Lowell Martens has taken a few stomach-churning spins on the roller coaster ride known as the Calgary real estate market.
“This is nothing we haven’t experienced before,” the veteran realtor says of the latest uncertainty in Calgary’s boom-and-bust housing market, including growing fears of a recession.
“They don’t call this the Stampede City for nothing,” Martens quips.
As of this week, however, sales and listings for the Calgary Real Estate Board — updated daily at www.creb.com — were showing signs that the new reality of low oil prices is hitting home.
As of Thursday, home sales were down 34.8 per cent — to 549 houses and condos from 842 over the same three-week period a year ago. And new listings soared by 42.8 per cent year-over-year, from 1,584 in the first 22 days of last January, to 2,262 properties this week.
That means consumer confidence is sinking right along with the price of crude, which has dropped by half, to just under $50 a barrel, since last summer.
“The big question is how long is this downturn going to last, six months or three years?” says Martens. “And is oil going to settle at $35 or suddenly shoot back to $80.
“If you ask anybody here, they just don’t know.”
Martens takes some solace in having lived through the worst — twice.
The first and biggest downturn was back in 1982 when worldwide glut of oil sent prices plummeting to less than $9 a barrel, wiping out thousands of Alberta jobs and the real estate market.
So many homeowners found themselves under water — with interest rates topped out at almost 22 per cent — they just handed their keys to the bank.
“That was a brutal year. That was a recession. You could look at homes all day and all night, there were so many vacant homes kicking around at the time,” says Martens.
The Calgary market recovered slowly, and not always steadily, until an oil boom sent the province into overdrive in 2006.
The energy sector was hiring so many people that Calgary’s relatively small housing market couldn’t begin to keep up. Bidding wars broke out. People were buying houses without even seeing them.
In 2006, the benchmark price for a Calgary home skyrocketed by 45 per cent.
Then, two years later, as all eyes were focused on the collapse of the U.S. banking sector and the growing global economic crisis, oil prices plunged again.
Calgary house listings soared, new homebuilding slowed. House prices dropped by 5 per cent in 2008. They lost another 8 per cent in 2009.
By 2010, sales had bottomed out at about 17,000 a year, down 17 per cent from historic norms.
Only recently did Calgary home prices return to pre-recession levels as oil boomed again and 54,000 new, job-seeking residents came to Calgary in 2012 and 2013 alone.
Now, with Suncor cutting 1,000 jobs and oilpatch exploration slowing or shutting down, the reality of low oil is rolling into Calgary. And that could well drive up demand in Ontario as displaced workers head east.
“People outside of our province have a much different perspective than Calgarians do. They think the sky is falling,” says realtor Cliff Stevenson, president-elect of the Calgary Real Estate Board.
“Don’t get me wrong, there is a lot of concern here. But people in Alberta have seen this movie before. I think they are a bit more level-headed in reacting to this.”
This week’s surprise, one-quarter percentage point cut in interest rates by the Bank of Canada is unlikely to spur on many buyers who’ve been unable to break into the tight Calgary market during the last two years, says Ann-Marie Lurie, chief economist for the Calgary Real Estate Board.
“Obviously the concern is how long will oil prices stay low, what will be the impact on employment and net migration, and how all those things will affect consumer confidence.”
Lurie had been predicting a slowdown in sales for this year, but still marginal price growth of 1.5 per cent. Now, she thinks it will be spring market — closer to March — before it becomes clearer where the market is headed.
Thankfully, new housing starts have been modest, so there’s no a lot of oversupply. And investors aren’t a major force, as they are in the GTA and Vancouver, so that minimizes fears that multiple properties will be dumped on the market, pushing down prices.
But Calgary is, at its heart, a young city — Lurie says Statistics Canada studies have shown it has relatively few senior citizens. Most of those young people came here looking for work. Some now have families.
The question remains: how long will they stay if their roots are really elsewhere, especially if the good times get bad?