Have home prices gone down? A closer look at real estate price averages in Central Ab

In real estate, we often look at the average price of homes selling to determine the direction the market’s taking but this year there’s a unique variable to consider. We typically think when real estate prices decrease property values have decreased. Don’t tell your local assessment office but this year that may not be exactly what’s happened.

In Red Deer, more properties sell in each higher price range until the $250,000-$350,000 range where they peak. After the peak, the number of homes selling in each price range decreases with much fewer homes selling above the $500,000 range.

At HomeScope.ca we track the sold price average of homes through the year to see what’s happening. During the first quarter of 2018 the average home price appeared to decrease as the economy improved. I wanted to look closer at why this might have happened and I found some interesting results?

Click here to see the most recent price average report
for the Central Alberta real estate market

At the start of 2018 an interesting thing happened in the Canadian lending market.  Everyone applying for a mortgage had to qualify at a higher interest rate. The need to qualifying higher forced everyone to purchase slightly lower-priced homes. For example, if you were to prequalify for a mortgage at the start of 2017 you could buy a home approx. 20% higher than you can this year.

The chart below shows more homes selling in 2018 slightly lower than 2017. Between January and May 2017 100 homes sold at an average price of $165,000, but a year later the 100 number mark was below $150,000. The same thing happens at the 200 unit mark. In 2017 the 200 mark was at about $255,000 and now, a year later, with the new mortgage rules 200 people purchase on average around $235,000 in Central Ab.

So, have home prices gone down in Central Alberta in 2018? Not necessarily, but more homes are selling at lower prices. I say this because sales and inventory numbers this year are similar to what they were last year. If sales were lower this year than last, and inventory was higher we could assume prices were decreasing in the typical fashion. The same number of homes are selling on a whole but everyone’s forced to shop at a lower price.

What’s interesting too is – the affect the mortgage rules appear to have on home prices above $300,000 is less. Probably because people buying homes above $300,000 now and a year earlier where less likely to purchase at their maximum approval rate, having less of an affect on the high price ranges.

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About the Author

Blake King
Having lived in Red Deer my entire life and having experience in many avenues of real estate I offer enormous value to my clients.