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We're living in a time when there are more questions than answers and from two different directions—the unknowns of COVID-19 and the outcome of our Oil & Gas sector in the most recent tailspin.
Current events are so unpredictable that industry experts are giving a series of possible outcomes instead of one opinion.
One of the many questions being asked is, what's going to happen to YYC's real estate market? Every day I search for answers and opinions from industry experts from all sectors, and here is a summary of seems most realistic to me with what we know now.
LAST 14 DAYS
For the last two weeks, the number of firm sales and conditionally selling are moving up and forward.
Who's buying?
Former sellers that sold this past December, January, and February.
Another category of buyers will be investors jumping back to real estate from the even more volatile stock market. These buyers include institutions such as hedge funds, trusts, etc., which don't just purchase one or two properties, but hundreds.
And buyers taking advantage of the low-interest rates and opportunity to borrow more.
THE CRYSTAL BALL APPROACH
At this point, everyone has the same odds at guessing how everything is going to unfold, and here's mine.
Best Case Scenario
THE LULL
As we get closer to the core of the peak with COVID-19, the overall market activity will flatline as sellers and buyers camp out on the sidelines and watch how events unfold before taking any action.
CLIMBING DAYS ON MARKET
Days on the market will start adding up as the lull period sets in, and buyers will need more time to weigh the pros/cons of purchasing now or waiting it out.
BIG HITS
Because of the new protocol to work from home, commercial real estate will take a hard hit as companies will rethink all the space they are paying for to create the same or better results.
Second-home markets (i.e., vacation homes), will also be negatively affected along with other discretionary spending.
SELLER'S PSYCHOLOGY
Eventually, inventory levels will begin to decline as many sellers will come off the market because they question their timing due to the market's slower response. Many others will not enter the market because of the unknowns. And, the low-interest rates can make it very easy for everyone to refinance while they wait for more direction.
DECREASE IN SALES VOLUME
Because there will be fewer properties on the market to sell, the number of sales will decline. The decrease in sales volume will likely be what the mass media promotes during this phase.
LOWER INVENTORY LEVELS
The lower inventory levels will help to stabilize prices, and there's even potential for upward pressure while supply is low. This trend played out in the detached market from June - September 2019' when the Benchmark Price stabilized because inventory levels were low.
TIME THE MARKET
Some buyers will try to time their purchase with "the bottom" of the market conditions. Unfortunately for them, the only way they will know that point is when it's passed them by because this timeline can only be defined in historical data.
MARKET ACTIVITY
As more sellers come to market, more buyers will soon follow because they have more selection and will want to "get in" before the banks start to raise rates again or change mortgage policies.
BUYER DEMAND
Despite the sluggish economy, Calgary's population increased by approximately 1.4% or 18,000 plus people by September 2019, and all these people will help fuel the economy in some form or another.
We'll temporarily lose some buyers do to job losses; however, these numbers will rebound once the rehiring begins, people diversify their careers, and overall balance is restored.
BANK OF MOM & DAD
The market may also lose some first time home buyers because "bank of Mom & Dad" took big hits during the stock market crash this go- around and no longer have the ability to fund their kids down payments, or will take some time to rebuild the cash-stash.
CONFERENCE BOARD OF CANADA'S FORECAST
With all the unknown variables today, the Conference Board of Canda issued two forecasts. One based on the virus containment of six weeks and another of 24 weeks to level-off.
Regardless of the timeline, they anticipate a full economic recovery and growth in Canada.
CLICK HERE to access the recording of - The Economic Outlook: Canda's Economy to Navigate Rough Seas
In the meantime...
Government stimulus packages and other fiscal measures (i,e low-interest rates, deferred taxes, etc.) are being issued on a worldwide scale with the intention to "slingshot" economies forward once recover from COVID-19 begins. Negative side- effects are impossible to avoid, yet the goal is to minimize them and rebound faster.
Alberta's Economy
For the time-being, Alberta's projected growth has been downgraded from 2.2% in 2020 to 0% because of the drastic negative impacts from COVID-19's decrease in global O&G demand layered on top of an abundant over-supply.
Do I have any good news?
The Economic Recovery Council has been appointed by the Kenny government to provide insight and expert advice on how to protect jobs during the economic crisis stemming from the COVID-19 pandemic and the recent collapse in energy prices." And, Canada's federal government is reportedly preparing a $15 billion bailout package for the oil and gas industry. The funds will not help with the long-term solution but will help in the meantime.
Internationally, it seems that Putin and the Prince of Saudi have recently realized that by threatening to continue to flood the global market with more oil, they are drowning themselves. Recently, the Prince reached out to Texas and invited them to the next Opec meeting in June for discussions. And, Putin is rallying to widen Opec + membership, which may help stabilize the oil market.
Why does this matter to you?
Since none of the players are happy at the current prices, perhaps, collaboration and long term solutions are on the horizon...even a distant one.
In the meantime...
We'll enjoy low gas prices, practice social distancing, keep our dogs happy with unlimited walks, and a slower pace for more quality time with our loved ones.
Adding some hope that the solutions to our problems are closer than they appear right now, there will be collaboration from parties that don't agree, and our leaders have the forward-thinking, so history doesn't repeat itself.
At the moment, I am focused on the best-case scenario, as I think it's too early to forecast otherwise accurately. I'll continue to search for new information and share it along the way.
