Calgary Area Real Estate Newsletter
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October, 2014

In this issue:



Calgary Real Estate Board Update

Condominium sector boosts Calgary resale housing activity

Citywide year-over-year sales growth reaches double digits

City of Calgary residential property prices, September 2014

Calgary, October 1, 2014 – Calgary’s condo sectors continue to set the pace for the city’s residential resale housing market, which recorded 2,148 sales in September, nearly 12 per cent higher than the same period last year.

“September’s sales growth was stronger than expected, due largely to a surge in condominium apartment and townhouse sales,” said CREB®® chief economist Ann-Marie Lurie, who credits Calgary’s strong economy and fewer options in the lower-priced single-family market behind the continued demand.

For the fifth consecutive month, year-over-year condominium apartment sales growth outpaced growth in the single-family sector. Year-to-date condominium apartment sales totaled 3,819, a 21 per cent increase over last year. This compares with a seven per cent increase to 13,842 units in the single-family market over the same time frame.

Added supply in the condominium apartment sector, meanwhile, is providing more choices. New listings increased by 48 per cent in September over last year and nearly five per cent over last month, further improving inventory levels and pushing this market into balanced territory.

In the condominium townhouse market, sales and listings continued its year-to date trend, rising 20 and 21 per cent, respectively, compared to the same period a year ago. Over the first three quarters, 3,002 units have exchanged hands, relative to the 4,011 new listings.

Despite an increase in new listings, the condominium townhouse market continues to be relatively tight, with absorption rates remaining below two months.

“While overall supply levels have improved, the condominium townhouse sector continues to reflect the tightest market conditions in Calgary,” said CREB®® president Bill Kirk. Calgary, October 1, 2014 – Calgary’s condo sectors continue to set the pace for the city’s residential resale housing market, which recorded 2,148 sales in September, nearly 12 per cent higher than the same period last year.

“September’s sales growth was stronger than expected, due largely to a surge in condominium apartment and townhouse sales,” said CREB®® chief economist Ann-Marie Lurie, who credits Calgary’s strong economy and fewer options in the lower-priced single-family market behind the continued demand.

For the fifth consecutive month, year-over-year condominium apartment sales growth outpaced growth in the single-family sector. Year-to-date condominium apartment sales totaled 3,819, a 21 per cent increase over last year. This compares with a seven per cent increase to 13,842 units in the single-family market over the same time frame.

Added supply in the condominium apartment sector, meanwhile, is providing more choices. New listings increased by 48 per cent in September over last year and nearly five per cent over last month, further improving inventory levels and pushing this market into balanced territory.

In the condominium townhouse market, sales and listings continued its year-to date trend, rising 20 and 21 per cent, respectively, compared to the same period a year ago. Over the first three quarters, 3,002 units have exchanged hands, relative to the 4,011 new listings.

Despite an increase in new listings, the condominium townhouse market continues to be relatively tight, with absorption rates remaining below two months.

“While overall supply levels have improved, the condominium townhouse sector continues to reflect the tightest market conditions in Calgary,” said CREB®® president Bill Kirk.

[Read the Full Report]

Finance Minister Joe Oliver says Calgary, Toronto and Vancouver distorting housing numbers

By Garry Marr, the Financial Post

Calgary, Toronto and Vancouver distorting housing numbersJoe Oliver, the federal finance minister, downplayed fears of a housing bubble and emphasized three of Canada’s largest markets continue to distort national housing numbers.

Housing bubble will force Bank of Canada to renew rate hike warnings soon, Pimco says

World’s biggest bond investor warns Canadian housing prices could swell to 30% over value if low rates continue, opening the door to a sharp decline

“There are three urban centres, Calgary, Toronto and Vancouver, where the prices continue to go up and there are affordability issues,” the finance minister said following a conference in Toronto hosted by the Investment Funds Institute of Canada. “I don’t see a housing bubble, neither does the governor of the Bank of Canada or the CMHC or the OECD.”

September housing results could be more of the same for those cities. The Calgary Real Estate Board said Wednesday sales were up 12% in September from a year ago while the price of single family home in the city rose 10.6% from a year ago to $512,800 in September. Condo prices were up 9.5% from a year ago to $330,200. Toronto and Vancouver results are due out this week.

His comments reflect what others have suggested about those cities driving overall housing comments. Some economists have suggested the housing market is mediocre at best in a majority of Canadian cities outside of the big three. Those cities are responsible for a third of all sales this year while contributing to almost 50% of the dollar value.

Mr. Oliver said it would be difficult for him as finance minister to cool off just three Canadian cities and leave the rest of the country unscathed if he was to further tighten the lending environment. “That’s one of the challenges. There are some markets flat and some are experiencing some decline,” said Mr. Oliver. “We are examining all the issues and we are keeping it very much in mind.”

He reiterated that while he is not ready do anything immediately, the long-term goal is to reduce the government’s involvement in the mortgage market.

