Photo: Charles Fettinger/Flickr
A senior economist with the Conference Board of Canada is equating Calgary home builders and sellers with Wile E. Coyote. If you’ve ever seen that old Looney Tunes cartoon, you know an analogy like that can’t mean good things for the housing market. In his online commentary released Tuesday, Robin Wiebe writes:
A frequent scenario from the classic Warner Brothers’ Road Runner cartoons features Wile E. Coyote chasing the Road Runner to the edge of a cliff, then overshooting the mark and hanging in mid-air. It is only when Mr. Coyote looks down and sees that he is unsupported that he plunges to the canyon’s floor. Calgary homebuilders and sellers of existing homes are likely feeling similar vertigo as collapsing demand leaves supply in the new and resale markets hanging in thin air.
To avoid the edge of the proverbial cliff, Wiebe says builders and sellers need to slow down and respond to declining demand. He points out that for the new construction market, the number of completed and unoccupied units rose significantly in March on a year-over-year basis for the first time since May 2011. Meanwhile, the number of new homes under construction in Calgary remained above 15,000 units for the eighth consecutive month in March, after hitting a record high of 15,678 units in January.
For the resale market, Wiebe writes that “although existing housing sales are on track to fall by a third this year, listings are currently on pace to decline by only 5 per cent.”
The good news is, according to a new report from the Conference Board of Canada, Calgary housing starts are poised to fall in both the short and long term.
Wiebe writes that builders and existing housing vendors, like Wile E. Coyote, have realized that they are unsupported. At the first quarter’s pace, Wiebe says starts in 2015 could end the year 4,000 units lower than last year (when starts hit 17,000), while price declines are likely to “accelerate through the balance of the year.” Wiebe concludes his commentary with the moral of the story:
Just like Wile E. Coyote, builders are ultimately susceptible to gravity, even if there is a lag. Supply additions to new and resale housing markets (in the form of starts and listings) will likely remain subdued until the city’s hanging homebuilders and the hovering existing home sellers see inventories fall significantly.