While we seemed to have a good trend going at the end of 2009, 2010 seems to have begun with a bit of a thud! Is this cause for worry? Read on….

The most significant statistic, in my opinion, when considering market conditions, is what portion of the available inventory is selling? The following table shows the percentage of properties sold compared to the available inventory or the absorbtion rate for single-family homes in Calgary Metro year over year for the month of January for the last four years.

Month/Year Single Family Sales Month End Inventory + Inventory Added During the Month Percentage of Available Inventory Sold
January 2007 1,497 1,894 + 2,325 = 4,219 35.48%
January 2008 1,083 3,997 + 3,023 = 7,020 15.43%
January 2009 550 4,040 + 2,068 = 6,108 9%
January 2010 762 2,513 + 1,822 = 4,335 17.58%

 The following table shows the absorbtion rate for each month since January of last year.

Month/Year Single Family Sales Month End Inventory + Inventory Added During the Month Percentage of Available Inventory Sold
January  2009 550 4,040 + 2,068 = 4,248 12.95%
February 2009 825 4,352 + 2057 = 6,409 12.87%
March 2009 1,086 4,369 + 2,023 = 6,392 16.99%
April 2009 1,290 4,130 + 2,010 = 6,140 21.01%
May 2009 1,584 3,861 + 2,235 = 6,096 25.98%
June 2009 1,837 3,395 + 2,244 = 5,639 32.58%
July 2009 1,585 3,314 + 2,089 = 5,403 29.34%
August 2009 1,277 3,296 + 1,910 = 5,206 24.53%
September 2009 1,257 3,148 + 1,857 = 5,005 25.11%
October 2009 1,285 3,003 + 1,819 = 4,822 26.65%
November 2009 1,095 2,658 + 1,365 = 4,023 27.22%
December 2009 799 2,054 + 806 = 2,860 27.94%
January 2010 762 2,513 + 1,822 = 4,335 17.58%

The absorbtion rate dropped from 27.94% in December to only 17.58% in January for single-family homes! Well that’s only one part of a market review, what has happened to the Median Price?

The Total MLS (including Condos and Country Residential) Median Price has shown the following progression:

 

Yikes! The Total MLS Median Price has dropped from $360,000 in October, November and December to only $352,000 in January! What does this all mean? Are we headed for another correction?

Before we panic, let’s review the data. First of all the Median Price reflects the middle price properties have sold for and it has only dropped 2.2%. This is probably a reflection of the fact that although single family sales were down 4.63% from December to January, condominium sales were up 9.31% from December to January.

Also year over year the absorbtion rate for single family homes has almost doubled. OK so we were deeply entrenched in a correction last January but our absorbtion rate January 2010 was still better than January 2008. The lower absorbtion rate has more to do with slower buyer activity than higher inventory. My opinion is that because we saw such strong sales activity in the last quarter of 2009, there were fewer buyers in January. The first few days in February are already proving to be much more active than last month.  Also the number of new listings this January was less than in January of 2009, 2008 and 2007.

Because interest rates remain low, some say until the middle of the year and some say for twelve to eighteen months, I predict the buyer activity will be strong – at least for the first quarter of 2010 – but because less than one quarter of available homes are selling properties still have to be accurately priced to sell. Buyers do have properties to choose from but because there is no longer super high inventory, not at bottom basement pricing. I will leave it to the economists to make long term predictions, but it looks like we will have a balanced market for the first quarter of 2010.

Hope this helps!

Susanita de Diego