FORECASTING IS A TOUGH JOB!
We are based near Calgary, Alberta. Recently there was a hail storm that seemed to come out of nowhere. It is now ranked as Canada’s 4th most expensive natural disaster! In contrast, a couple of weeks later, the emergency warning system went off, but many people looked outside to see bright sunshine. Rotating clouds were spotted in Airdrie—but if you happened to live in West Calgary, it was still patio weather.
Forecasting the weather isn’t much different than trying to predict the economy. It’s part science, part art form, and part “you never know what might happen at the last minute.”
Keeping that in mind, we do pay attention to all the forecasters out there. Recently, CMHC suggested that Calgary’s house prices could fall between 10% to 24% by 2022, and Edmonton’s prices could fall between 11% and 26% by 2022. Yikes! Storm clouds ahead! Send out an emergency alert! The science says it’s time to panic!
But the art of forecasting says, “hold your horses”—ok, maybe it only says that in Alberta! Just like it can look like a Tornado is imminent in Airdrie, while Bragg Creek can have blue skies—there are also micro-climates in the real estate world. CMHC is suggesting Calgary’s average prices are predicted to drop. So if the high end homes drop dramatically, and the condo market continues to struggle with over-supply, those two housing categories can cause a major shift in the average price. For example this month, Royal LePage is reporting Calgary condo prices have already dropped about 10% over the past year.
How are we processing all the doom and gloom? We’re watching that segment of the housing market that is detached or semi-detached and below $500,000. Why? Interest rates are extremely attractive right now. Also, even with COVID, many people are still employed (currently almost 85% of Calgarians). And some Millennials are looking to take advantage of a Buyer’s market to finally move out on their own, or move up to a family home. Royal Lepage has stats to show only a 0.2% decrease in housing prices in Calgary since last year (this excludes condo’s). Hmmm. That quiet little story didn’t really make the news, did it? That same report clearly shows that first-time buyers are driving the Calgary real estate market, especially in the $300,000 to $500,000 price range.
So what are we doing today as Real Estate Investors, interested in the Calgary and the Alberta markets? We listen to all the forecasts – but then we filter out what is most applicable to our goals, our investing strategy, and even our specific neighbourhoods. And we continue to talk to a variety of people in the industry—the stats don’t always show the big picture at ground level.
Finally, there’s the “you never know what might happen at the last minute-factor.” Albertans and Calgarians have already weathered (pun intended) 6 years of a tough economy. Personally, we would never under-estimate the resilience and resourcefulness of our neighbours, colleagues, and acquaintances. I don’t think the stats can measure that kind of hard work and determination. We’re not advising a Pollyanna approach. We are suggesting that investors look very carefully for specific market information, and specific opportunities at this time. If you’re playing the long game, stay alert and ready for Buy and Hold properties. Be picky and be patient.
