Two weeks ago we reported that "the next victim of crashing oil prices has been identified: housing", particularly non-residential construction among the energy producing regions, where the capex collapse reality is already being felt far and wide. Eventually, once the overall economy of these same oil producing regions is impacted sufficiently, the pain would spread to residential housing as well, as the energy boom that kept the local economies humming for years, turns to a bust. But while the US patiently, and nervously, awaits the outcome of the crude crash, one place is already starting to suffer the consequences of the price collapse is Canada's energy Mecca, Calgary, where as the Financial Post reports, "the stage has been set for a massive correction in the oilpatch."

To be sure, just like with US production, nobody is quite ready to pull the plug just yet and indeed, "the price correction hasn’t happened"... yet. "The average price of a home sold in January was $460,933, down 0.5% from a year ago. The median sale price climbed 1.1% from a year ago to $417,500."

But it's just a matter of time, and as FP adds, "the stage has been set for a massive correction in the oilpatch. New listings jumped 37% from a year ago while the overall inventory was up 113.4% during the same period. A year ago, based on market conditions at the time, there was 1.52 months of supply in the system. At the end of last month, that number was 5.29 months."

Doug Porter, chief economist with Bank of Montreal, noted Calgary saw the largest percentage increase in prices, among major cities, in 2014.

The question is when does the momentum shift, and when do all the pent up "sellers on the sidelines" enter the market in hopes of being the one who sells first (and thus best). That moments is about to arrive: “by some measures it was the hottest and the tightest market in Canada,” said Mr. Porter. “The change is beyond dramatic and about as quick as you can say oil prices plunged, we are going to see this go from a sellers’ market to a buyers’ market.”

How bad will it be? Mr. Porter says nowhere near as bad as 2008. “We had a global recession. It won’t get that bad, but we will see a correction in Calgary and probably Edmonton as well,” adding Alberta’s capital could face even more difficult circumstances if the provincial government starts “swinging the axe” – cutting jobs – which would make the city even more vulnerable than Calgary.

For local listing managers, the outcome will be bittersweet: on one hand, once the selling deluge begins, the amount of commissions will soar. However, the outcome will be a devastated real estate market, and the brief surge in real estate revenues will be followed by a long, protracted recession in domestic spending. Unless, of course, crude prices explode right over $100 on short notice.

Elton Ash, executive vice-president of Re/Max of Western Canada, who has seen a few boom and busts in his decades in the business, says it’s too early to tell how bad this market collapse will be for the oilpatch. “So much is dependent on how long these low oil prices stick around,” he said, adding move-up buyers have pulled the plug on decisions to move immediately. “Information from our offices in Calgary … They are staying put.” At the same time, he says some people are listing to test the waters to see what price they can get if they cash out. “It’s human nature. People become concerned. There have been job losses. We’ve seen it,” said Mr. Ash. “Some people want to sell now and hedge their bet.” Corinne Lyall, the Calgary Real Estate Board’s president, appeared to be preparing people for the worst when she warned in a statement that sellers would have to have “appropriate expectations” in this market. “They need to consider their property type, the competition they may be facing in their community, their reasons for selling and, of course, when they ultimately need their property to be sold,” she said. Demand was already beginning to wane in the city as Calgary sales fell 38.9% in January from a year earlier. “Sales are also down to levels we have not seen in a long time and a lot of that is due to consumer confidence,” CREB chief economist Ann-Marie Lurie warned. “I wouldn’t say there is panic because people would be fire-selling their houses.”

It all comes down to expectations: if sellers expect that oil will rebound quickly, they will pull their house from the market. On the other hand, buyers may do the same, in expectation of crude plunging right back down. Ultimately, it will be a question of housing vs cash flow need. And yes, if and when the crude flush takes place, as it surely will because Saudi Arabia means business when it says it wants to crush shale and the marginal US prodcuers, there will be a housing bloodbath, first in Calgary, then in Texas, North Dakota, and the rest of the shale states, and eventually, everywhere else. Because whenever someone tells you something is "unambiguously good" it never is.