My Mortgage Blog

The question of the year - what can we expect from the Calgary Real Estate Market in 2020?

This week I was fortunate to attend the CREB (Calgary Real Estate Board) 2020 Forecast, as I do each year. I've been asked a few times this week what the outlook was. The Coles' Notes version: cautious optimism that we will see stability in the market this year.

For the full forecast details, go to the

I know, not much to get excited about ... or is there?

Looking back at 2019

Last year we saw sales improve but prices dropped more than expected. What changed? Mortgage rates came down and we saw job growth. However, sales didn't increase in the Calgary Real Estate market enough to offset inventory levels. As a result, prices fell.

The 2019 story also changed depending on what price point you were looking at. Sales increased seven per cent in properties valued under $500,000. Properties over $500,000 saw a nine per cent drop in sales. So what fuelled the increase in properties under $500,000?

More people were working last year than in 2014, but the composition has changed. We are seeing the return of scientific/technical jobs, but at lower salaries. This is good news for industries competing for these resources. Prior to 2014/15, oil and gas was able to attract top candidates for all positions because the salary differential was often times significant. Now that salaries in oil and gas are more in line with other industries, it's a fair fight.

What can we expect in 2020?

We expect sales to continue to improve in the Calgary Real Estate market, but are likely to continue to see prices fall until inventory levels come down. So if you were expecting to see an improvement in prices in 2020, don't hold your breath.

The expectation is that there will be modest economic growth - ie. if Trans Mountain Pipeline is built, this will help to get increase the barrels we can move into the market. This will lead to job growth.

In 2019 Calgary the only region in Alberta to see employment growth. Calgary saw a four per cent increase in employment growth while the majority of the province experienced negative employment growth.

Believe it or not, this could be a good thing. In 2014/15 Calgary was the first municipality to be hard hit with job cuts. Perhaps this is the pendulum swinging back, with Calgary first to see an uptick.

The strong job growth from 2019 is expected to flow into 2020 and help drive demand in Real Estate.

Another determining factor for demand in the Calgary Real Estate market is population growth. There are still more people moving to Calgary than leaving, but growth has slowed.

What will mortgage rates do this year?

We saw mortgage rates rocket up in the last month of 2018 and into January 2019. Higher rates definitely put the breaks on the market. Luckily we then saw rates drop from their high of approximately four per cent down to a low of 2.49% in late summer/early fall.

We have seen rates increase again in the last six weeks, but more recently we've seen a few lenders start to drop rates slightly. Lenders are responding to the changes in the Bond Yield and we're not seeing significant decreases there, so we're not expecting fixed rates to drop to the same extent they did in 2019.

We are, however, experiencing an atypical rate environment. The gap between the best fixed-rate mortgages and the best variable-rate mortgages has fallen to multi-decade lows. Not bad for those who like the security of a fixed rate!

So why are variable rates and shorter term mortgages priced higher than a five-year fixed? Bond yields took a dive starting at the end of 2018, which eventually caused the huge rate drop I spoke of in 2019, causing the spread between fixed and variable rates to plunge. This is called an inverted yield cycle.

An inverted yield cycle, for those who want to know, is when long-term debt instruments have a lower yield than short-term debt instruments.

Inverted yield aside, they are forecasting low-growth and low-inflation for the Canadian economy in 2020. This means the bond market should remain stable and keep fixed rates in and around where they are today.

As for variable rates? We may see the Bank of Canada cut its overnight rate (the rate that Prime is based on) this year despite their seeming reluctance. However, without the huge discounts off Prime, variable rates will not be able to compete with fixed rates in the coming year.

And then there's the stress test

Do we expect changes to the stress test in 2020? Well my fingers are crossed!

I think the Liberal Government heard Canadians and lobby groups when they voiced their opinion over the stress test. There are elements - like the rate used for qualification - that are completely arbitrary. There were plenty of discussion about this leading up to the election.

The qualification rate is based on the Bank of Canada Benchmark rate which is the average of the big five banks posted rate. So the big banks are setting the qualifying rate? Simply put, yes.

I know what you're thinking and no, it doesn't make any sense to me either.

But we have some hope that the Government is willing to revisit the stress test in 2020. We anxiously await any announcements on this front and will share the news as soon as we hear anything.

I also have hope that they will bring back 30 year amortizations for insured mortgages. I think this is a longer shot, but hope nonetheless.