2016 creb mid year housing forecast update report

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MID-YEARUPDATE

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CONTENTS

©2016 CREB®. All rights reserved.

The forecasts included in this document are based on information available as of July 2016. Prepared by Ann-Marie Lurie, CREB® chief economist.

300 Manning Road NECalgary, AlbertaT2E 8K4, Canada

Phone: 403-263-0530Fax: 403-218-3688Email: [email protected]

creb.comcrebforecast.comcrebnow.com


CREB® | 2016 ECONOMIC OUTLOOK & REGIONAL HOUSING MARKET FORECAST | MID-YEAR UPDATE 3

CONTENTS

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

ECONOMY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 GDP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Energy sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Population. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

HOUSING MARKET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

New home. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Rental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Resale City of Calgary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

Detached . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

Apartment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

Attached . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

DISTRICTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

SURROUNDING AREAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Airdrie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

Rocky View region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

Foothills region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19


CREB® | 2016 ECONOMIC OUTLOOK & REGIONAL HOUSING MARKET FORECAST | MID-YEAR UPDATE4

Alberta’s economy is moving through a second consecutive year of recession, with the impact of low oil prices weighing heavy on the region. Energy producers and industry suppliers felt the brunt of the pullback initially, but recessionary conditions have stretched on and are now impacting other sectors and a broader range of consumers.

The situation is still not as dire as the 80’s when considering migration, unemployment and lending rates, but job levels and net migration contracted more than expected in the first half of the year. Current indicators have been revised down to reflect a much deeper and longer recession, potentially extending periods of time where people are out of work and making it more difficult to find employment at a comparable salary.

With no near term changes expected in the economic climate, housing demand is expected to remain weak for the second consecutive year, as resale activity is forecasted to decline by eight per cent in 2016. Demand will be low, but other indicators reflect some easing of the supply pressure in the market, which should limit downward pressure on prices this year.

City-wide annual prices are expected to decline by 3.8 per cent compared to 2015. The steepest price declines are expected in the apartment and row sectors of the market, with some leveling in the detached and semi-detached markets by the end of the year.

Note: When will the economic downturn end?

There have been many different forecasts about the depth of this recession and its impact on the housing sector. While no one can be absolutely sure when the energy sector will improve, it’s likely that we will continue to face headwinds in the housing market sometime after energy prices stabilize at more optimal levels. When oil prices improve, it may take some time to realize job and wage growth in the province.

With over 30,000 full-time jobs lost, many of those people will need to get back to work before the housing market starts to stabilize. This would require several months of full-time job creation and a reduction in the unemployment rate, translating into demand growth and greater absorption of additional supply in the market. Based on current expectations, it is possible to see more housing market volatility by the end of the year with some house price stability as we move into 2017.

SUMMARY

Forecast

CITY OF CALGARY SALES AND PRICE GROWTH FORECAST

Detached Apartment

Attached 10 Year - Average

Price Growth Source: CREB®

‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16F-20%

-10%

0%

10%

20%

30%

40%

50%

0

5,000

10,000

15,000

20,000

25,000

30,000



SUMMARY

Market risk:

• While North American oil supply is easing, some analysts indicate that production can be ramped up very quickly if prices strengthen, increasing the risk of pricing volatility. This could have prolonged impacts on investment spending until oil prices are sustained for several consecutive quarters. Lack of investment activity is likely to prevent any significant turnaround in the employment market;

• The financial capacity of some homeowners to weather the storm would be impacted if pressed into a third year of this cycle. If the current economic climate does not improve in the later portion of this year and into 2017, steeper price declines could occur in the housing sector;

• Concerns about other housing markets in the country (e.g. Vancouver/Toronto) may also result in policy changes that could impact our region;

• Resolution on market access issues through pipelines can influence the speed of economic recovery in the city, especially in terms of the ability to attract investment;

• Weaker global economic growth could impact demand outlook for energy products, resulting in longer than expected recovery;

• Additional risk to the housing market comes with government policy changes that can strain household finances, further impacting housing activity.

