Single Family Home Value Forecast and Equilibrium Home Price
Calgary single family homes are forecast to increase by 4 per cent over the next 12 months. More generally, home prices across Canada are expected to increase by 1 per cent.
Long-term, we can expect home prices in Calgary to increase by 5 per cent each year for the next two years. This predicted increase is based on the values we’ve been seeing in recent years.
Fortunately for residents, Calgary has balanced prices. Relatively, income growth is most important when it comes to determining future home values. When estimating future market income growth, both current job growth within the local market and an approximation of the overall growth of the Canadian economy are considered.
Home prices in Calgary peaked in the second quarter of 2007 at $414,066. Since this peak, prices have fallen considerably — by 11 per cent. Just over the past 12 months, we have seen a price decrease of 4.7 per cent. At the last estimation, in the fourth quarter of 2010, the Average Home Value in Calgary was sitting at $367,912.
At present, The Average Home Value in Calgary is about $377,616 — the last recorded figure, also from the fourth quarter of 2010. The housing market is currently in-balance, and Calgary’s home prices are now 22 per cent higher than the national average.
The Equilibrium Home Price is a useful figure because it helps us to determine whether the market is in balance or whether it is over-priced by comparing the calculated Equilibrium Price with the actual average home value. It is also essential for predicting fluctuations in the market since over-priced markets always return to the Equilibrium Home Price. The greater the difference between the actual price and the Equilibrium price, the greater the risk of an eventual sharp price drop.
Equilibrium Home Price, Housing Starts and Vacancy Rates
The Equilibrium Home Price for Calgary in the coming years is predicted as follows: $408,983 in 2011; $439,361 in 2012; and $465,722 in 2013. By comparing these figures with the forecasted actual home values in Calgary, we can determine that the market will be in-balance from 2011 through to 2013.
2010 saw a 21 per cent increase in Total Housing Permits compared to 2009. Conversely, single family starts have decreased by 81 per cent since they peaked in 2006.
Calgary’s Rental Vacancy Rate fell from 4.9 per cent in 2009 to 3.6 percent in 2010. However, it still exceeded Canada’s Vacancy Rate in 2010 by 2.9 per cent.
In 2010, the unemployment rate in Calgary was 7.0 per cent, while it had been 6.7 per cent the previous year. In the past 12 months, unemployment in Calgary has shown a fall of 0.3 per cent. This parallels the national unemployment decrease of 0.3 per cent.
Calgary’s population growth between 2009 and 2010 fell shy of 1 per cent. Similarly, the national population growth rate was also below the 1 per cent mark for these two years. Calgary’s population growth, though, narrowly exceeded the national average.
Calgary’s oil industry remains a key component of the city’s economy. The Average Crude Oil price was 89.04 in December of 2010. Significantly, the price of crude oil increased by 20 per cent over the last 12 months. Moreover, it is expected to rise by a further 25 per cent over the next year.