If you are a homeowner who has spent a lot of time thinking “I could have listed” or “I should have sold” and you’re feeling like you missed the epic real estate boom, realtor Taylor Bennett has a short pep-talk.
Bennett reassures homeowners here they can feel good about their real estate values.
“Ottawa is one of the most stable and predictable real estate markets in North America. Going back to the 1950s, the home prices in Ottawa increased by 6.75 per cent annually,” explains Bennett.
Instead of comparing 2022 values to 2020, Bennett suggests going back four years to look at the incredible growth since 2018.
And his main quote that bears repeating:
“While sales are down compared to last year, it’s important to put the last year into context – 2021 was the best year for real estate, setting both sales and price records. So, a comparison to the best year on record is like comparing an NHL-ers season stats to Wayne Gretzky’s best year. It’s not going to look very successful. But when you pull back and take a broader look, we are currently on the same pace as we were in 2019 – the third best year on record.”
Taylor Bennett of Bennett Property Shop Realty, co-hosts the Bennett Real Estate and Wealth Show on Newstalk 580 CFRA and is a regular contributor on CTV Ottawa’s News at Noon.
“I thought we would give viewers a different perspective of the market and go back to 2020 and 2018 to see how quickly things have changed in four years,” says Bennett.
“The Ottawa real estate market is finally seeing signs of going back to ‘old normal’ – more inventory, fewer sales, and stable prices. But after over two years of record-setting prices and sales, where each month seemed to be better than the last, it’s easy to forget how much the market has changed.”
TAYLOR BENNETT COMPARES JUNE OF 2022 TO JUNE OF 2018:
1. Pricing Strategy (residential)
“Residential homes have grown by over $300,000 in a four year window and almost $200,000 in two years,” Bennet says.
“One of the big reasons for this was the competitive multiple offer scenarios that were commonplace. These scenarios forced buyers to spend to the maximum of their budgets, whereas buyers in previous years could find options in the middle of their budgets. Additionally, the historically-low interest rates allowed for buyers’ maximum budgets to be higher than in years past, resulting in the record-setting prices we have seen over the last two-plus years.”
2. Pricing Strategy (condominium)
“The price for condominiums also grew substantially during the last four years, seeing the price increase by over $140,000 during that time,” Bennet explains. “And just like their residential counterparts, buyers were having to compete against multiple buyers – often having to outspend their competition to win. While the number of homes selling in multiple offers has drastically decreased – THAT is the norm. In 2018, and in many other years prior, most homes sold in one buyer vs one seller scenarios, and the sale prices typically ended up within one to two per cent of the list price – only since 2019, did we see the average sale price surpass the average list price.”
3. Sales & Inventory (residential & condo)
“One of the big factors contributing to the return to the ‘old normal’ is the increase in inventory – with more options for buyers to consider, not only are they able to shop around and find the best home, but they can now work in a condition or two into their offers, giving buyers more time to finalize their purchase,” says Bennett.
“Yet, even still, well-priced homes are still selling quickly – under 1 month, on average. Four years ago homes almost took 2 months to sell and inventory levels were almost double what they are today.”
4. Growth in Context
“Ottawa is one of the most stable and predictable real estate markets in North America. Going back to the 1950s, the home prices in Ottawa increased by 6.75% annually, and seldom did the market grow below two per cent or above ten per cent,” Bennet says.
“But, since 2019, we have seen the average sale price increase by over 50 per cent- or over 16 per cent per year, almost three times the average annual rate! With prices stabilizing we are seeing fewer record-setting sale prices, but compared to where home prices would normally be today, homeowners can still sell for almost $200,000 more than expected – well beyond any optimistic projections from 2018.”
Toronto home prices rose in September, but sluggish sales and a surge of new listings could be tilting the market back in favour of buyers.
Monthly data released by the Toronto Regional Real Estate Board (TRREB) on Oct. 4 showed the average price was up roughly three per cent month-over-month to $1,119,428 in September. That was also about three per cent higher than the same month a year ago.
Home sales, however, declined sharply from August. Sales registered through TRREB’s MLS System were down 12 per cent from the previous month and 7.1 per cent in comparison to September 2022. The decline in year-over-year sales was especially evident in semi-detached houses and townhouses.
