What You Need to Know About Oil Prices & Calgary Real Estate
Everyone had high hopes when the Calgary Real Estate Board predicted that home prices in the area would be consistent this year. However, only a month later did they admit that consumer confidence has dwindled as low oil prices and Alberta’s fragile real estate market began to crumble.
In January, Calgary’s housing took a sharp downward turn. Home sales dropped 35 percent—Calgary’s lowest levels in the past seven years. Meanwhile, new listings went in the opposite direction, soaring to 40 percent.
This region, which has been known as the hottest housing market in the country, is filled with consumers who are unsure about where the market is headed due to potential fears concerning their employment. Hesitant consumers have made for a slower housing market, which has only added to the slump in sales.
As the months go on, many are wondering: what will happen to Calgary’s housing economy? Will things get better or worse? What can we expect?
Though we may not be able to answer all those question, we can tell you what happens to the real estate market when oil prices drop:
At 6 Months:
Some experts say that the impact on the region’s housing market should come as no surprise. When the price of oil drops consistently for 6 months, that’s when it begins to play out in the market. Its influence is obvious when you see “For Sale” signs in front of all the homes down the block. Though the actual prices of most homes were not affected directly at first, right now is when we’ll see home prices begin to drop. Homes that receive the biggest impact are those that are listed at 1 million dollars or higher.
At 9-12 months:
Home builders begin to slow down and, soon after, workers and labourers are laid off. More listings continue to flood the market due to low sales. But in the real estate market, that is the point where things come full circle. In fact, it’s been shown in the past that this slumped market will be shifting back into a buyer’s market again. In the upcoming months, experts agree that the market is well on its way to correcting itself as buyers start to come back onto the scene.
The Good News:
The Calgary economy will gradually and inevitably shift into a buyer’s market. Though it’s impossible to predict a detailed outcome since we don’t know how long oil prices will stay down, we know that the region has made comebacks from low oil prices and plummeting home sales in the past.
Just a few years ago, the region had a similar experience. Calgary thrived as home prices shot up 45 per cent in 2006. Only two years later was the global economic crisis, leading to plunging oil prices. It was a familiar picture: Slowed homebuilding and overflow of house listings, as well as sales that were driven down 17 per cent. But within the past couple of years, Calgary has boomed and thrived more than ever before, bringing in over 50,000 new workers during 2012 and 2013 alone.
Also, a flood of Calgary homes for sale isn’t something to fear at the moment. New housing markets have been modest in growth, so homes aren’t being dumped into the market.
“People outside of our province have a much different perspective than Calgarians do. They think the sky is falling,” said realtor Cliff Stevenson, president-elect of the Calgary Real Estate Board.
“Don’t get me wrong, there is a lot of concern here. But people in Alberta have seen this movie before. I think they are a bit more level-headed in reacting to this.”
But again, we’re still missing a key factor in predicting