2013 2014 2015 2016 (F)

MLS® System resale market

City of Calgary

Sales 23,371 25,551 18,837 17,321

Price growth 6.77% 10.05% 1.30% -3.80%

City of Calgary detached

Sales 14,446 15,104 11,519 10,943

Price growth 6.78% 10.03% 1.43% -3.20%

City of Calgary attached

Sales 4,869 5,649 4,090 3,763

Price growth 5.06% 9.60% 2.07% -4.20%

City of Calgary apartment

Sales 4,056 4,798 3,228 2,615

Price growth 8.18% 10.84% -0.05% -5.60%

Source: CREB® Forecast



ECONOMY

As we move into the second consecutive year of weakness in the energy sector, it does not come as a surprise that this industry has reduced spending with salary and benefit adjustments, job cuts and reductions in investment.

The scope of economic weakness is no longer isolated to the energy sector. It’s now extended into other sectors that have been impacted from the overall reduction in family income and rising consumer and business insolvencies.

According to statistics Canada, more than 30,000 full-time jobs have already been lost in Calgary, causing more people to move out of the city than move in. The second year of this slowdown is turning out to be deeper and more prolonged than many had anticipated.

With no near term relief expected in the energy sector, it’s likely that more instability will remain for the housing market through 2016 and into 2017.

GDP

The energy sector accounts for over 40 per cent of our economic activity, which is why the slowdown has resulted in a province-wide recession in 2015. Continued weakness in energy prices and the resulting impacts on the broader economy is expected to cause a second consecutive year of contraction:

• Alberta’s economy saw an annual GDP contraction of nearly four per cent in 2015 and is expected to contract by another two per cent in 2016. This is the first time since 1983 that the province is on pace to record two consecutive years of GDP retraction;

• The pullback was recorded across most sectors of the economy in 2015, with the largest declines occurring in manufacturing, construction, primary and utilities industries;

• As we move through 2016, weakness is spreading beyond the energy industry, as business spending cuts have impacted the travel and hospitality sector;

• Consumers have also been negatively impacted by the downturn. Job loss and declining income has reduced household spending. This can be seen through the fall in retail sales, which weighed heavy on the services sector. Other indicators point toward rising bankruptcies in the province;

• Construction activity has also declined from the combined impact of slower engineering construction related to the energy sector and the drop in residential and commercial construction;

CALGARY AND ALBERTA CMA GDP GROWTH

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

-6%

-8%

-4%

-2%

0%

2%

4%

6%

8%

10% Millions ($2002)

Calgary CMA Annual Growth Calgary CMA Total GDP Forecast

Source: Statistics Canada, Conference Board of Canada Forecast

‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16(F)

‘17(F)

Alberta GDP Growth



Energy sector

With spring WTI prices hovering near $50 US per barrel, many had a renewed sense of optimism that the worst of the price lows was over. Unfortunately, prices have since adjusted to a lower level, as excess supply continues to impact oil markets.

While there are some positive signs of improving oil demand, many analysts feel that price volatility will continue this year, due to the depth of oversupply. While oil prices remain below levels needed to encourage investments for new projects, moderate price improvement and stability over several quarters may prevent further contractions and potentially encourage some investment activity beyond merger and asset acquisitions:

• Supply disruptions from Nigeria, Libya and Fort McMurray helped decrease global oil supply in the spring, supporting some price gains. This was augmented by U.S. production starting to fall, which will also contribute to the overall easing in supply. Nonetheless, record levels of oil inventory remain and recent production gains in OPEC and the U.S. have caused oil prices to decline, once again raising questions about sustainability of current price levels;

• WTI prices averaged well below original forecasts of $50 in 2016. The actual average for this year so far is $39, below the $48 average recorded in 2015. Current forecasts point toward WTI prices averaging $41 in 2016 and increasing to only $52 in 2017;

• More volatility with oil prices that are already low, combined with political uncertainty, is expected to cause further contraction in investment activity and ultimately impact future employment potential;

• Cost reduction has been the focus for energy companies. This has resulted in staff cuts, decreasing wages/benefits and many other forms of discretionary spending. While layoffs have already been happening throughout the city, further reductions are expected with energy prices resting below the $50 WTI threshold, a figure many had used for budgeting purposes this year;

• Excluding the impact on drilling and well maintenance, the weakness in energy has hit related sectors, including engineering construction in oil and gas, professional, scientific and technical services, while reducing demand for Alberta machinery produced by local manufacturers and wholesale trade;

• Transportation of energy products continues to be a significant challenge for oil producers. Uncertainty about approvals will put stress on the industry in terms of long-term potential and the ability to attract investment dollars.

