Market activity slowed in August compared to the previous 2 months, however we still saw an improvement over the same month in 2019. I really noticed a slow down in showings compared to July throughout all price points, and it seemed like despite COVID many people were still taking summer holidays. BC probably got a nice tourism bump, it seemed like every person I spoke with spent time in Kelowna or Vernon in July and August.
The overall market in Red Deer fell back into buyer’s market territory, being just on the cusp of balanced with a 19% absorption rate (20% – 28% is balanced). The single family market under $400,000 remains very strong, and the $200-$300k price bracket stayed in seller’s market territory selling just over a third of all its active listings. First time buyers are keeping that market busy thanks to record low interest rates (some lenders are posting rates as low as 1.89% for 5 years now) and extremely attractive prices compared to 5 years ago.
The market over $400,000 has not seen the same activity this year as the lower price points, and there’s a noticeable difference in showing activity for a home under 400k compared to homes above 400k. For most first time buyer’s, homes over $400,000 are out of their reach or general comfort level, especially on a single income. In Central Alberta, over $400,000 would be considered a “move up” price point, meaning these price points might be second or third home purchases for the average buyer. Generally at this point in life, people either need larger homes due to family expansion, incomes have increased (or doubled in the case of people getting married), and equity in their existing homes have increased by paying down their mortgages. During hot markets when the value of people’s homes were increasing, moving up was easy as you could take the “free” equity in your current home to use as down payment for something bigger/better, usually without increasing your monthly mortgage payment. In our current market, where values have decreased and many people are selling at a loss, moving up requires either a large increase in income or saving money for a bigger down payment. Those who are able to save up a larger down payment are enjoying the savings on higher priced homes right now, as low demand levels at those price points continue to push prices down.
Looking at the year over year graph, every type of housing saw some improvement in 2020 compared to the same month in 2019, although a couple of stats stand out. The duplex/townhouse market average price is down 18% (or $34,459) and the apartment condos average price is down 49% (or $69,193). While average pricing can be a deceiving stat, it tells us that people are spending drastically less on these types of properties than they were a year ago. The duplex/townhouse market has struggled as a result of single family homes becoming so much more affordable, with many buyers opting to spend a little more money to not have to share a wall with their neighbor. Apartment condos used to be a very affordable way to get into the market, or offered a different type of living for people who wanted a lock and it and leave it lifestyle. With detached and semidetached homes becoming more affordable, and many condo buildings in Red Deer having large cash calls in the last 10 years, and with lingering insurance cost increases, many buyers have moved away from the condo market completely. Seniors condos will always have their own niche, although with COVID we’ve noticed a decrease in activity in these buildings as well.
Here’s a snapshot of other Central Alberta communities for August:
Absorption Rate: 17.2% (buyer’s market)
Absorption Rate: 16.6% (buyer’s market)
Absorption Rate: 13.5% (buyer’s market)