After a 20% drop in sales in September, the market bounced back nicely in October, posting 142 sales in Red Deer, an increase of 15 sales from the previous month. It’s rare to see an increase in sales month over month at this time of the year, typically the market is on a steady decline into December, however we’re dealing with some unique circumstances.
The drop in September was likely tied to uncertainty around rate increases and inflation, as well as a gap between what sellers were wanting for their properties versus what buyers were willing to pay. Rates increased 2.25% in just over 3 months, the fastest increase since the 1990’s, massively impacting a buyer’s purchasing power. The rule of thumb is that every 1% the rates increase reduces purchasing power by 10%. For buyers to lose over 20% of their purchasing power in such a short period had them looking for reduced prices and many seller’s didn’t want to drop their prices that quickly.
As prices for most homes have now adjusted (albeit not 20%), buyers are coming back into the market and we’re seeing activity pick up. While I don’t believe that 2023 will set any sales records, I do believe demand in Alberta will remain strong as we see a large inflow of migration from other provinces. Our economy is in great shape largely thanks to oil and gas prices and likely won’t see recession the way the rest of the country will. As our provincial population increases, we’ll need to increase the number of homes to accommodate them, and given that many builders aren’t building at high volumes due to cost inflation on materials and lack of available labour, inventory levels are likely to stay low for the next year which should hold prices stable. Another increase in rates could impact pricing slightly but I don’t think we’re going to see any more large drops at this point.
The forecasts around interest rates right now are that they’ll remain high through 2023 and start to come down as inflation continues to drop somewhere around 2024. If we’re still dealing with inventory shortages as interest rates drop, expect to see prices start to climb again.
Surrounding Community Snapshot:
Current Active Listings – 52
Sales in October – 15
Likelihood to Sell – 31% (balanced market)
Current Active Listings – 124
Sales in October – 35
Likelihood to Sell – 29.5% (balanced market)
Current Active Listings – 21
Sales in October – 8
Likelihood to Sell – 40% (balanced market)