Borrowing costs

June home sales lose momentum as borrowing costs rise

“We expect to see more monthly slippages…because the gains were so strong at the start of the year,” says CREB’s Ann-Marie Lurie.

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The onset of summer heat last month did not prevent Calgary’s resale real estate market from cooling off from the scorching temperature of early spring.

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The Calgary Real Estate Board released its data for June this week, showing that sales (2,842 in total) fell 2.5% year over year.

“The jump we’ve had in interest rates is probably weighing on the market,” says Ann-Marie Lurie, chief economist at CREB.

Mortgage rates have risen as the Bank of Canada has raised its overnight rate by 1.25 percentage points since March – the same month prices and sales hit all-time highs in Calgary.

Interest charges are expected to rise even further, with the Bank of Canada expecting to raise the lending benchmark by 75 to 100 basis points this month and possibly even more before the end of the year.

Already, higher borrowing costs are having an impact. Still, not all parts of the market are affected equally, adds Lurie.

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Higher rates slowed sales of single-family homes, down 18% year over year to 1,483 transactions. In addition, sales of semi-detached homes (223) fell by 8%.

With more overpriced buyers in these markets, row and apartment sales surged, setting records for June.

Townhouses – or townhouses – were up 35% in June from 2021 with 555 sales. Apartment sales rose 31% last month compared to the same month last year with 581 transactions.

“Condominiums have finally tipped under tighter market conditions,” says Lurie.

The segment had long had more than three months of supply, but last month’s supply fell to around 2.6 months, down 41% from the same period last year. At the same time, stocks fell 22%.

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In turn, the benchmark price of a condo rose 10%, year over year, to $277,400.

Townhouses had the least supply in the market at 1.44 months, down 46%, while inventories fell 27%. As a result, its benchmark price climbed 16% to $363,700 in June.

Even amid declining sales, benchmark prices for single-detached and single-detached homes rose as supply remained low relative to demand. The twins, for example, had only 1.85 months supply. In addition, its inventory has decreased by 30%. As a result, its benchmark price increased by 13% to $581,600.

Amid 1.8 months of supply and inventory down 18%, the benchmark single-detached home price also rose 16% to $647,500.

Overall, the aggregate benchmark price for all segments in Calgary increased 13% year over year.

Yet even these price gains are likely losing momentum, as the June benchmark was down about a full percentage point from the May price.

“We expect to see more monthly slippages as we move forward because the gains were so strong at the start of the year,” Lurie says.

Still, the market is expected to remain strong given the city’s economic growth, driven by energy prices, which are driving job growth and migration, Lurie adds.

“But the market is definitely showing signs of stabilizing.”