Calgary's housing market has taken a sudden turn downward, raising new concerns about the state of Alberta's economy in the midst of falling oil prices.
Figures released Monday showed soaring listings and plummeting home sales in Calgary, once one of the hottest markets in the country. The sharp slump comes two weeks after Bank of Canada Governor Stephen Poloz cut the bank's key lending rate, warning that he was seeking to counteract the economic damage of plunging oil prices on the country's indebted households.
Only a month after predicting that home prices in the region would be stable in 2015, the Calgary Real Estate Board admitted that low oil prices and fears over the fate of the region's fragile economy have hammered consumer confidence. Home sales plunged 35 per cent in January to their lowest levels in more than seven years while new listings shot up 40 per cent.
Just 880 homes changed hands in January, well below the 1,439 homes that sold in January of last year and the lowest level for any January since 2009, according to the board. Even as sales fell, new listings rose to their second-highest level for any January in a decade, behind only 2008.
The ratio of sales to new listings plunged 55 per cent as inventories of homes listed for sale rose to more than five months compared to just 1.5 months a year ago.
The region's deteriorating housing market has yet to hit prices, the board said. Among detached homes and townhouses, prices were flat compared to a month earlier, but up an average of 7.7 per cent compared to January, 2014, largely thanks to a strong housing market for most of 2014.
It was a more dire picture in the condo market, however, where the inventory of units up for sale leaped from less than two months in January of last year to more than seven months and the median price fell 3 per cent to $268,000. The number of days on the market also rose sharply, with condos taking an average of 55 days to sell, compared to 43 days in December.
"Consumers are a bit uneasy about what's happening in the market," said the board's chief economist Ann-Marie Lurie. "They see that we're having these continued low oil prices, potentially having concerns about what's going to happen to their employment situation and this is making them very hesitant to transact."
With crude oil prices touching seven-year lows, more than 40 per cent of Alberta oil producers are expected to slash capital expenditures and a third expected to cut jobs, according to a report released Monday by human resource firm Mercer. Already, companies such as Royal Dutch Shell PLC and Suncor Energy Inc. have announced plans to slash thousands of jobs, although employment losses have yet to show up in the region's labour force statistics, said Royal Bank of Canada senior economist Robert Hogue.
Even so, he said the central bank's rate cut won't be enough to offset the economic uncertainty that is plaguing Alberta's housing market. "At this stage it's more of a psychological game," Mr. Hogue said. "If confidence is eroding, I'm not quite sure the Bank of Canada move is going to do much to reverse that in the near term."
Bank of Montreal senior economist Sal Guatieri predicted prices in Calgary could fall as much as 10 per cent this year as "layoffs in the energy sector and a reversal in migration flows will weigh on the housing market."
So far the slowdown in the market is mainly affecting high-end homes with price tags above $1-million, said Calgary realtor Josh Nelson. He has prospective buyers working in the oil and gas industry who are watching from the sidelines as prices of some multimillion-dollar homes have dropped as much as $500,000. "Now that news has started to come out I think you are getting people a little bit gun-shy to make that decision," he said. "They know that prices were high and supply was down in 2014. There are people sitting on the fence now saying, 'okay, let's see what's happening.'"
Since listing her condo townhouse at about $340,000 three weeks ago, Calgary entrepreneur Susan Benoit has received only a handful of phone calls from interested buyers and just a single viewing. She purchased the unit six years ago, shortly before the market crash brought on by the financial crisis, which instantly wiped more than $100,000 off the assessed value of the home. It's taken this long for home prices to rebound to a point where Ms. Benoit hopes to break even on selling the property, which she began renting out after she got married.
"I probably should be more worried because I have a rental property I'm trying to sell," she said. "Right now I'm not worried. Maybe that's naive or wishful thinking, but so many people say even though oil and gas is going down, [home] prices are still going up."