To judge where a market has been and where it is going, I analyze the absorption rate. Simply put, this rate measures how many properties sell in comparison to the number of properties for sale during the month. As I track this metric over time, I can see the balance between supply and demand.
Let’s look at the largest market segment driving Calgary’s real estate growth, detached homes. In March, the absorption rate was 77.46%, which means 77.46% of all homes for sale in the month of March were sold. In April, the rate dropped to 73.60%. In May, the rate dropped to 59.77% and in June the rate dropped even further to 55.78%. This signals a reduction in demand during normal times, however, in today’s environment this does not mean the demand is shrinking. The buyers are still there, they just have more to choose from as more properties have come onto the market. This is a normal occurrence after a super-heated market like March’s because people realize that they can get a good price for their home. This year it’s a bit different because along with the natural interest in getting the best dollar for a property, those sellers who would have sold in 2020 but were hesitant to list are now listing their homes because they feel safer due to Covid-19 safety protocols and vaccinations.
The next few months will be telling for the Calgary market. If the detached home absorption rate falls below 40%, we will see prices level off and potentially go down a bit.
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