It’s rather ironic to see the two headlines show up within a few days of each other and to realize both are occurring at the same time, but this is the current reality. It’s been explained that the slowdown in the outlying areas around Calgary has been directly related to the slowdown within Calgary itself.
The surrounding area is simply taking a lead from what occurred within the city during the summer months when Calgary’s entire housing market slowed to a crawl. Part of the slowdown is valid as the economy is only slowly gaining ground and people are still feeling out what will happen, but much of it has to do with uncertainty and fear that we aren’t completely out of the entire recessionary period.
It’s very common for surrounding areas to feel the economic slowdown of a major center in the months following its slowdown. As Calgary slowed during the summer months, the economic benefits that many areas derived from the city also dried up. This is the ripple effect at its finest and it shouldn’t come as a surprise that we are seeing the slow down expand from the main center outwards.
As we see the market get slightly stronger during the fall buying season, this once again will ripple out to surrounding communities. Unfortunately, upwards growth ripples tend to move much slower than other way, so it may take longer for it to fully impact.
So that explains the fall in sales for the outlying area, but why on earth would we now see the luxury home sales jump so drastically at the same time? So first, just to define what a luxury home is, these are the properties priced at $1 million dollars or more. Obviously, these aren’t the types of property that the average person purchases. At the same time, they’re a little reminder for us of how much money is actually in the region.
So the big question from this should be, Why are people spending so much on a home right now? I wrote earlier in this article that the rest of the housing market slowed to a crawl, do the folks at the top of the market know something we don’t’?
My own personal view on this is the people with the money to spend have been sitting on the sidelines waiting to see how everything would play out. Now that they have made it through what they feel is the worst they can see the future, so to speak, and in most cases feel that there will be more opportunity coming forth over the next five years plus.
Realistically, the majority of the people purchasing these million dollar plus homes are also not getting CMHC insured high ratio mortgages. It’s more likely that most are smaller mortgages as a percentage that an average home buyer providing them even further security. They are actually exposing themselves to very little risk (unlike a 95% Loan to Value first time home buyer) and are taking advantage of reduced prices making it a smarter decision for them.
Will this enthusiasm trickle down to homes below the million dollar mark? Eventually it will, but we are still dealing with different challenges and a significant amount of fear as to whether we are through the worst. So while I previously held fairly high hopes for the fall market to rebound, I am starting to believe more of the recovery of the overall housing market will be pushed back into the spring market of 2011. So while the headlines are giving us a portion of the story, you really have to look behind the headlines to determine what may really be happening.
Town and Country really seems to be picking up now that we’re well into December. Cochrane is picking up anyway, and still seeing activity in Airdrie. Not sure what it means, but happy to see things happening, with showings and offers. Still seeing things happen on listings in Calgary, but not to the same extent as Town and Country.