ECONOMY

WTI - CRUDE OIL PRICE

0

20

40

60

80

100

120

140

US$ / BBL

Source: U.S. Energy Information Administration

Jan‘06

Jan‘07

Jan‘08

Jan‘09

Jan‘10

Jan‘11

Jan‘12

Jan‘13

Jan‘14

Jan‘15

Jan‘16



Employment

Persistently weak energy prices are expected to result in further direct and indirect job losses this year. While job losses may ease by the last quarter of the year, Calgary continues to face high unemployment rates, which has lingering effects on the housing market.

Better supply demand balance in the housing sector will likely start to occur after excess labour supply is resolved, either through out-migration or employment gains. Although there is still significant debate about the timing of the outcome, employment levels are not expected to start rebounding until the later portion of the year into 2017.

• Statistics Canada has estimated that by June of 2016 there were 30,000 fewer full time positions than June of 2015. If employment does not improve in the second half of the year, the decline will exceed the combined full-time job losses that occurred from 2009 to 2010;

• Calgary’s unemployment rate rose to 8.3 per cent by June 2015, which is higher than the provincial average of 7.9 per cent;

• Employment levels fell by 3.4 per cent compared to last year, as measured in June 2016;

• Those sectors with the most significant job loss this year have been personal services, non-commercial services, transportation and warehousing, manufacturing and primary utilities;

• High levels of office vacancy rates point toward a lack of job creation in the city, along with continued challenges in the employment sector and limited housing demand over the near term;

• Income levels have started to ease and are expected to keep falling in the back half of 2016 and into 2017.

CALGARY CMA FULL AND PART TIME EMPLOYMENT

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

(60,000)

(40,000)

(20,000)

-

20,000

40,000

60,000

80,000 Unemployment Rate

Full-Time Employment Growth (Y/Y)

Part-Time Employment Growth (Y/Y) Unemployment Rate Source: Statistics Canada

Jan‘03

Jan‘04

Jan‘05

Jan‘06

Jan‘07

Jan‘08

Jan‘09

Jan‘10

Jan‘11

Jan‘12

Jan‘13

Jan‘14

Jan‘15

Jan‘16

2.06%

-1.33%

0.50%

CALGARY CMA EMPLOYMENT GROWTH

‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16(F) ‘17(F)

% Change (Y/Y) Total Employment

Y/Y % Change Average Annual Employed

Source: Seasonally adjusted data, Statistics Canada,Conference Board of Canada Forecast

500,000

550,000

600,000

650,000

700,000

750,000

800,000

850,000

-2%

0%

2%

4%

6%

8%

10%

Forecast

ECONOMY CONTINUED



Population

The city’s most recent civic census has painted a dark reality for Calgary. While the population remains relatively flat, net migration went from 24,900 in April 2015 to a net outflow of 6,527 people. That is a change of 31,427 net migrants. The last time the outflow of migrants surpassed the inflow was in 2009.

Less migration will continue to weaken demand for housing in 2016, making it more difficult to absorb the additional supply and continuing to place further downward pressure on housing prices:

• Overall, provincial population growth has remained strong in 2016, mostly due to natural increases associated with our younger population and international immigration;

• International migration has remained a net positive for the province, but interprovincial migration moved into negative territory. There has been an outflow of people moving from Alberta to other provinces such as B.C. and Ontario, both of which have stronger economies and better job prospects this year;

• Based on the 2016 civic census, Calgary’s population remained virtually unchanged from last year with 1,235,171 residents.

ECONOMY CONTINUED

CITY OF CALGARY NET MIGRATION

-10,000

-5,000

0

5,000

10,000

15,000

20,000

25,000

30,000

Source: City of Calgary Census

‘05 ‘04 ‘03 ‘02 ‘01 ‘00 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16

ALBERTA QUARTERLY POPULATION

-5,000

0

5,000

10,000

15,000

20,000

25,000

‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16

Net International Migration Net Interprovincial Migration Natural Increase

Source: Statistics Canada, Conference Board of Canada adjustment,

Conference Board of Canada Forecast



Weaker demand for housing has been felt across all sectors of the market this year. While there has been some divergent activity in Calgary’s resale market, overall sales activity has declined with economic conditions.

