SFH Market's Worst Nightmare/Enemy: the Condo Market

The simple physics of building implosion/demolition. Place highly powerful explosive charges to knock out supporting infrastructure and allow the building to cave in on itself.

One can argue that the condo market and the sfh market are two different markets but one must also make the realization that the two have a relationship. The condo market can be portrayed as supporting the sfh market. Does anyone notice how all of the realtor authored blogs avoid talking about the condo market?

Could the collapsing condo market in Calgary bring down the sfh market?

Remember that the condo market is seen as the easiest entry point into real estate especially when price hyperinflation occurs such as they did in Calgary in the last couple of years.

With the announcement of construction being halted on the Gateway Midtown towers yesterday, it indicates that there is substantial trouble in the condo market in Calgary. Right now there is severely low demand for condo units and there will be soon a enormous influx of product coming onto the market. Inner city fundamentals are out of touch with reality.

With a severe reduction in demand and record high inventories, prices will have to come way down.

As Radley77 has beautifully composed graphs comparing the two markets and levels of construction, we can see that the quantity of multi-family units continues to increase outstripping single family units.

For the bulls out there who remain, seeing the quantity of condos being built in the future should be concerning because the element of inventory will not be manageable.

I believe that there is a relationship between the condo market and the sfh market.

If inventories continue to skyrocket, prices will come down as they have now. Because condos have a price point much lower than a sfh, they will become more attractive to the first time home buyer looking to enter into the real estate market.
Once that buyer is removed from the pool of buyers then the sfh inventory will be stagnant and will continue to increase if prices in that market are not lowered (in accordance) to attract buyers.

Once the new mortgage rules come into effect in October, the pool of buyers will be reduced even more.

The reality may be that the condo market may be the first go, followed then shortly by the sfh market.