Sales activity in 2019 was slightly higher than forecasted, as stronger-than-expected price declines and easing mortgage rates helped support modest improvements for homes priced below $500,000. These improvements outweighed the losses for the higher-priced product.
As we move into 2020, we expect these trends in the market to continue – where improvements will be driven by the lower end of the market and challenges will persist in the higher end. Despite challenges in the higher end of the market, overall sales activity is expected to improve by two per cent.
Improving sales and easing inventories are expected to help reduce the oversupply. These reductions will help shift the market closer to balanced conditions, but the pace of adjustment is expected to be slow. The reductions in oversupply are expected to slow the pace of price declines, as prices are forecasted to ease by less than one per cent. Like 2019, divergent trends are expected to remain the theme of 2020. Relatively affordable product is expected to record some improvements, while persistent oversupply will weigh on the higher end of the market.
While the housing market is generally expected to move to more stable conditions, there is some downside risk to the forecast this year.
Much of this risk is coming from employment expectations. Full-time job growth did improve in 2019, but at the end of 2019, Calgary and many other areas of the province recorded job losses. Some growth is expected in 2020, but recent job losses could spill into the early part of 2020, impacting confidence, housing sales and prices in 2020.
Detached Housing Market
A LOOK BACK AT 2019:
Sales activity was slightly lower than last year’s levels, making it one of the slowest years of sales since 1995. Stricter lending requirements and weak job growth in higher-paying jobs have impacted demand growth for the higher-priced detached homes.
Nearly 60 per cent of the inventory is priced over $500,000, and with easing sales for higher-priced homes, it does not come as a surprise that the detached market has not seen the same pickup in sales as the other sectors.
While 2019 sales improved in the North West and South districts, activity declined across all other districts, with the largest declines occurring in the North district.
Adjustments in supply helped push the market toward more balanced conditions by the end of the year. However, persistent oversupply in the detached market this year resulted in stronger-than-expected price declines of over three per cent. Overall, detached home prices remain nearly eight per cent lower than 2014 highs.
Despite some shifts in sales by district, persistent oversupply weighed on prices across all districts, with 2019 price declines ranging from a low of one per cent in the North East to a high of over five per cent in the City Centre
2020 MARKET FORECAST:
The detached market has struggled more than other sectors following the stress-test change occurring in 2018. However, after several years of adjustments, and steeper price declines in 2019, we are expecting to see some signs of improvement in 2020. Further declines in inventory, coupled with expected sales growth, will help reduce the oversupply in the market and slow the pace of decline in prices.
However, as was the case in 2019, the market will continue to see divergent trends based on price range. Price declines, favorable lending rates, lower wages, and job growth that is occurring in non-traditional and lower-paid sectors are creating conditions that support modest demand growth for lower- priced product. In addition, we benefit from a younger buyer demographic that is looking for homeownership options. These trends should support improvements in the lower price ranges, both in terms of sales growth and price improvements.
While improving conditions in the lower end can eventually spill into the upper end of the market, this is not expected to occur over the next year. The lack of employment growth in higher-paid sectors and the risk associated with economic prospects will continue to weigh on demand for higher-priced homes. The elevated supply-demand balances in those ranges will likely continue to impact prices until they ease enough to support changes in supply and demand.
Attached Housing Market
A LOOK BACK AT 2019 (SEMI-DETACHED SECTOR):
Last year, semi-detached sales improved by six per cent, making it the only sector to see sales rise to long-term averages. For many, this property type provides some of the same benefits as a detached property, but at a more affordable price.
The improvement in sales, combined with easing new listings, helped support inventory declines across most districts. This helped push the market toward more balanced conditions. However, the oversupply scenario persisted, weighing on prices.
In 2019, semi-detached prices eased by nearly four per cent. However, there was a wide range of price adjustments within each district. Both the City Centre and South districts recorded price declines of five per cent, while the North district saw prices improve by nearly two per cent.
A LOOK BACK AT 2019 (TOWNHOME SECTOR):
The relative affordability of this product type, coupled with price adjustments in this segment, supported sales growth in the resale market. While sales improved across most districts, the largest gains occurred in the South East district.
New listings continued to decline across most districts, supporting reductions in inventory levels. The one exception is the City Centre district, where, despite improving sales, the rise in new listings was enough to prevent any reductions in overall inventory levels.
The balance between supply and demand improved, mostly for product priced below $400,000. Citywide, this helped prevent further price slides in the second and third quarters, slowing the annual decline in prices. However, overall, row prices remained four per cent lower than last year’s levels and 13 per cent lower than 2015 annual highs.
2020 MARKET FORECAST:
Benefiting from its relative affordability compared to detached product, and steeper price declines, attached sales activity far surpassed expectations and grew by nearly seven per cent. Stronger sales and easing new listings helped reduce inventory levels and push the market toward more balanced conditions. However, persistent oversupply continued to weigh on prices. Attached prices eased by four per cent in 2019, for a total price decline of 11 per cent since 2015 highs.
In 2020, added competition from the new-home sector is expected to draw some demand away from the resale side of the market, but resale activity is still expected to improve by three per cent. Gradual reduction in supply levels should help to support more stable conditions. However, the competition from the new-home sector, and the still-oversupplied resale market, will continue to weigh on prices, which will ease slightly over the previous year’s levels.
Apartment Housing Market
A LOOK BACK AT 2019:
- Fuelled by a stronger second half of the 50% year, sales activity for apartment-style condominiums remained similar to 2018 figures with 2,672 sales. While sales did stabilize, they remain over 20 per cent lower than longer-term averages.
- Stable sales were met with reductions in new listings, causing declines in overall inventory levels and months of supply. The months of supply went from levels that averaged over seven months in 2018 to the over six months recorded in 2019.
- While the market remains generally oversupplied, these reductions helped support some stability in prices in some districts. However, prices still eased by two per cent in 2019 and remain 17 per cent below 2015 annual highs.
- While citywide sales remained stable, sales improved for product priced below $200,000. Reductions in oversupply were fuelled by supply adjustments, as new listings declined by nearly nine per cent and 500 inventories declined by nearly six per cent.
2020 MARKET FORECAST:
The apartment sector is typically the most affordable sector in the market. However, it did not receive the same boost in sales that the attached sector saw, likely due to competition coming from the new-home market. Competition from the new-home market and excess supply in the resale market have caused prices to decline for four consecutive years.
In 2020, easing prices and tighter rental-market conditions are expected to support modest sales growth in this sector. However, growth will be limited, as persistent competition from the new-home sector will continue to impact resale demand. At the same time, supply levels should continue to slowly ease, but this is not expected to be enough to support balanced conditions. Persistent oversupply is expected to continue to weigh on prices, but the pace of decline should ease, with an annual forecasted decline of nearly one per cent.