Fewer migrants and steady job losses have weakened demand and prevented any significant reduction in market supply, which has been gradually rising since 2015. The pullback in new home starts will help limit future supply pressure, but the market will still need to work through additional inventory in the new home, resale and rental markets before any significant price stability can be achieved.

New home

Home builders have been adjusting to the economic climate with year-to-date (YTD) starts activity declining by over 30 per cent. However, supply pressures continued due the large amount of product under construction, especially in the multi-family segment. Easing absorption levels caused by weaker demand has pushed inventories up. The increased supply in this competing market has contributed to downward pressure on housing prices in the resale market.

Potential improvements in the economic climate could start to impact demand in the later portion of the year and help ease upward supply pressures. However, challenges in the overall housing market will likely persist until much of the inventory and product under construction is absorbed:

• The resale condominium apartment market has been impacted the most by increased competition coming from the new home segment, with 66 per cent of the product under construction being apartment condominiums, of which 4,996 units are intended for private ownership;

• There were over 9,100 multi-family new units under construction as of July 2016;

• Detached homes under construction totaled 2,054 units in May, over 68 per cent below previous highs;

• Inventory levels in July reached 1,088 units, of which 70 per cent were multi-family units;

• YTD starts activity has fallen by 33 per cent, with 1,793 single-family starts and 3,158 multi-family starts. Overall forecasts estimate that 2016 starts will drop by over 30 per cent in Calgary compared to last year.

CALGARY CMA HOUSING STARTS - YTD JULY

Source: CMHC, year-to-dateSingle Family Multi Family

YTD‘02

YTD‘03

YTD‘04

YTD‘05

YTD‘06

YTD‘07

YTD‘08

YTD‘09

YTD‘10

YTD‘11

YTD‘12

YTD‘13

YTD‘14

YTD‘15

YTD‘16

0

1000

2000

3000

4000

5000

6000

7000

12,000

CALGARY CMA UNDER CONSTRUCTION AND NEW HOME INVENTORY

0

200

400

600

800

1,000

1,200

1,400

0

2,000

4,000

6,000

8,000

10,000

14,000

16,000

18,000

Source: CMHC

Jan‘03

Jan‘04

Jan‘05

Jan‘06

Jan‘07

Jan‘08

Jan‘09

Jan‘10

Jan‘11

Jan‘12

Jan‘13

Jan‘14

Jan‘15

Jan‘16

Detached Multi Family Inventory

HOUSING MARKET



Rental

Rental vacancy rates have climbed to levels not seen since the highs recorded in 2009. The combination of more rental options and lingering economic uncertainty has contributed to weak housing demand in the resale market, as potential buyers are able to prolong any decision regarding ownership:

• CMHC’s rental market survey in October 2015 reported that purpose built apartment vacancies rose to 5.3 per cent. However, this figure does not include supply coming from sources such as individual condominium apartments for rent, detached homes or secondary suites;

• The overall increase in availability of rental product has resulted in downward pressure on rental rates and landlord incentives to encourage renters to stay in their property;

• As economic and housing market conditions start to demonstrate signs of improvement, renters may be encouraged to move toward home ownership. It’s unlikely that these changes will impact housing demand this year, but they could influence activity as we move into 2017.

HOUSING MARKET

CALGARY CMA RENTAL MARKET

0%

1%

2%

3%

4%

5%

6%

7%

8%

Forecast Source: CMHC, 2015 vacancy based on October CMHC survey

‘05 ‘04 ‘03 ‘02 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16(F)

‘17(F)



Resale City of Calgary

Following a 26 per cent annual decline in sales, persistently weak demand conditions continued to place higher than expected downward pressure on sales moving into 2016. Sales activity was expected to contract, but the YTD decline of 10 per cent has been far deeper than original estimates. It was also met with a pullback in new listings, preventing a flood of product on the market.

