Calgary housing market – where opportunities remain

The city's market has cooled in recent weeks, although prices remain robust

Calgary housing market – where opportunities remain

With Canada’s housing market in the throes of a sharp decline in sales and activity, one city that’s proven especially resilient in recent weeks has been Calgary.

Alberta’s most populous urban sprawl actually saw total sales climb from July 14-20 compared with the same week last year, according to statistics from the Calgary Real Estate Board (CREB), posting an increase of over 9% (496 sales in 2021, compared to 542 in 2022).

The city’s year-to-date sales are nearly 23% higher than this point last year, while CREB noted in its latest monthly report on housing that it’s “unlikely” a full reversal of price gains in the year to date will take place anytime soon.

Activity heated up in the city roughly between November 2021 and February this year, Calgary-based broker at Mortgages for Less, Josh Tagg (pictured top), told Canadian Mortgage Professional. That period saw multiple offers on properties, with many would-be buyers having to go in without conditions attached to their bids.

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It was a trend that mirrored the frenzy that became the norm in red-hot markets like Toronto and Vancouver, but Tagg said it “quickly calmed down” when the Bank of Canada began its rate-hiking trajectory in March.

It’s resulted in fewer transactions on a month-to-month basis, with many buyers deciding that they’d prefer to wait out those rate increases and bide their time until they either start inching lower or stop rising, although that sentiment is likely to be “short-lived,” according to Tagg.

That’s because the impact of higher rates is offset somewhat, he said, by the fact that the housing market is cooler with fewer bids and lower risk of having to overpay.

“While some people are going to be priced out of the market due to the rate increases, I think there will be enough people that will recognize [those] increases are temporary,” he said.

“But price increases last longer. If they have a low rate but they spent $30,000 more on a house [over list price], that’s not actually saving – it’s a little bit of a higher rate for a shorter period of time. [Meanwhile] not having to outbid somebody in a bidding war actually comes out more favourable than paying $30,000, $40,000, $50,000 extra on the house.”

The woes of first-time homebuyers, who often saw themselves outbid and priced out of property during the pandemic housing market boom, are well documented. That landscape could be shifting, though, as the market cools – even though interest rates are creeping upwards.

“A first-time buyer that’s well positioned is still going to have lots of opportunity out there,” Tagg said. “The entry market and the condos and townhouses – that never really went up nearly as much as the detached market anyway. And so first-time buyers still have opportunity, as long as they have a bit of a cushion in their income to get through any future rate increases that are happening.”

The Bank of Canada’s recent rate jump means that most borrowers are now having to qualify at a level above 5.25% because that figure is lower than their contract rate plus 2%. That might push some buyers to their maximum approval amount – and although that cohort is likely to move to the sidelines as a result, there will still be plenty of Calgary buyers who won’t be dissuaded from entering the market, Tagg said.

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“Those that were not going to spend the maximum they would qualify for anyway, or have higher income levels and can still get themselves a home they’re happy with well under the upper limit of what they could qualify for – those are the ones that I think we’re going to see continuing to buy homes over the next little while,” he said. “And not until we start to see rates trending in a downward direction are we going to get those that are pushing the upper limits of what they would qualify to buy.”

Ultimately, Tagg stressed that the real estate and mortgage markets would remain robust despite that rising-rate environment, with variable rates still representing an excellent opportunity even though they’re moving upwards along with the Bank of Canada’s benchmark rate.

“The sky isn’t falling. The interest rates are only going to go up a little bit more, by about 1%,” he said. “It is definitely better to take that variable rate than the fixed in almost all cases, because then you get to ride it back down once maybe 18 months from now when interest rates start to go down.”

The cost of extra interest is lower in most cases than the added price of the homes when the market’s hotter, he reiterated, noting that a cooler market could be a welcome development for many across the province.

“I think that’s the silver lining in all of this: that removing some of the competition has pulled some of the out-of-province buyers out,” he said, “and it’s allowing things to kind of reset and get back to more normal for those who are in Alberta.”