to several factors including scaled down home starts and new build activity in 2020, buyers who do not want to have their homes listed during a pandemic and the traditional seasonal trend that generally sees lower inventory levels December through February before the flood of spring listings arrive.
Although we are not out of the woods yet in regard to COVID, the light at the end of the tunnel is closer than ever with vaccines finally rolling out and the goal of some sort of normality presumably just around the corner. Additionally, as surmised by the most recent CREB market update “…some of the worst fears concerning the energy sector are easing with recent gains in energy prices.”
Space at Home
This is a unique underlaying trend that has contributed to the scenario as many individuals, couples and families simply need more space! With a drastic increase in working and schooling at home it has become glaringly apparent that the dining room table alone is not big enough to accommodate numerous workspaces and simultaneous Zoom calls. In addition, previously designated recreation spaces have also been squeezed with more bodies at home for longer periods of time.
Finally, one of the most intriguing side effects of the pandemic lockdown has been the record level of household savings in 2020 as most stayed home and tightened the purse strings. Canadians are currently sitting on the largest cash hoard in recorded history, forecasted by BMO’s chief economist to be close to $200 billion when the final numbers are calculated for the fourth quarter. Statistics Canada indicates household savings rates peaked at almost 28% in the second quarter of last year up from just under 4% pre-pandemic. Simply put, a greater number of buyers were able to save enough for a down payment in 2020 and are now purchasing homes.
Now that you know why we are here…what is the best strategy moving forward? The answer to that question depends on whether you are looking to sell or buy.
If you are thinking of listing your home this year, getting it on the market in the short term is definitely something to consider to take advantage of the current market. The red-hot conditions were unexpected to say the least, there were signs that the market was gaining momentum heading into 2021 but you would be hard-pressed to find anyone in the industry who forecast the current level of activity. Predicting how long this scenario will last falls along the same lines, the expectation is that inventory will eventually catch up to the demand but it almost impossible to predict when that will occur.
On the buying side of the coin, be prepared to be very active and very competitive as you are look for a new home, when quality properties hit the MLS they sell extremely fast so you need to ensure you get in to see listings as quickly as possible. Although this can be stressful, actively searching is likely still in your best interest as we have seen notable price increases recently which means the homes you are browsing through today may very well be priced higher in the weeks and months to come.
As always, we are here to answer all your real estate questions so don’t hesitate to reach out to us with any queries you have. Our goal is to ensure you have all the resources and advice you need to help you make your best and most informed real estate decisions in 2021.
- Geoffrey, Shirine, Trista, Ryley & Sara