While inventories have been steadily rising, they have remained well below historical highs, which is one of main reasons we have not seen steeper price declines. The situation could be worse, but that is not to say weak demand and rising inventories have not impacted prices. Overall benchmark prices have been trending down this year with no expected change in direction for the remainder of the year. City-wide annual benchmark prices are expected to contract by 3.8 per cent this year:

• YTD City of Calgary sales totaled 10,952 units, a 10 per cent decline over last year. The slower pace of sales is expected to persist for the remainder of 2016;

• YTD new listings totaled 21,191 units, a two per cent decline over the previous year, and 11 per cent below ten year averages for the city. That’s also 32 per cent below the same period where record highs were recorded in 2008 at 31,049 units. Given the current demand environment a decline in new listings has helped prevent inventory levels from reaching the highs recorded in 2008;

• While the quarterly months of supply has trended down from 4.8 in the first quarter to 3.2 in the second quarter, we are still facing considerable challenges. The months of supply during the second quarter is roughly 23 per cent higher than what is typical behavior during this period;

• Benchmark prices have recorded a YTD average decline of 3.7 per cent. Based on CREB®’s monthly figures, prices have moved from their recent high of $462,800 in October 2014 to 440,000 in July 2016, a 4.9 per cent decline;

• Pricing trends have varied when considering both the average price and median prices. This is partially related to the variance with the distribution of the sales.

Note: Why have home prices not declined more dramatically?

Since the start of the downturn back in 2015, there has been wide ranging speculation about the impact on housing, with some expecting prices declines beyond 20 per cent. The reality is that it

would take several more years of economic weakness to realize such extreme declines, with rising new listings from distressed homeowners and persistency weak housing demand.

Prices were resilient in 2015 due the lack of housing supply in the market. This cushioned the impact of weaker demand and prevented more significant price reductions in 2015. There is a much different outlook this year. We started 2016 with more inventory and persistently weak demand that placed more significant downward pressure on pricing.

Despite our economic climate, there has not been an overwhelming amount of product coming onto the resale market. The supply gains have been tempered by factors such as savings, severance packages and unemployment insurance, all of which helped buy time for those who have lost their jobs. If the same conditions persist into 2017, we could potentially see more supply pressure from those in a must sell scenario, further impacting housing prices.

HOUSING MARKET CONTINUED

CALGARY INVENTORY

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

-

2,000

4,000

6,000

8,000

10,000

12,000

Jan‘03

Jan‘04

Jan‘05

Jan‘06

Jan‘07

Jan‘08

Jan‘09

Jan‘10

Jan‘11

Jan‘12

Jan‘13

Jan‘14

Jan‘15

Jan‘16

Source: CREB® Detached Apartment Attached S/NL Ratio (12m)



Detached

Demand has weakened for detached product, but not as severely as what’s been recorded in other sectors of the market. The detached market accounts for over 60 per cent of Calgary’s sales, and price trends can vary depending on price range, product type and location. In 2015, the largest impact to the housing market occurred in the higher price ranges where imbalances between supply and demand were more prevalent.

As we moved into 2016, the challenges that were isolated in the higher price ranges started spreading to other areas of the market. This resulted in disproportional price adjustments within the detached market, somewhat evidenced by steeper price declines in the more expensive districts/communities within the city. This variation in price adjustment is expected to continue in the detached segment of the market, but the supply and demand imbalances will likely ease and limit some of the downward pressure on aggregate detached prices:

• YTD detached sales totaled 6,911 units, a 6.8 per cent decline compared to last year;

• New listings slowed to help offset the decline in sales activity, moving the market toward more balanced conditions;

• There is less competition from standing inventory in the new home sector, reducing the impact of additional supply competition from competing markets;

• The benchmark home price reached its peak of $522,400 in October 2014, while prices today are $502,300, still 3.8 per cent below recent highs, but higher than levels recorded before 2014;

• Average inventory levels recorded in the detached market are slightly higher than last year, but over 40 per cent below peak levels reached in 2008;

• Annual sales are forecasted to decline by five per cent in 2016, while price declines are expected to average 3.2 per cent for the year.


