Dan Welyk Realtor®  Since 1999

There Is No Substitute for Experience.

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The other day CFCN.ca reported a story regarding a warning from economists from TD bank stating the spike in the Calgary real estate market is unsustainable and there are signs of a "bubble" forming. The article also states of local real estate professionals not being worried as we have a booming economy.

In my opinion, the bubble is here and it is bursting right now. Am I worried though? Short term a little, for the long term - not in the least. Possibly for different reasons my colleagues have though. Calgary will see a fall in market prices - this is inevitable.

History has recorded over the past several decades a rise and fall of the market value of homes. Some years drop, some maintain - then other years, the market rises. In 2006, the market rose significantly with average home prices jumping from just shy of $270,000 to bursting over $360,000 in the second quarter of the year. Overall, a steady increase in property values has been maintained.

Calgary is still seeing a large number of buyers snatching up properties, however the length of time these homes sit on the market is growing significantly. Are there less buyers? Or are there more homes available? In April, Calgary had approximately 1500 properties for sale, now we are pushing 4000. Rather than having multiple offers and seeing homes sell over asking price, we are seeing homes sit on the market for a couple weeks - sometimes several weeks followed by a large number of price reductions.

I do expect to see a drop in home prices - how much is a question I am unable to predict. If we look at Vancouver’s real estate market back in the mid 1980's the city exploded with the dubbed "Asian Invasion". Homes were selling for $250,000 to $350,000 on average - by the end of the decade they jumped towards $500,000 on the lower end. In the early 90's, their market crashed. People saw their homes fall in value $100,000 overnight.

Where is Vancouver now? Those same homes are selling over $1,000,000.

I view Calgary as Vancouver was in 1988. We had our spike, the prices we have are at their maximum for our current economy and we will see a drop. The market will also bounce back and by 2015 we will see the average home prices upwards to $500,000. This of course depends on the maintenance of our current economy. If you are unable to see my logic, possibly you were one of the many people who thought Calgary’s average house price would never reach $300,000.

What will you do when the market does fall? Well, just like when the market spike’s upwards, the prices are relative - sell low, buy low - sell high, buy high.

 

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