At the same time, new listings surged. In September, 16,258 new listings came on the market, a 32 per cent increase from August and 44.1 per cent higher than a year ago.
That left the sales to new listings ratio (SNLR) for September at 28.6 per cent, firmly in buyers’ market territory. The Canadian Real Estate Association (CREA) has said that an SNLR between 40 per cent and 60 per cent is indicative of a balanced market. Below 40 per cent suggests buyers have an advantage, while above 60 per cent points to a sellers’ market.
The SNLR for the Toronto region covered by TRREB had been above 60 per cent as recently as March and April of this year, but has been trending down since then. In August, it stood at approximately 43 per cent, according to calculations based on TRREB data.
TRREB’s chief market analyst, Jason Mercer, suggested buyers might see some increased leverage as a result of the shift.
“GTA home selling prices remain above the trough experienced early in the first quarter of 2023. However, we did experience more balanced market in the summer and early fall, with listings increasing noticeably relative to sales,” Mercer said in the report. “This suggests that some buyers may benefit from more negotiating power, at least in the short term. This could help offset the impact of high borrowing costs.”
TRREB president Paul Baron said the market outlooks in the short and medium terms were very different, and that lagging demand should turn around by the middle of next year.
“In the short term, the consensus view is that borrowing costs will remain elevated until mid-2024, after which they will start to trend lower,” Baron said. “This suggests that we should start to see a marked uptick in demand for ownership housing in the second half of next year, as lower rates and record population growth spur an increase in buyers.”
The belief that the Bank of Canada has concluded its rate hikes was echoed in an Oct. 4 report from Toronto-Dominion Bank economist Rishi Sondhi.
“We currently assume that the Bank of Canada is finished raising rates and will start to take the policy rate lower beginning in the second quarter of next year,” Sondhi said in the report.
In the meantime, the bank’s projection indicates a more significant and prolonged decline in Canadian home sales and average prices than previously anticipated in their June forecast.
“Indeed, both home sales and prices are likely to record declines in the final quarter of this year and the early part of 2024,” Sondhi said in the report. “By 2024 Q1, we expect that sales and prices will have fallen by eight per cent and six per cent, respectively, from their 2023 Q2 levels. These projected pullbacks pale in comparison to the 40 per cent and 20 per cent declines in sales and prices that took place from 2022 Q1 to 2023 Q1 amid aggressive Bank of Canada rate hikes.”
Cameron Forbes, chief operating officer at Remax Realtron Realty Inc. in Thornhill, Ont., said that while an abundance of listings can reduce buyer competition, it doesn’t necessarily lead to large price adjustments or a significant decrease in prices.
“In certain markets, where there is more supply that’s coming to the market, certainly prices are not going up, maybe declining a little bit. I don’t see any sort of big adjustment in prices and the reason for that is that people who own homes will not sell at what they perceive to be a lower market price unless they have to.”
But Toronto realtor Cailey Heaps believes the balance has indeed shifted in favour of buyers.
“Buyers definitely have more power than they’ve had in quite some time,” Heaps said. “However, it is dependent on price point and geography because in the market there’s little micro markets and micro economies within the Toronto real estate market.”
TORONTO, Oct 4 (Reuters) – Greater Toronto Area (GTA) home prices rose in September for the first time in four months, as the Bank of Canada paused its interest rate hiking campaign, but the level of sales fell to the lowest since January.
The average price of a GTA home rose 3.4% in September from August to C$1,119,428 ($816,623.87), the first increase since May, Toronto Regional Real Estate Board (TRREB) data showed on Wednesday.
On a year-over-year basis, home prices were up 3%. Still, they have fallen 16.1% from a peak hit in February 2022.
The Canadian central bank left its benchmark rate on hold at a 22-year high of 5% last month after hiking in June and July.
“GTA home selling prices remain above the trough experienced early in the first quarter of 2023,” Jason Mercer, TRREB chief market analyst, said in a statement.
“However, we did experience a more balanced market in the summer and early fall, with listings increasing noticeably relative to sales. This suggests that some buyers may benefit from more negotiating power, at least in the short term.”
New listings jumped 44.1% year-over-year, while home sales were down 7.1%. On a month-over-month basis, sales fell 12.3% to 4,642 homes.
($1 = 1.3708 Canadian dollars)
Reporting by Fergal Smith, editing by Deepa Babington
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