The finance minister wouldn’t directly address a published report Wednesday quoting the Canadian managing director of Pacific Investment Management Co. who stated the market here may be 10% to 20% overvalued and could get to 30% if the Bank of Canada doesn’t start talking up rising rates.

Mr. Oliver did say he was in New York the last couple of days talking to money managers and hedge fund managers and real estate came up in those conversation.

“Our situation was totally different from the U.S. situation before the recession and it’s quite a bit different now. For one thing, their mortgages are non-recourse and ours are not, with the exception of Alberta. They also have mortgage deductibility. There are some differences,” he said.

He said Americans are “sophisticated” but they come from an U.S. perspective. “Something happened to them so it will happen to someone else,” said Mr. Oliver, adding any talk of the Bank of Canada raising rates is outside of his mandate.

The finance minister did say people understand that interest rates cannot stay this low forever but it might be difficult for them to act on that knowledge. “People can know intellectually what the history of interest rates have been, psychologically they aren’t perhaps prepared. I think it’s important for people to understand.”

When it’s better to rent a home in retirement

Home Improvementsby Amy Hoak, from MarketWatch.com

Many argue it’s best to own a home in retirement instead of renting one. But there are exceptions.

Owning is more predictable — even if you don’t own your home free and clear. There’s no landlord to increase your rent or tell you to move; with a fixed-rate mortgage, your monthly payments are set.

“With a fixed-rate mortgage, you can control the principal and interest components of the mortgage. You can also control when that gets paid off,” said Greg McBride, senior financial analyst at Bankrate.com. Owning a home also opens up the possibility of getting a reverse mortgage to help with cash flow, he said.

A recent analysis from the Mortgage Bankers Association’s Research Institute for Housing America concluded that retirees generally come out ahead when they’re homeowners.

“The study found older Americans who own their homes are more financially secure and generally experience fewer impediments to good health than their peers who rent,” said Michael D. Eriksen, a professor at Texas Tech University and an author of “A Profile of Housing and Health Among Older Americans.” Moreover, renters often have difficulty modifying their spaces if they acquire any physical ailments as they age, he added. Gary V. Engelhardt of Syracuse University and Nadia Greenhalgh-Stanley of Kent State University also co-wrote the study.

That said, there are situations where signing a lease beats a mortgage — even during retirement. Slide show: 10 best cities for snowbirds and retirees.

Ask Sally Gavin, a recently retired teacher who, with her husband, sold a house in the Chicago suburb of Lake Forest to move into a rental apartment building in downtown Chicago.

“We don’t need a five-bedroom house anymore, and we weren’t ready to make a commitment for a condo,” she said. And they’re not sure when, but the couple will likely eventually relocate to Austin, where their son lives. In the interim, they decided to live in a “fun” place, where they could walk everywhere and have easy access to all the cultural attractions downtown Chicago has to offer.

When flexibility rules

For Gavin and her husband, renting affords them flexibility. And that flexibility is a big reason retirees turn into renters — at least for a while. Retirees may rent to try out living in a new location. Or they can rent to see if they like being snowbirds, spending the colder months where the weather is warm.

Flexibility is also helpful when financial or health situations change, requiring a move to a less expensive place, to a place closer to family, or to a care facility, said Tammy Kotula, spokeswoman for Apartments.com. Renters don’t have the burden of selling a home should those issues arise.

Plus, apartment living comes without some of the hassles of homeownership, said Lauren Boston, staff writer for the National Apartment Association, in an email interview.

“Many retirees are looking for the same experience as that of their Millennial children or grandchildren — they want to live in an all-inclusive place where they don’t have to worry about maintaining a home,” she said. What’s more, renting an apartment might be best for those who want to be within walking distance of cultural activities, stores and restaurants, Boston added.

For those with insufficient retirement savings, renting could also be a good option, said Kevin R. Worthley, a financial planner in Rhode Island and vice president of Wealth Management Resources. Instead of tying up money in a house, an asset that typically appreciates at a slow pace, some might be better off renting in retirement and considering other alternatives for their money, he said.

Owning for the long haul

But for those planning on living in a place for an extended period — and for people who can afford to own — many argue the perks of renting in retirement are often not worth it. Of the more than 47 million households of people 55 and older, 80% are homeowners, according to the MBA study.

With homeownership, there may be surprises like a broken washing machine or air conditioner that needs replacing, and there are regular maintenance costs. But don’t think those costs and taxes aren’t baked into a rent payment as well, said Bankrate’s McBride.

Forty-four percent of renters 65 and older spend more than 30% of their annual gross income on rent, according to the MBA study. Meanwhile, median housing equity for homeowners of that age is $125,000, and half of the typical homeowner’s portfolio is made up of housing wealth. For those with mortgage payments, they typically pay a monthly amount equal to 16% of their annual gross income.

“Renting for a short period of occupancy makes all the sense in the world,” McBride said. But for those planning to stay in a home for the foreseeable future — and especially for those on a fixed income — homeownership often wins out.'

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