May was another great month for real estate in Central Alberta, although we’re seeing signs of things starting to normalize after a few very crazy months to start the year. Sales in Red Deer dropped to 198 units in May, down from 223 in April, while listing inventory increased slightly up to 653 from 621. I suspect the hot market is over, but I’m still expecting sales to continue on at a nice balanced pace for the remainder of the summer.
I’ve been saying over the last few months that this surge in the market was largely fueled by COVID boredom. As I type this, we’re 2 days off from going into phase 2 of re-opening, with a plan in sight to completely re-open by July. Suddenly the summer is looking accessible, people can be outside, restaurant dining will be nearly back to normal, and the option to travel in most places in Canada this summer should be fully open. There’s also a strong chance that international travel will re-open by this fall, and there is a lot of pent-up demand for people wanting to head South. Many people had disposable income thanks to their inability to travel, dine out, or pay for entertainment and opted to spend it on housing, renovations, retail, and local recreation instead. As travel opens, there will be huge demand, and I suspect the price for flights and hotels in major tourism markets is going to see a sharp increase in price over the next 6 months.
The other factors at play for cooling the market will be the stress test increase which just happened on June 1st (rate back to 5.25% from 4.79%), and the potential for rising interest rates. While 5 year fixed rates are still holding around 2%, I suspect we could see .25% to .50% increase in rates before the end of the year, and variable rates will inevitably start to increase in 2022 as the Bank of Canada starts to increase the prime rate.
Looking at the stats, single family home sales under $600,000 are still the hottest segment of the market. Acreage sales are also strong, the condo market is still flat, and attached housing (duplexes and townhouses) are just barely sitting in balanced market territory. I suspect we could start to see condo activity increase slightly as we move into the fall, although I don’t expect a major change or increase in that market in the foreseeable future. I’m also predicting that demand levels for acreages will start to cool off as we move into summer.
Surrounding community snapshot:
Current Active Listings – 94
Sales in May – 41
Likelihood to Sell – 42% (seller’s market)
Current Active Listings – 167
Sales in May – 66
Likelihood to Sell – 38.8% (balanced market)
Current Active Listings – 38
Sales in May – 5
Likelihood to Sell – 13.7% (buyer’s market)