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The effects of falling oil prices are only starting to be felt in Calgary’s housing market, the city’s local real estate board warned, with home prices expected to fall further as unemployment continues to rise.
Resale home prices will likely end the year 0.2 per cent lower for the year, the Calgary Real Estate Board predicted Wednesday in a mid-year forecast. Home sales should end the year 22 per cent lower than 2014.
While the picture emerging is a far cry from a housing crash, the board admitted the city’s economic prospects are much bleaker than it initially expected in January, when it predicted that Calgary home prices would rise by 1.58 per cent this year.
With oil prices falling back below $50 (U.S.) a barrel, the city’s economy “continues to be plagued with a level of uncertainty,” the board said.
Economists now expect Calgary’s economy to contract by 1.2 per cent this year. Calgary has lost nearly 12,000 full-time jobs since January, many of them high paid positions, the board said, while gaining about 24,000 part-time positions. The city could stand to lose an additional 23,000 jobs this year, the board said, citing Conference Board of Canada economic forecasts.
“Employment conditions are expected to worsen and put increased downward pressure on wages,” the board wrote. “When combined with lower levels of migration, it’s expected that these conditions will cause further impacts on the housing sector.”
Home prices have been falling in the city since December as oil prices plunged and sellers rushed to put their homes on the market. The city saw a surge of new listings at the start of the year, but that had tapered off by spring as many homeowners took their unsold properties off the market. With further job losses expected and high levels of new homes under construction across the city, Calgary could see a spike in new listings once again this year.
The benchmark home price, a measure that compares prices of homes with the same features over time, would likely fall to $448,354 by the end of the year, the board said, below its earlier prediction that prices would rise to $456,346 by year’s end. Benchmark prices averaged $455,133 in June.
Detached home sales fell 25 per cent in the first half of the year compared to the same period last year. High-priced homes over $600,000 saw the biggest jump in listings and the largest drop in sales. “Consumers in a must-sell situation will have to carefully consider the price they are willing to accept,” the board wrote.
Vacancy rates have more than doubled from last year, from roughly 1.5 per cent last year to 3.6 per cent today amid rising levels of newly built apartments. The glut of new rental supply has already helped drive the prices of condos down 2 per cent from last year as potential first-time buyers and condo investors sat on the sidelines.
While the board expects housing starts to fall by 31 per cent this year, there are roughly 14,000 new homes now under construction in the city, which could lead to a surge in new listings, helping to drive prices even lower.
“Supply levels in the new home sector and rental markets will likely continue to rise,” the board predicted, “while the rate of decline for resale listings may also ease as the need to sell becomes more prevalent in the later portion of the year.”