New home industry to impact inventory, prices
Homebuyers could be in for more good news over the next several months as industry experts predict oversupply from the new home industry will create more selection and overall price softness.
“With the number of units still under construction, we do expect inventories to continue moving higher in the next couple of months,” said Richard Cho, market analyst in Calgary for Canada Mortgage and Housing Corp. (CMHC). “I think the impact that would have on the overall housing market and the resale market is more choice for buyers.”
Cho added the number of units still under construction remains elevated, which will lead to the rise in inventory levels.
“Right now, what we’re seeing in the new home market is a rise in inventory in particular on the multi-family side,” he said. “The single-detached inventory has been creeping higher, but historically they’re still fairly low.”
According to CMHC, the total number of housing starts in the Calgary region for January and February combined was 1,156, which is down 25 per cent from 1,538 for the same period in 2015.
Completions, meanwhile, were up during the first two months of this year by eight per cent to 1,757 from 1,635 a year ago. Absorptions, fell by nearly 19 per cent to 1,304 from 1,603, thus creating more inventory on the market.
As of February, there were 856 completed and unabsorbed housing units in the Calgary census metropolitan area, which was up from\404 in February 2015. The big hike was in apartment units, which increased from three last year to 229 this year.
“If it doesn’t get all absorbed – so the builders are not selling it fast enough – that can lead to just an overall increase.”
CMHC showed 13,171 housing units were under construction in the Calgary region in February, with 8,748 of them apartment units. A year ago in February, 15,325 units were under construction.
In the resale residential housing market, there were 5,681 active MLS® listings in February, which was up from 5,531 during the same time last year.
CREB® chief economist Ann-Marie Lurie said more new home inventory means more supply to the overall housing market, resale included.
“If it doesn’t get all absorbed – so the builders are not selling it fast enough – that can lead to just an overall increase,” she said. “We know a lot of them are pre-sold, but it’s when they don’t get absorbed or if they have a slower rate that that impacts the resale market as well … It causes some downward pressure in prices.”