“If oil prices continue to do what they’ve done in recent weeks, which is inch up – we’re now about 25 per cent off the bottom,” says Phil Soper. “If it continues to creep up, we may well see Calgary avoid a reset in home prices.”
Soper says the fact that housing prices haven’t dropped off dramatically is a good indication of the market’s fairly strong position.
“Price is a trailing indicator,” he explains. “So when the market changes, either to the positive or to the negative, the first thing you see is a change in the number of homes changing hands.”
Still, the number of those homes changing hands has dropped dramatically. The Canadian Real Estate Association reported a 20 per cent year-over-year drop in the number of real estate transactions during the month of March.
However, prices were only one per cent lower than the year-ago period. Since prices haven’t yet followed a downward trajectory, and since the Brent crude oil prices have been slowly rising – it was around $64 a barrel last week – Soper says the market may very well have avoided a hard landing.
“So where are we with Calgary?” Soper asks. “If oil prices drop back below $50, if the outlook in the energy sector globally remains grim, then we’ll start to see home prices dropping in Calgary by mid-June.
“My expectation is by 2016 Calgary will be back in the growth column, but in 2015, it remains a bit of a wild card.”
The real estate market in Calgary will avoid the kind of correction it suffered in 2008 if oil prices even begin to turnaround, argued the president and CEO of Royal LePage and Brookfield Real Estate.