CALGARY MONTHS OF SUPPLY DETACHED - YTD AVG JULY

<$300,000 $500,000

-$599,999

$400,000-

$499,999

$300,000-

$399,999

$600,000-

$699,999

$700,000-

$799,999$1,000,000+

20162009 2010 2011 2012 2013 2014 2015 Source: CREB®

0

2

4

6

8

10

12

14



Apartment

Increased competition from rental product, new construction and resale housing is impacting the condominium apartment market. Sales activity has totaled 1,669 units this year, 21 per cent below last year and over 30 per cent below long-term trends. In fact, year-to-date sales are at their lowest level since 2002.

While inventories have not reached the same highs recorded in 2008, over the first seven months of the year, the average amount of inventory in the market was the second highest on record. With supply far outpacing demand, the apartment market has seen the largest impact to pricing. The benchmark price reached a recent high of $303,400 in October 2014, falling by 8.7 per cent since then to $277,000. It took many years for apartment prices to recover following the financial crisis, just to have current levels once again fall below levels recorded prior to 2007.

Further price declines are anticipated until the additional supply from all other sources in the market can be absorbed. Until those inventory levels decrease, it’s anticipated that this sector of the market will continue to face the most challenges:

• Inventory levels are on the rise. They averaged 1,496 units so far this year, 15 per cent above last year’s levels and 21 per cent above long-term averages;

• With months of supply staying firmly in buyers’ market territory, prices have continued to go down;

• With conditions remaining weak across this sector, further price declines are expected to persist in the second part of the year. This is forecasted to result in an annual decline of 5.6 per cent.

CALGARY MONTHS OF SUPPLY AND PRICE CHANGES

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Estimated months of supply Months of supply trend (12 M) Benchmark y/y price change

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Jan‘15

Jan‘16

Source: CREB®




Attached

The attached market represents 20 per cent of the sales activity within the overall market. Much like what’s been seen in other categories of the market, sales activity has continued to decline following the steep pullback last year.

A closer look shows the decline in sales was steeper in row style product versus semi-detached product, reflecting the demand preference by property type. While inventories expanded in both sub-sections, the rise was far more significant for row product, which resulted in a greater imbalance between supply and demand levels and ultimately larger price declines:

• Semi-detached benchmark prices averaged 2.6 per cent below last year, but have not given up all the gains that were realized since the fallout of the financial crisis;

• The YTD row benchmark price totaled $316,086, a 4.2 per cent decline over last year. Benchmark row prices have dropped to levels below previous highs recorded in October 2014;

• Within each of these sub-sections of the market, a larger disconnect exists at the mid to higher price ranges. This is consistent with expectations, given that there are more alternatives in the detached sector as soon as prices move beyond the $400,000 range.


CALGARY BENCHMARK PRICE AND GROWTH

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Semi-detached benchmark price growth Row benchmark price change Semi-detached benchmark price Row benchmark price Source: CREB®

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Housing demand was slower than long-term trends YTD. Each district has seen higher inventories and easing prices. However, price declines in certain areas of the market have supported some growth in detached sales activity this year. There are even some segments of the detached market that are starting to show resiliency with prices. While this is not a sign that market conditions are shifting toward a more positive outlook, it’s important to highlight that variation exists within the sub-sectors of Calgary’s market.

