The COVID-19 global pandemic has rocked markets all around the world, and the real estate market is no exception. For both home buyers and home sellers, questions abound. People wonder how the housing market will be affected by the virus, and for good reason.
The last time the world witnessed a significant global recession was just ten years ago, where the median sales price of existing homes dropped by 25% across the board. The downturn lasted for years.
Today, homeowners wonder if they should sell quickly before things get really bad. Conversely, potential home buyers wonder if the worst is yet to come, and if they should wait a few more months in the hopes that home prices will drop further.
If you’re interested in homes for sale in Calgary, keep reading!
Calgary Real Estate Trends During the Coronavirus
At this point, things are not looking good for the global economy. This is likely to affect Calgary housing prices and sales volumes.
Back in May, only 10 weeks into the global pandemic, economic forecasts were relatively rosy compared to today - and even then Canadian officials from the Canada Mortgage and Housing Corporation (CMHC) warned that home prices could fall between nine per cent and 18 per cent from their pre-COVID levels through mid-2021.
In cities like Calgary that were already hurting, this was not welcome news.
For potential sellers like retirees, it meant that they would either need to sell right away and risk getting less money for their houses, or wait in order to sell. This can be a tough choice when the profits from the sale of the home were supposed to be reserved to fund retirement. 
There were also risks for buyers. Anyone buying today might find that the value of their new home drops significantly over the next one to two years, leaving them in an unenviable financial position.
The result is that, so far at least, both supply and demand have been lowered across the country. Calgary homeowners are waiting to sell, and potential Calgary home buyers are taking the same wait-and-see approach. As a result, prices have stayed relatively stable so far.
However, dark clouds are on the horizon. Several months into the pandemic, the forecasts are beginning to move from bad to worse. DBRSMorningstar, a credit ratings agency, as well as Moody’s, an economic analysis and risk management firm, believe that housing prices may plummet by as much as 15 per cent through 2022.
What Factors Most Affect Housing Prices During a Recession?
There are a number of factors that come into play, but the ultimate result of the Coronavirus on the housing market generally (and Calgary housing prices in particular) remain difficult to predict.
The elements to keep an eye on will be:
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The total number of businesses that will fail
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The number of workers that are currently furloughed that ultimately end up laid off
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The number of people forced to sell their homes due to the economic contraction
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The level of new home construction and the level of inventory on the market
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The global demand for oil and gas and the overall health of Canada’s energy sector
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Immigration levels in an age of travel restrictions
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The level of interest rates, unemployment levels, and government subsidies
Many of the answers will depend on the resilience of the virus, and on successful efforts to fight it. After all, a vaccine in the late year or in early 2021 could turn things around. As pandemic restrictions are eased, economic activity generally improves in lockstep.
Should I Buy a Home During a Recession?
While there are risks involved in buying a home during a recession, there are also some good reasons to buy a house in Calgary. The number one reason? It’s looking more and more like a buyer’s market.
As mentioned above, prices are likely to drop if the trends continue on their present path. Those who purchased homes at the nadir of the housing market crash between 2007 and 2011 have seen the values of their investments rise by 30% or more over the last several years, an enticing prospect.
In addition, home buyers will have increased leverage, so during any negotiations, they may be able to squeeze sellers for items or agreements that they normally would not. These include asking for furniture and appliances to be included, as well as having the seller pay closing costs. A savvy real estate professional will be able to give you the best advice on negotiation tactics when buying a home in Calgary.
That said, there are also risks and downsides associated with buying during a major economic downturn. Just because you have a job now doesn’t mean you will have one in a year’s time. This uncertainty should be factored into any decision to purchase a home, no matter how good the deal is. Banks also tend to tighten up during periods of economic uncertainty, possibly making it more difficult to obtain a mortgage, especially if you work in a vulnerable industry.
The result is that if you’re a buyer, you may need to prove that you have savings equal to many months worth of mortgage payments, as well as provide a hefty down payment.
In the end, if you’re a buyer and you’re interested in purchasing real estate in Calgary, your best bet may be to wait and see. The CMHC believes that the global economic outlook will likely come into sharper focus over the coming months, and that the fourth quarter may provide potential buyers with the information they need to succeed during these uncertain times.
Need Advice From a Professional?
Calgary’s real estate market is complex, and even more so during a pandemic.
The decisions you make over the next several months will make a huge financial impact and affect you for years - even decades - to come. When faced with such uncertainty, we always recommend that you get advice from those that have spent their lives becoming experts in the field.
But while the decisions can be tough and the subject matter complex, sometimes gaining clarity can be as easy as hashing it out over a coffee. A simple conversation with a real estate professional from Real Estate Partners could be the difference between success and failure.
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