Midsummer Night’s Data | hello, Calgary

Sep 15th, 2015 | By FCT

It’s sundown here at EXPERT/ease HQ. We’re on the south porch, on a perfect high summer evening, a beverage in one hand and a stack of housing data in the other.  Let’s see what’s bubbling up behind the numbers, shall we?

The trend lines we can parse out of CMHC data continue to suggest that the Canadian housing ‘bubble’ isn’t so much a consequence of demand but rather supply. And the old adage still rings true: It’s all about location.

Snapshots? Let’s look at how location affects different aspects of the national market.

Single detached homes

The city of Guelph has seen an eye-popping 118% increase in single-detached housing starts over 2014 but the province of Ontario overall is limping into 2016 with a serious housing startup pump-priming in order. Nationally, only PEI and Ontario show significant real start growth for detached homes. Every other province, with the exception of BC, has seen double-digit declines as resource economies continue to get hammered by the freefall in gas & oil prices.

New Market Listings

Local data often contradicts the ‘view from 30,000’ federal numbers, even in Calgary, where the ‘invisible hand of the market’ feels pretty invisible indeed. Despite the fears and doubts caused by the uncertainty of the oil patch, the sharpest worrying downturn to date in the Calgary numbers is in actual new market listings.

Where to find a little clarity? Say hello to the bellwether ‘Ab rate’. This is the burn-time for Calgary’s market inventory if no new stock comes on the market. It peaked in January 2015 (no seasonal adjustments: straight MLS data) at 4.9 months but has declined steadily to 2.2 months in June. That is, by no measure, a crisis number and may suggest that the worst of the oil crisis carnage is behind us.

So here’s the interesting thing (at least to EXPERT/ease): Markets are not mechanisms. They are living things, at the mercy of momentum, bias and perception. They don’t always act in a predictable way.

Data-rich Calgary is a solid case in point:

  • Inventories for detached homes are declining microscopically
  • Prices are up but less than 5% over the past 90 day moving average.
  • And sales are down, way down (~20%; all stats versus Calgary MLS averages since June 2012).

Logically, we’d expect the economic uncertainty in Alberta generally to cool the housing market. But the salient (but not sole) limiting factor is listings. There are simply too few detached houses offered for sale. So to come full circle, the Canadian housing ‘bubble’ isn’t so much a consequence of demand but rather supply.

Pain point? Average days on market (ADOM), the momentum measure, is on the rise in Calgary. This inverse benchmark stat—less time on market means greater turnover—infers market momentum on the demand side is definitely slowing, by a solid 32% year over year versus 2014.

That’s pure drag on an already fragile market. However, even ADOM doesn’t translate literally to life on the street. Because there is no geolocation of the various market momentums by Calgary neighbourhoods we can’t infer –

  • Which ones are hot or cold.
  • Why or how local prices respond to unemployment rates.
  • How the steady growth of emerging urban economies (such as design/build and the arts) offset (if at all) the construction slump contracting sales.

Datawise, Calgary and everywhere else could use a far more nearly transparent lens on market behaviours.

And somewhere in Silicon Valley, some 19 year-old is reading this and thinking: there should be an app for that data.  That’s the topic of our next blog—where technology is driving the real estate market.

Is The Next Big Thing where tech meets real estate? Answer: Yes—disruption isn’t far off.

If you know where to listen, you can hear the pounding hooves already…live and be well.

Leave a Reply

Your email address will not be published. Required fields are marked *