Report from the Calgary Real Estate Board published on December 31st, 2021   

While sales are expected to rise by nearly five percent on an annual basis in 2021, persistent economic challenges are expected to prevent stronger growth in our  housing market.   

SUMMARY  

In 2020, housing markets across the country surprised many with a stronger-than-expected rebound in the second half of the year despite record-high unemployment rates and significant job losses. Calgary did not hit record-high sales or prices in the third or fourth quarters, but still posted some of the strongest sales relative to the past five years. This was nearly enough to offset the initial losses recorded during the first shutdown caused by the pandemic.

It is expected some of the momentum recorded at the end of 2020 will continue into 2021, fuelled by exceptionally low lending rates and pent-up demand. While sales are expected to rise by nearly five percent on an annual basis in 2021, persistent economic challenges are expected to prevent stronger growth in our housing market.

Reduction in supply relative to sales is the primary reason the Calgary housing market returned to more balanced conditions by the end of 2020. The pullback in new listings relative to sales activity resulted in inventory levels falling to the lowest levels seen in the past several years.

As we move into 2021, we anticipate new listings will start to rise, as COVID-19 likely caused many homeowners to delay listing their homes. We could start to see some supply come back in 2021, as concerns regarding the spread of the virus ease. Persistently high unemployment rates could also weigh on some existing homeowners who may need to sell their homes.

Growth in supply is expected to offset some of the gains in sales, pushing our market to the upper bounds of balanced conditions and slowing price recovery. However, the price gains that occurred at the end of 2020 are not expected to be eroded, and 2021 annual prices are forecasted to improve by over one percent.

Despite citywide gains, we anticipate persistent variation between the lower and upper ends of the market, as well as between different product types.

Conditions are expected to remain relatively tight for lower-priced and mid-range homes in the market, likely resulting in stronger price gains. However, lack of job growth for higher-paid professional positions could result in persistent imbalances in the higher price ranges, impacting price recovery in the upper end of the market.

TOP CONSIDERATIONS & RISKS

UPSIDE RISK TO THE FORECAST:

• GOVERNMENT SUPPORT AND THE LOW INTEREST RATE environment may be enough to prevent any substantial rise in supply levels. If supply levels remain relatively low, prices could continue to trend up at a faster pace throughout the year.


• LONGER-TERM CHANGES TO WORK-FROM-HOME POLICIES could influence or change demand patterns in the housing market, as preferences could shift slightly. This might support stronger sales growth from those looking for space that better meets their needs.


• THE BENEFITS OF OUR YOUNGER DEMOGRAPHIC, combined with lower lending rates and previous price declines, could support stronger-than-expected demand growth coming from first-time homebuyers.

DOWNSIDE RISK TO THE FORECAST:

• THERE IS SIGNIFICANT UNCERTAINTY surrounding how long it will take for the economy to fully reopen, the pace of economic recovery, and the long-term impacts of the pandemic in relation to business bankruptcies and job losses. This could result in both slower-than-expected sales and stronger-than-expected supply gains, impacting the pace of price growth.


• ADDITIONAL MERGERS IN THE ENERGY SECTOR could result in further job loss over the short term, weighing on consumer confidence and the housing market.


• THE HIGHER RATE OF MORTGAGE DEFERRALS in Alberta compared to other provinces could start to turn into supply pressure in the housing market. While not all deferrals are expected to turn into foreclosures, if their conversion is higher than expected, we could see a more significant impact on supply levels and home prices.

TOP CONSIDERATIONS FOR 2021:

• LENDING - The low interest rate environment is expected to continue to support sales activity this year, but the pace of improvement is expected to slow by the end of 2021.


• INVENTORY - Supply levels are expected to rise, keeping the market relatively balanced. However, the supply gains are expected to slow the pace of price growth in the market.


• ECONOMY - There is considerable risk regarding the pace of recovery and the longer term impacts of the economic fallout from the pandemic.


• INDUSTRY - Consolidation in the energy sector is expected to continue, which could impact employment and housing activity, especially in the higher price ranges.

Full Report
https://www.creb.com/-/media/Public/Forecast2021/Q42020ForecastReportFinal.pdf?la=en

Calgary Real Estate Board (CREB®)
https://www.creb.com/