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June Newsletter - THE SKY ISN’T FALLING THE MEDIA’S MISCALCULATION
Dated: June 3 2020
THE SKY ISN’T FALLING THE MEDIA’S MISCALCULATION
Contrary to the stories in the media, the sky is not falling on the Alberta real estate market.
In April in the Calgary market, we saw an average price drop of -8.31 per cent. That’s pretty big. But is it true? At face value, yes. But let’s consider how the average is calculated. If there are three homes that sell in a month and two are $1,000,000 and one is a $200,000 condo, the average is $733,333. But if next month there is one $1,000,000 home sale and two $200,000 condos, then the average is only $466,666. That is a decline of 36 per cent. Except the higher priced homes are still selling for $1,000,000 and the condos and are still selling for $200,000. The actual prices remain unchanged.
During COVID-19, less homes are selling during isolation and many people have decided to hold off on buying in the higher price ranges. This skews the average. A more accurate indicator is what’s called the Home Price Index or HPI. This looks at the individual prices of each unique property type to determine changes. The year-over-year HPI in Calgary in April, declined a paltry -1.56 per cent. That’s a far cry from the -8.31 per cent average.
Although parts of Canada are reacting differently, Albertans appear to be taking advantage of low interest rates and the government programs to avoid a market full of distressed sellers. While we don’t know what the future holds, after living through five years of an economic downturn, Albertans appear to be better positioned than most provinces to weather this current storm, and that’s evident in the real estate market.
See the full newsletter June 2020 Newsletter
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