The Real Estate Frenzy Continues!🦈

January 2022 Market Update


"‘Pressing need’ for Bank of Canada to raise interest rates amid inflation surge" - Global News, January 20, 2022


If that's not the blood in the water, I'm not sure what is!


This past month, there have been entire news cycles around the interest rates, inflation adjustments, etc, etc. Do you find it a bit nauseating?


I know I do!


Not only for having to hear all this crazy news but then having to field questions from my clients from an article, their uncle, twice removed, on their great aunt's side told them about to make them question if now is the time to buy or sell.


I'm here to help you through it if you'd have me 😀, let's dive in.


The Aggregated Absorption Rates


Do you see that lonely green dot? That is our current absorption rate, 72%. To put this figure another way, the months of inventory this represents is 1.38 months. A balanced market is between 4-6 months of inventory.


To put this number in perspective for you, at this same time in 2020, this rate was 16%. in 2021, it was 29%.


This increase has been driven by a month-over-month increase in sales of 16% while the number of listings declined by nearly 30%.


Some of the declines in new listings can be attributed to the seasonality of real estate. Generally, in January, we see fewer listings as people are hunkering down for the colder months. This is also generally the time most sellers are preparing their homes for the spring market.


In addition to this supply factor, builders and developers have significantly reduced the number of properties they are offering to the market due to labor and tie-in to the city infrastructure delays. They are only releasing a limited number of lots and have indirectly created a scarcity on their end as well.


Why The Frenzy? Especially in January!


So why are we seeing yet another increase in absorption? Who is buying all of these homes and what is the driving factor behind these bidding wars and astronomical pricing?


You know the old adage, "garbage in, garbage out"? A lot of the knee-jerking decision-making happening with home prices are due to the information buyers are receiving.


News outlets, social media posts, clickbait articles, etc are all in the business of sensationalizing the news to give you the most extreme circumstances. And this is no different from the interest rate discussion everyone seems to be having.


It was rumored that the BOC would increase their rates at the end of January. Thus making the cost of borrowing to becoming higher for today's buyers. If you'd like to know why this is, check out my post about the topic here.


Nothing happened by the way, but the idea was out there, driving all kinds of sales in January.


Keeping an eye on these announcements should not be the driving factor for most to decide to spend a significant amount on housing. For starters, the announcements from the BOC rates don't really affect those that are pre-qualified with a fixed rate.


Their announcements also don't impact the market for at least a year or so into the economy.


Any change the BOC makes this year will have impacts on buyers down the road, not those in the market now. It will only impact those with a variable rate, but even that will be much lower than current fixed rates.


If you'd like to learn more about how the changes in interest rates affect you as a buyer, reach out to me. I can put you in contact with a great broker that can help you understand the changes.


Aside from the rates, the true issue is that all through the pandemic, we have seen steady declines in the number of homes for sale. This is understandable as people are worried about not only their home expenses but also work changes and layoffs, safety and health issues, and so many other things families have on the go through each day.


Homeowners are also becoming stronger financially with reduced costs like fuel and dining out expenses, making their financial house more sound to invest in other markets like stocks, bonds, and investment properties.


Apartment Absorption Rates

Apartments have seen a steady increase in absorption as more and more investors are turning to these properties due to their remaining cost-effectiveness.


Month over month, we have seen the number of listings remain consistent, with the number of sales increasing by 16%. Fewer owners are offloading these properties as they can see the rental opportunity grow.


In addition, the unfortunate side is also that buyers that are being priced out of single-family homes are looking to apartments and townhomes as a more cost-effective alternative.


If you'd like to learn why this might be the smart move for you as a buyer right now, check out my last blog post here. I discuss how these markets can actually make you better off from an investment and wealth standpoint.


Our real estate market is constantly in flux. It is absolutely critical that the information about our market and possible solutions for buyers and sellers are available so that the consumers in our market can make sound decisions about their investments and home.


I'm more than happy to answer any questions you have. Feel free to email me at aly@calgaryareahomes.ca and join our newsletter to get the most up-to-date information and member-only access to off-market and coming soon listings.


Finally, if you are a bit more of a stats junkie like me, be sure to check out the blog every Tuesday for our latest Weekly Market Minute breaking down all the stats of the week from new listings, to the median and average pricing. Feel free to bookmark these posts here.


Take care, stay safe, and I hope we can chat soon!


Aly



23 views0 comments