DISTRICTS

CITYCENTRE

EAST

NORTH

NORTH EASTNORTH WEST

WEST

SOUTH SOUTH EAST

DISTRICT MAP



DISTRICTS

2016 - YTD July CN NE N NW W S SE E CalgaryDETACHEDBenchmark price 653,729 392,200 443,900 542,100 694,343 481,000 451,343 354,871 503,071Y/Y % change -5.0% -0.6% -1.6% -4.1% -3.2% -3.5% -4.1% -3.0% -3.2%Sales 704 794 990 1,067 739 1,331 1,077 210 6,911Sales growth 4.9% -20.9% -5.0% 3.3% 1.1% -12.8% -9.9% -0.9% -6.8%New listings 1,370 1,493 1,573 1,648 1,375 2,237 1,815 314 11,824New listings growth -9.1% 3.9% -3.3% -3.3% -10.5% -7.6% -6.6% 4.7% -5.3%Sales to new listings ratio 0.51 0.53 0.63 0.65 0.54 0.59 0.59 0.67 0.58Average annual months of supply 4.41 3.02 2.42 2.32 3.73 2.76 2.96 2.03 2.96Share of district sales 35.0% 73.0% 72.6% 71.6% 62.6% 67.9% 70.4% 63.8% 63.1%Share of citywide sales 10.19% 11.49% 14.32% 15.44% 10.69% 19.26% 15.58% 3.04% 100.00%ATTACHEDBenchmark price 533,043 263,343 294,143 331,686 368,529 291,214 313,757 253,000 334,900Y/Y % change -4.8% -1.6% -4.5% -4.9% -5.0% -2.7% -2.9% -1.1% -3.7%Sales 538 228 274 262 265 383 339 83 2,372Sales growth -5.6% -26.5% -13.0% -4.7% -12.3% -10.3% -5.3% -21.7% -10.9%New listings 1,250 490 516 527 618 722 607 148 4,878New listings growth -6.6% 7.5% 3.8% 22.6% 3.9% 7.9% -1.9% -6.9% 2.4%Sales to new listings ratio 0.43 0.47 0.53 0.50 0.43 0.53 0.56 0.56 0.49Average annual months of supply 5.70 3.95 3.42 3.72 4.93 3.60 3.45 3.51 4.23Share of district sales 26.7% 21.0% 20.1% 17.6% 22.4% 19.5% 22.2% 25.2% 21.7%Share of citywide sales 22.68% 9.61% 11.55% 11.05% 11.17% 16.15% 14.29% 3.50% 100.00%APARTMENTBenchmark price 307,614 265,329 243,500 265,743 258,586 248,457 244,500 234,729 280,400Y/Y % change -5.5% -1.8% -5.5% -5.5% -6.8% -4.8% -5.1% -3.0% -5.5%Sales 772 65 99 161 177 246 113 36 1,669Sales growth -20.1% -33.7% -25.0% -16.1% -15.3% -19.6% -21.0% -37.9% -20.7%New listings 2,217 191 221 381 438 602 309 128 4,489New listings growth 0.3% -8.2% -13.3% 5.5% -5.6% 9.9% 22.6% 3.2% 1.5%Sales to new listings ratio 0.35 0.34 0.45 0.42 0.40 0.41 0.37 0.28 0.37Average annual months of supply 6.77 7.32 4.76 5.49 5.72 5.39 6.77 8.50 6.27Share of district sales 38.3% 6.0% 7.3% 10.8% 15.0% 12.6% 7.4% 10.9% 15.2%Share of citywide sales 46.26% 3.89% 5.93% 9.65% 10.61% 14.74% 6.77% 2.16% 100.00%TOTALBenchmark price 506,757 363,629 402,243 480,329 543,014 420,386 430,071 320,686 442,386Y/Y % change -5.1% -0.8% -2.6% -4.4% -4.4% -3.6% -3.9% -2.4% -3.7%Sales 2,014 1,087 1,363 1,490 1,181 1,960 1,529 329 10,952Sales growth -8.7% -23.0% -8.5% -0.7% -4.9% -13.2% -9.8% -12.5% -10.1%New listings 4,837 2,174 2,310 2,556 2,431 3,561 2,731 590 21,191New listings growth -4.4% 3.5% -2.9% 2.4% -6.3% -2.1% -3.0% 1.2% -2.2%Sales to new listings ratio 0.42 0.50 0.59 0.58 0.49 0.55 0.56 0.56 0.52Average annual months of supply 5.66 3.47 2.79 2.91 4.30 3.26 3.35 3.11 3.74Share of citywide sales 18.39% 9.93% 12.45% 13.60% 10.78% 17.90% 13.96% 3.00% 100.00%



Weak economic conditions will continue to negatively impact demand for the entire region for the remainder of 2016, with activity fluctuating based on the specifics dynamics in each surrounding area. Prices have been trending down for most of the larger areas around Calgary, but the range of price decline varies significantly by local supply conditions:

Airdrie

• Sales in Airdrie have been slowing like most other regions. However, despite the pullback in sales activity, demand conditions remain similar to levels over the past five years;

• The amount of new listings on the market has remained elevated at the pace recorded over the past three years. This has resulted in inventory build-up to levels not seen since the financial crisis in 2009, putting downward pressure on prices;

• Quarterly prices have retracted for five consecutive quarters, moving from $376,167 in Q1 2015 to $360,467 in Q2 2016;

• In many of the surrounding areas, detached homes account for a larger share of the market. In Airdrie, 70 per cent of the sales are from detached homes, while 24 per cent are attached properties and four per cent are apartment. Similar to Calgary, price declines have been larger in both the attached an apartment sectors due to increased competition from the new home sector;

• New home starts are easing, but the additional inventory will have to return to normal levels to achieve price stability.

