The sharp drop in new home construction in Calgary reported this week is actually good news for the city, according to a real estate expert.

The Canada Mortgage and Housing Corporation (CMHC) says housing starts were down 43 per cent, falling to 770 units last month from 1,354 in July 2014.

The city's seasonally adjusted annual rate plunged to 8,716 units in July from 19,146 the previous month due to a "pronounced decline in multi-family starts.

But Don Campbell, founding partner and senior analyst at the Real Estate Investment Network Ltd., says those numbers just show that home builders in Alberta respond to market conditions more quickly than they do in other parts of the country.

"They actually turn the tap off more quickly, which is good because we don't get that over-supply and therefore a giant drop in value and the supply outstrips the demand," he said.

Campbell said the bad news is that it's reflective of the slowing demand in new housing prices, as people come to believe the price of oil isn't going to rebound any time soon.

The credit ratings agency Moody's Investors Service said Thursday the current weakness in energy prices will likely stick around until 2018 at least.

"So now what we're starting to see is people starting to come to the reality that 12 months in, maybe this isn't a short run, 'maybe I'm going to have to adjust my price, maybe I'm going to have to, if I really want to sell my property, is lower the price', and that's what we haven't seen to this date."

But it might be starting to happen. The Teranet-National Bank house price index released this week showed house prices in Calgary dropped by 1.9 per cent in the past month.

Price drop predicted

"Here's our forecast, you're really going to start to see prices really start to move in a downward, on the average sale price, November, December, January, February," Campbell said.

"That's when the reality of this low oil prices … really will start hitting the seller side. And the sellers will start looking at their listings and going, 'if we want to sell, if we want to move, and we want to protect our capital, we have to sell now, therefore lowering our price.'"

But don't expect to see a rush to get out of Calgary's real estate market, Campbell said.

"Well frankly, this is not Calgary's first rodeo when it comes to low oil prices, so we haven't seen the panic that would have occurred in other cities," he said.

On the luxury end of the market, sales have been cooling off, Campbell said.

"But on that lower end of the market, the bottom third for instance, we're seeing the demand is still staying relatively strong, due to the rents being so high in the city," he said.