May is great for a number of reasons here in Calgary. It is the month where we can start to see some amazing weather (although it did snow at the beginning of the month! 🤦♂️). It's just the month that feels like summer is launching and with the amazing weather this upcoming week, hope you are able to enjoy it to the fullest.
In May, however, we saw stricter restrictions due to the pandemic. We saw businesses have to close once again and last-minute changes to the increase in the stress test effective June 1 (TO READ ABOUT THIS CHANGE - CLICK HERE)
So let's dive right in and analyze this past month's activity and see where we are heading.
In May, we saw the absorption rate for all sales in Calgary dip to 43% from the previous month of 50% (please note - each month this chart is updated year to date with changes in previous months MLS correction data).
This drop of 7% comes from a 9% increase in new listings onto the market with a decline in sales of 7%. More sellers are entering the market this past month (which we will look at below) while the number of buyers actively purchasing in the month dropped 7%.
This however is still significantly higher than our previous years at this time. in 2019 and 2020, our absorption rates were 22% and 16% respectively. We are now operating at over double the rate of 2019 in the number of sales to new listings we are working with.
But why have we seen this dip? Is this the supposed bubble deflating to some degree? Well, things are getting harder for buyers at the moment, unfortunately. In the month of May, we have seen the below strain on buyers wanting to find their next home.
The median purchase price in Calgary as a whole for May increased $458,250 from $455,000 (0.7% increase in a single month)
Based on the absorption rate, 1 in every 2 homes sold in April and nearly the same in May causing them to have to compete (exposing them to writing offers that don't protect their due diligence)
The interest rates increased in May to around 2% for a five-year fixed mortgage.
Finally, the clock was ticking for them to get a purchase in before the changes to the stress tests effective today, June 1. Unlike previously reported, you need to have an active sale in place by June 1 to not be affected by this change.
All of these factors have hindered the buyers' ability to purchase a home in May. Now with the new stress test rules are in effect for all mortgages as well (not just uninsured mortgages as originally reported). With these challenges, you can continue to expect more and more homegrown buyers to see challenges whereas more foreign investment (interprovincial and international) to continue to purchase in this climate with more equity to do so rather than relying on lending.
Going into the summer months, as things reopen we should continue to see the activity remain strong (over 40% absorption). More and more sellers will continue to bring inventory to the market and buyers would have already adjusted to changes in their mortgage rates and stress tests.
For sellers, this past month might hinder your thoughts about selling. However, I would say that this past month, the increased restrictions slowed our market slightly. Now with reopening plans more closer and phase 1 already complete, we can continue to see growth for buyers wanting to enter the market before the rates increase further.
This is still your market with prices increasing, the inventory still low and not outpacing sales as we had in the past, and the interest rates are still very low. If you are considering a sale, let's book a time to chat (BOOK TIME).
If you'd like to check out some of my other blogs or keep up to date with the market, feel free to visit my library of updates at THE BREAKDOWN BLOGS
Thank you, talk soon.