EMOTIONAL ROLLER COASTER!
Picture this: the first week of school, with 2 teenagers. Ah, the highs and lows of it all!
Real estate investors are experiencing this too. Regardless of your opinions about Covid, masking, passports, etc…, there are a lot of emotions everywhere. Oh yes, and let’s add the chaos and divisiveness of an election into the mayhem. Media, social media, and even grocery store line ups are full of people with opinions and a willingness to express them, with passion.
All this when many of us thought we were turning a corner over the summer. How’s an investor to proceed? Which “facts” are even real? How do we keep emotions out of our investing, when we’re literally surrounded?
Get off the ride. Find a way to get grounded. No, it’s not easy.
For real estate investors, seeking out the best information possible is a great strategy. Yes, we know stats are delayed, and easily manipulated—but some stats and trends are very helpful as we make our next choices on our investment journey. So we’re going to share a bit of the highs and lows.
Real estate sales in Calgary just had the 3rd best August on record; and year over year, sales were up 37%. But yes, sales were down slightly from July’s peak. Sales in Airdrie, Cochrane, Chestermere and Okotoks continue to be strong. Calgary Inventory is neither high nor low—it’s really in line with historical averages. The average Benchmark Price in Calgary is now $459.600 (August 2021). This is up 9.4% year over year, and again a slight drop from July. The city centre is the lowest performing area—no surprise. Current Days on Market is 42. What do the experts expect? A general easing in sales and prices (which is normal for the upcoming seasons). The Delta variant may impact both the volume and price of sales going forward—yup, it’s a big ol’ wild card.
How about jobs? Unemployment in Canada overall and in Alberta is at its lowest since February 2020 (pre-pandemic). Canada’s unemployment sits at 7.1%, and Alberta is at 7.9%. Calgary has minimal change over the summer: July was 9.8% unemployment, August was 9.6%. Edmonton is showing some improvement with unemployment down to 8.2% in August, from 8.8% in July.
Inflation is not new, but its impact on quality of living is certainly more remarkable than it has been in a long time. Inflation was 2.7% in June, and up to 3.7% in July!! Inflation data is actually up to 4.0% in Calgary, 3.2% in Edmonton. Gasoline prices were up 38.4%, natural gas 30.9% and electricity up 21.1%. Depending on how you work your utilities for your tenants, that’s a very real change for cashflow—either for you or your tenants. Now would be a very good time to be double-checking that your tenants are paying their utility bills.
Overall, Gross Domestic Product (GDP), is the “ultimate” measure of economic recovery. Expectations for the second quarter were 2.5% growth—but alas, the roller coaster ride continues. Q2 Real GDP declined 0.3% nationally. And Q3 and Q4 GDP is expected to be affected by the pesky Delta variant.
Please don’t get us started about the chaos of the supply chain!
When we get grounded, and keep it real, the overall economic fundamentals show a mixed picture: jobs are up, real estate is up, even rents are up a bit, but inflation is also a force, GDP is down, and the fourth wave is just beginning. Our takeaways? In every crisis, lies opportunity. Calgary and Alberta have already grown a tremendous amount of resilience. We are continuing to pay attention for positive cash-flow opportunities. And we continue to do everything possible to manage the wild emotional ride.
