It’s far from panic, but there is concern in the marketplace regarding resale housing — and much of this concern is around rising mortgage rates at a time when selling prices are in flux.
I’ve said this before and I’ll say it again: homebuyers today have it exceptionally good when it comes to mortgage rates.
I moved to Calgary and bought in the early 1980s when mortgage rates were something like 22 per cent. Try that on for size — and compare it with what the rates are today, even after they moved off the historic bottom.
Then there was the commentator I heard on TV the other night saying the latest movement would add just $20 per month per $100,000 to the monthly mortgage.
Granted, there will be some who will find it difficult to cope with that marginal increase, but for most it’s easily covered.
And yes, the overall average price reported by the Calgary Real Estate Board did go up by more than $20,000 in May from April, but that’s because there were so many high-end properties changing hands.
Board figures show that during May, 52 homes priced at $1 million or more were sold compared with 29 the month before. Take those numbers out of the equation and average prices are going down.
Here are a couple of examples.
Two months ago, the average price of detached single-family homes in the southwest was $506,000. By the end of May, it had fallen to $472,500.
The southeast average slipped by less than $5,000 in two months and in the northeast, the decline was more than $10,000 — in one month.
Realtor Bryan Morrow of Re/ Max First is one who believes sales will continue to decline while listings increase. Good old supply and demand, again.
He agrees with the suggestion that upward average prices are being skewed by the number of upper-end deals — but there’s another calculation he rolls out.
He’s compiled a graph that tracks price reductions — and the fever line on that graph is pointing up.
For sellers, it’s not a good thing.
“Clearly with asking prices now being reduced en masse, it seems clear that the stats will begin to confirm the fact in a month or two at the most,” says Morrow.
This scenario is not one that realtors want to see.
“We, like lots of other hardworking realtors, have properties for sale and no one likes to suggest to their clients that perhaps they’ll need to reduce their price expectations. However, it is what we do when we see the wheels coming off and prices in decline — with no end in sight,” says Morrow.
Diane Scott, president of the Calgary Real Estate Board, says a market decline in sales was noted in May. The number of detached homes sold that month was down 20 per cent compared to a year ago, while condo deals fell by 21 per cent.
It marks an inauspicious start to the second quarter of the year.
“The first quarter of 2010 was exceptionally strong, with our spring sales coming early in the wake of anticipated mortgage hikes,” says Scott. But mortgage rates alone didn’t bring about the slowdown, she says, adding there was a reduced number of first-time buyers being active, a rise in monthly carrying costs brought on by higher mortgage rates, and international issues out of the control of almost everyone.
“Consumers are feeling a little nervous about the recent instability of the stock markets — and with the mortgage rate hikes behind us, it’s understandable that feelings of urgency among buyers have lessened,” says Scott.
While the number of first-timers has slowed, there has been an increase in the head count of move-up buyers, she says in the board’s monthly activity report.
“Our inventory is shifting to higher price points as move-up buyers enter the market,” says Scott. ” Nonetheless, our days on market year over year has decreased, suggesting that competitively-priced homes are selling.”
There is instability in the market, as there has been before. How long this will continue is anybody’s guess — but probably until such time as rates move again and people decide to jump into ownership before rates and prices get even higher — at least, that’s my guess.
mhope@theherald.canwest.com
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