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Good luck !!!!!

I have a feeling the Calgary market has a bit more jump in it left for this summer, based on the fact that during the winter a lot of people who would have been in the market otherwise decided to wait and see what would happen with the world economy and oil prices. I suspect that those who have not been laid off already probably feel relatively optimistic about things getting better and therefore have made the plunge already or will do so in the coming months. So I think June may see more price increases. Overall though I my prediction for the next year or so is a fairly balanced market without any significant price spikes - and that probably will hold true for the foreseeable future since improvements in the economy would be offset my increases in interest rates from the current historic lows...

Why is there such demand for Calgary homes at these prices?  I must say that this surprises me, since I still think a vast majority of homes are priced too high.  Where is the sales mix Bob?  Is it more inner city or just all over the place?

All I think is that purchasers who must make a purchase should buy quality real estate that they can both live in and "invest" in.  Inner city homes with large land in a non-flooding location with good access to transit and main roads is what I would think is the best value.

Still, overall the market surprises me and I am sure it surprises everyone else too (bull or bear).  The market is as the market does.  I am still worried about the over-arching theme of inflationary pressures created by government and central banks.  Deflation is what SHOULD be happening, but inflation is what our politicians will end up causing (much to the detriment of our monetary system and, by extension, society).

Quality (or maybe I should say - decent) real estate in the inner city on a big lot starts at $750k-$800k. Now as the average and median suggest, most people can't afford that, as a matter of fact some can barely afford the average/median no matter the location. If you ask me, best value average household in Calgary can get for the money is the area in  between inner city and suburbs. Lots are still decent in size, houses are bigger and newer and prices are reasonable for today's market.  

Interest rate. The main reason why people buy, but we will see what happen next.

Interestingly I think things have definitely turned the corner...at least for now.

My friend in Vancouver has been trying to buy a place for the last month.  He said up until March things were dead but after April things suddenly heated up.  He had to bid on two places and got the second place he bid on.  He would have paid about 60k (10%) less had he bought back in March.

From what I have heard in Regina , you get a mixed bag of stories there. Some people say it's hot right now but I have a friend who's been trying to sell their condo since last winter and they've knocked off 50k (15%) already.

Builders must be having some financial difficulty in getting new loans. This week there are some excellent pricing on small builder homes in a few high end communities. I suspect they're trying to reduce inventory ratios to accommodate financing requirements.

This is very true, I have seen some nice previously high priced homes in the inner city reduce their prices significantly.  It's a shame they are on half the land size (as they are likely on a subdivided previously 50ft lot).  But that's the way the cookie crumbles.

Nice blog.

1. I have clients who have sold their homes and can't find anything worth buying right now.

2. Prices have to stabilize or go down if the market is to remain healthy. With higher interest rates on their way, the sales will dry up if prices continue to rise. Higher inventory will put some downward presure on prices and keep the wheels turning

On #1)  That is correct.  Houses are $200K OVER their real worth.

#2)  Prices go down?  Ya think?  Hopefully interest rates go up to 15%.  That will fix the problems of this current bubble pricing.  Then maybe all the renters who qualify now will choose to buy.  No way IM spending $400K on a house worth $180K.

"No way IM spending $400K on a house worth $180K."

That statement always drives me nuts.  How much is something worth?  As much as someone is willing to pay for it.  Where did you get $180K from???  maybe once in a while, there is an overpriced house, but judging by the latest numbers, not many of them.

Or are you saying the replacement cost is $180k?  Once again, you are wrong.  You can get a lot of 2-3 year old houses, which are cheaper, then what new homes are selling for.

To Luke:

"As much as someone is willing to pay for it".Yes you right!!! But how is life under the plains in inner city for 800K house? well done!!!

Great blog. The untold story in Calgary is builder sentiment. Once you look at housing starts going back a few years and consider the law of supply and demand, you can easily explain our market pattern and make predictions for the next year or so.

Builders overbuilt in 05/06/07 and most of 08 and then basically stopped completely. We got a massive inventory overhang last spring (well before the downturn) and a constant drop in inventory this year. Now that people see their choices limited, they start getting nervous and paying more. Inventory will get very low this fall. If construction picks up this summer this will only affect inventory well into next year.

Our economy is in a different class from almost anywhere in North America so usual house index and rent:sale prices don't really apply as well. (Just look at average Calgary wages and employment participation for an eye opener). Keep in mind everything is relative -would you rather live in Ontario with unemployment near 10% and a heavy manufacturing base or Calgary at 6.6%. Yes natural gas matters but the price of oil at 60-70 reminds other Canadians of 3 years ago. The price of oil was almost 10 in the eighties and interest rates were near 20%.

Inflation is a bit of a friend to Calgary real estate - price of commodities goes up and so does oil. Interest rate increases of 3-4% should cool things off definitely though. We won't see that happen in the near future though. Timing that is the biggest uncertainty in my mind.

Bob why do you think building activity is not picking up yet - is credit still too thin? Are builders bankrupt?

BTW Peak price for this year has not been established yet.

To "worldclass"'s comment, it's a shame to see a 50ft lot got chopped into 1/2. There are some high-end houses sitting on a 50+ ft lot in Spruce Cliff that are really nice. I hope all inner-city houses are like that.