Oil is a major economic influence in Calgary, so the recent price drop is worrying. While we believe there may be some immediate term impact on the local housing market in the form of slowed price appreciation, there would need to be prolonged low oil prices for any spillover into the housing market to be significant.

As we’ve seen this month, large companies in the oil sector, like Suncor, are already starting to announce layoffs. This is pretty standard when the price of oil drops: projects get cancelled to save money in the short-term. The only way for these companies to realize any savings is to cancel contracts and layoff employees working on these projects.

Insecurity in the oil sector will also temper income growth. Raises and bonuses are not likely to be as forthcoming as they were in the past few years.

Uncertainty, and to some degree instability, in the labour market affects not only those who live in the province, but those that were considering relocating to the “land of opportunity”. This means we will see less inmigration this year – fewer people from other provinces and countries relocating to Alberta.

So we’ve determined there will be some job cuts and the longer oil prices remain low, the more significant the job cuts will be. So how will this impact the housing market?

First, housing starts will slow. Builders and developers aren’t in the business to build homes that aren’t going to sell or will sell at a lower than expected price. This won’t be immediate because many homes and condos that are under construction already have purchase contracts in place, but it will temper and, again, the longer prices stay low, the more dramatic the change will be.

Second, move-up demand will also slow. Those that are in the oil sector won’t want to take on a larger mortgage if their job security is at risk. Also, even if homeowners aren’t worried about their job security, some may be concerned about buying a home at the height of the market so they are likely to take a “wait and see” attitude towards moving up.

A slow in housing starts and those waiting to see how this scenario plays out will certainly impact inventory. 2014 was a year of relatively low inventory levels and we’re not expecting that to change significantly for 2015.

Although economists wish they had a crystal ball, we have to settle for their best guesses and insights to forecast how things may turn out—and here there is some disagreement.

When talking just GDP for the Alberta region, forecasts range from 2.75% positive growth change to 0.5% negative change. All major banks in the region, ATB, BMO, CIBC RBC and TD, weighing in on the positive side and only the Conference Board of Canada predicting negative GDP growth.

Of course it’s impossible to say for sure if the Conference Board’s forecast is correct—or if any of these forecasts are correct. And it’s normal for there to be some varying opinions about how far low oil prices will drag down the economy. But while economists don’t always agree, they are all in unison about one thing: Alberta’s economy is set to slow significantly in 2015.

All that being said, this is actually a great market for buying real estate! Whether you’re a real estate investor or looking for your dream home, you’ll find more product on the market which will keep prices from increasing at the same rate it did in 2014. We’re not expecting to see losses in value in most markets, but we’ll see better value for money. CREB, for one, is forecasting a price increase of 1.6% for 2015 compared to the 5.3% we saw in 2014.

The last year has proven challenging for buyers to find quality product and I, for one, am happy to see that being more balanced for 2015.

Remember too that real estate is a long term investment. It has been seven years since the last recession so a slow down in the market was inevitable. Despite the dip we saw in values in 2008/2009, 2014 showed an average of 8% price increase in the City of Calgary over 2007, the last peak in the market.

For the record, we aren’t expecting another 2008. That was a global financial crisis, this is simply low oil prices. Yes, oil is big industry in Alberta, but it’s only one industry and the low prices, as we’ve seen in the past, won’t last forever.

In addition, mortgage rates are at rock bottom. Getting into the market now, you’re paying a historically low amount of interest so home ownership is cheaper!

So to conclude, the sky is not falling. We will see some slowing of income growth for the province but we’re also going to see, and have already seen, an increase in inventory of homes on the market so this will lead to moderation in prices – the perfect time to get into the market or move up!