Condo Market is Soon to be Toast

Recently, I’ve noticed on blogs moderated by realtors, that talk and hype has been focused (sustained) purely on the SFH market.

But what they fail to acknowledge (perhaps denial?) is that the Calgary condo market is on the cusp of self destruction. The condo market is symbolized as the most affordable entry point into the real estate market. There should be market activity. But where is it? If you examine the market closely, it is stalling, weak and ready to crumble. Once the condo market falls, the effects will ultimately cascade into the SFH market (or will simultaneous combustion occur?).

Initially, we can examine inventory levels. We currently have 2313 active listings for condos in Calgary. That is only 16 listings away from the all time high of listings on October 2007 (2329). We should easily be surpassing that mark earlier this week. 

Secondly, condo sales are down 38% compared to last year. Currently, 2008 sales are stalling and flat lining:              

Feb 2008: 562
Jan 2008: 454
—
Feb 2007: 895
Jan 2007: 736

Thirdly, current condo prices are also stalling and flat lining as well. We no longer see the massive month to month price increases we saw in 2007:                                                                                                                                                  

Feb 2008 Median Price: $295,000 Average Price: $311,812
Jan 2008 Median Price: $290,000 Average Price: $311,232
—
Feb 2007 Median Price: $280,800 Average Price: $301,812
Jan 2007 Median Price: $267,500 Average Price: $287,299

In addition, the sales list ratio is plunging into the abyss as compared with 2007 statistics.                                                

Feb 2008: 45%
Jan 2008: 32%
—
Feb 2007: 101%
Jan 2007: 73%

Lastly, the February 2008 DOM statistic has barely moved from January 2008 DOM. DOM is not generally a good indicator to use when deciphering market conditions and direction, but for fun I thought I’d throw in the comparison as realtors use DOM as smoke and mirrors. Notice the difference from 2007 to now, when DOM a year ago was under a month.

Feb 2008: 45
Jan 2008: 48
—
Feb 2007: 28
Jan 2007: 39

We are witnessing a contraction in demand and super dilation of inventory for condominium units in Calgary. This contraction in demand may also be affecting the SFH market, resulting in a tapered variance in the sales mix. This would explain why the SFH market is seeing higher prices when inventory is high and sales are low.

New condo developments such as Arriva, Xenex on 12th, Nuera, Centro 733, Stonecroft, London London, Colors and so many others have been on the market for over a year and have not sold out.

With so much inventory right now, the sky will be the limit this year. It’s going to be a challenge for flippers to maintain their list prices at the current levels. If they maintain their denial, they’ll be priced out of the market forever – literally in terms of being able to sell their condo.

The days of a $300,000K+ 700 sq foot 1 bedroom condo are soon to be over.