I would like to start this post by comparing our current real estate situation in the Foothills Region to our last 2 booms in Real estate; 2006/07 and 2014. Sales volumes of detached homes for March in Calgary exceeded 2014 sales (March) by 9+%. and are 20% below 2007 sales volumes. Rural property sales for March 2021 have never been this high and exceeded sales volumes in 2014 and 2007/06 by 20+%. Okotoks sales have never been this high for March.
What is driving our market? The perfect storm of events. Some points to consider when trying to make sense of our current real estate boom. 1) Resale pricing for homes bought in March are still just at or below past peak real estate boom years. An average gain of 2% per year should be expected over time as a min on real estate. Given that, we should be 15%+ higher today than in 2014. So, there is room for home prices to go up to catch up to where they should be. Prior to our current real estate market boom, we were at a 13 year low in pricing (June 2020). 2) Our current market could see price gains of 15% this year and we would just be where inflation says we should be compared to 2014. If we compared to home values in 2007, we could have price gains of 25%+ and still just be catching up to a normal escalation of property values (2% per year). 3) February 2021 benchmark price was $502,500 for Calgary. This is about 5% lower than the last record high in 2014 (source-CREB). 4) Supply and demand in the lumber market is driving up the cost of new home pricing. Covid and lumber mill productivity is partly to blame for this. As new homes go up in price, resale homes can also go up in price. The economics of substitution. 5) Low interest rates 6) Move up market - need more space to have a home office as work moves away from the conventional. 7) Large pool of saved money during Covid for many working people 8) Desire for affluent youth to own $1mil+ properties 9) Huge injections of cash into the economy by the Feds
All in all, March madness I predict will continue into the spring season with inventory low, new construction still a ways out before it is ready to move in and increased cost of materials driving up new sales pricing which will drive up resale pricing.
As I have always said, if you are buying and selling in the same market, it is all relative. However, if you wish to pull some cash out of your current home, pay down some debt or invest, NOW IS THE TIME!!
Give me a call and I’ll help guide you through the options.