SURROUNDING AREAS

AIRDRIE YTD COMPARISON SALES - YTD JULY

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Detached Apartment Attached 10 Year - Average Source: CREB®

YTD‘06

YTD‘07

YTD‘08

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YTD‘10

YTD‘11

YTD‘12

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YTD‘16

AIRDRIE YTD COMPARISON NEW LISTINGS - YTD JULY

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Source: CREB®

YTD‘06

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YTD‘16

Detached Apartment Attached 10 Year - Average



Rocky View region

Most activity within the Rocky View region occurs in Cochrane, Chestermere and the Rural Rocky View region.

Cochrane

• When considering the most active regions in Rocky View, Cochrane is the only one to have recorded sales growth that is higher than long-term trends;

• At the same time, the level of new listings in Cochrane outpaced sales growth and resulted in new high inventory levels;

• Cochrane’s resale data includes a larger share of newly constructed properties, which accounted for approximately 37 per cent of total sales this year;

• Year-to-date detached home prices averaged $410,357, or 4.3 per cent lower than levels recorded last year.

Rural Rocky View

• The rural Rocky View area often represents higher end acreage properties, with over 95 per cent of the product in inventory priced over $700,000;

• Demand for this product has eased relative to last year and against longer term averages;

• New listings contracted as those who did not have to sell were able to postpone listing. This caused inventory levels to decline in the area;

• Prices have generally trended down in rural Rocky View. However, sales-to-inventory levels moved to an acceptable range in the second quarter, easing downward pressure on prices.

Chestermere

• Sales activity has been declining at a faster rate than last year and is now below long-term averages this year;

• The amount of new listings in the market remains similar to last year, but weak sales activity caused housing inventories to rise to the highest levels seen since 2008;

• Year-to-date, the total residential benchmark price has averaged $477,086 in Chestermere, a 3.6 per cent decline compared to last year.

Foothills region

Okotoks

• Despite slight improvements in the detached sector, YTD sales activity continued to ease in the overall market and remained 14 per cent below long-term averages;

• New listings were similar to the previous year and caused some upward pressure on inventories;

• Imbalance in the Okotoks market has resulted in some downward pressure on pricing. However, the YTD residential benchmark price has remained similar to levels recorded last year.

Rural Foothills

• The rural area of Foothills has mostly higher priced product. Demand for this type of property has eased as expected, but new listings activity also declined, helping to prevent inventory gains. These more balanced conditions were not enough to prevent a downward trend in pricing.

SURROUNDING AREAS

FORECAST2016ECONOMICOUTLOOK&REGIONALAST2016ECONOMICOUTLOOK&REGIONAL 2016ECONOMICOUTLOOK&REGIONALHOUSINGO AST2016ECONOMICOUTLOOK&REGIONALHO &REGIONAL&REGIONALHOUSINGMARKETOMICOUTLOOK&REGIONALHOUSINGMARKET LHOUSINGFORECAST2016ECONOMICOUTLOOKUTLOOK&REGIONALHOUSINGMARKETFORECASTECONOMICOUTLOOK&REGIONALHOUSINNALHOUSINGOUTLOOK&REGIONALHOUSI2016ECONOMICOUTLOOK&REGIONALHOUSI HOUSINGMARKETFORECAST2016ECONOM OUTLOOK&REGIONALHOUSINGMARKETFOR GMARKETFORECAST&REGIONALHOUSINGMHOUSINGFORECAST2016ECONOMICOUTLFORECAST2016ECONOMICOUTLOOK&REGIONFORECAST2016ECONOMICOUTLOOK&REGIONALAST2016ECONOMICOUTLOOK&REGIONAL

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2016 creb mid year housing forecast update report

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