Longevity key to housing market during oil price recovery: CREB
It’s still too early to tell how Calgary’s resale housing market will respond to recent gains in the price of oil, said CREB® chief economist Ann-Marie Lurie.
“We have to see how long – if [oil prices] continue to move up, how much it moves up, when it stops … That’s what we’re looking for. So it is still too early,” she said.
After significant declines starting in October, oil prices started to see some improvements recently before another slight drop this week. West Texas Intermediate, a U.S. grade of oil used a benchmark for North American oil prices was just over $53 US a barrel this week after dropping to near $40 earlier this year and is off 43.32 per cent compared to the same time last year.
The Canadian dollar, meanwhile, is hovering around the $0.80 US mark.
As oil prices decrease, so too have Calgary home sales. In January, year-over-year sales in the city decreased by 39 per cent to 880 units, and corresponded with a 37 per cent increase in new listings to 3,286 units over the same period.
CREB® president Corinne Lyall said it’s important, however, to remember oil prices don’t directly affect the housing market.
“The more immediate question is about consumer confidence and what the decline in oil prices does to investment, jobs and migration,” she said.
“Buyers have a “wait-and-see” attitude right now because they are anticipating a potential drop in housing prices or they have concerns about their employment situation. If energy prices increase or continue to stabilize, I think we will see a rise in consumer confidence and more stability in the housing market.”
In fact, a recent report from TD Economics noted the overall market continues to show “remarkable resilience,” led by Calgary, Toronto, Hamilton and Vancouver.
Calgary home prices increased 9.8 per cent to $449,267 in 2014, the highest home price appreciation in major urban markets, according to the report.
It’s been a similar story so far this year. Last month, CREB® reported the average benchmark price for a home in Calgary remained relatively flat compared to December, and had increased 7.69 per cent to $459,100 from the same period a year ago.
As well as some price stability for sellers, Calgary’s current housing market has also created some new opportunities for would-be buyers.
In addition to increased inventory to shop from, the Bank of Canada surprised almost everyone in January by decreasing the overnight lending rate from one per cent, as it had remained since September 2010, to 0.75 per cent.
Bank of Canada governor Stephen Poloz cited decreasing oil prices as motivation behind the drop.
“Canada’s income from oil exports will be reduced, and investment and employment in the energy sector are already being cut,” he said.
A number of financial institutions have responded by lowering their respective interest rates. The TD report said the prime rate has come down by 15 basis points and special five-year mortgage interest rates of under three per cent have returned to the marketplace, something Lyall said buyers can use to their advantage.
“Buyers who have been waiting for more inventory to come on the market may find what they are looking for today. They certainly should take advantage of the lower interest rates if they are in a position to make a buying decision,” she said.
“Sellers should be prepared to realize their homes may take a bit longer to sell while buyers regain their confidence in the market. They also should pay attention to how many other comparable properties are available in their area to ensure they make good decisions about competitively pricing their home.
While interest rates over the next three months should be “some of the best in history,” buyers looking to capitalize should act now, said Real Estate Investment Network founding partner and senior analyst Don Campbell.
“A great time to finance or re-finance is about to be upon us, but that window will only be open for a short period of time,” he said.