Soaring home prices impact Calgary, Vancouver

It is interesting to note in reading the July report from the Canadian Real Estate Association on the national MLS® market that both Calgary and Vancouver experienced decreased sales activity. 

This is in contrast to a number of other smaller markets, including Winnipeg’s, that were up over the same month last year, although not to any significant degree. Winnipeg actually had its best July ever with a sales increase of eight per cent.

One thing that has been referred to often in the last few years is the inexorable rise in house prices. Will there come a time when these steeper prices will reduce the number of potential buyers and hurt sales activity? 

This certainly appears to be the case in some U.S. markets. In the San Francisco Bay area, it is reported that fewer than 20 per cent of the home buyers can afford to purchase a home. 

Without knowing first hand what the percentage is for Vancouver and Calgary, but being aware that their average house price for July was $644,461 and $403,630, respectively, it would be interesting to study how significantly the higher house prices in these two Western Canadian cities negatively impacted MLS® sales performances last month. 

By comparison, Winnipeg’s average house price for July was $161,204, a far cry from the soaring levels noted above.

To indicate how  the Calgary market  has risen, its July 2005 average sale price was $273,280. This works out to a 48 per cent increase for July 2006. Winnipeg’s average sale price increase, while remaining in the double digits, was well off Calgary’s at 13 per cent.

According to the Canadian Real Estate Association, seasonally-adjusted home sales activity via the Multiple Listing Service ®  in Canada’s major markets numbered 27,231 units in July 2006, a decline of 2.9 per cent compared to June.

CREA said the monthly decline in sales activity was largely the result of fewer transactions in Vancouver and Calgary, which more than offset smaller monthly increases in Edmonton and a number of other major markets.

Actual (unadjusted) sales activity in July declined 4.1 per cent compared to the same month in 2005. Even so, transactions for the year-to-date in July were 2.6 per cent ahead of levels posted for the first seven months of last year.

Seasonally-adjusted MLS® residential new listings numbered 47,557 units in July. This represents an increase of 1.9 per cent from the previous month, and is the highest level in more than 15 years. 

The monthly decline in sales and the increase in new listings caused the market to become more balanced than during any other month in the past 5.5 years.

New listings reached the highest level on record in Calgary, and the second highest level on record in Toronto and Montreal.

“Sales edged lower in Vancouver and returned to more normal levels in Calgary, which caused total resale housing activity in Canada’s major markets to ease slightly in July,” said CREA president Alan Tennant. “The increase in new listings in many major markets will provide buyers with a wider selection of homes to choose from.”