Ottawa real estate news, discussion and inside broker information brought to you by Gord McCormick, Broker of Record and Dawn Davey, Broker 613-435-4692 firstname.lastname@example.org www.oasisrealtyottawa.com
Ottawa real estate continues to baffle just about everyone. While sales plunged again in April, (transactions were down 44% vs May 2019) average selling prices surged 11.2% for residential properties and 15.5% for condos. So what gives?
Listing inventory down by 50.4% The number of listings available dropped an incredible 50.4% from the same time a year ago. Compared to May 2015 (much slower market then) available listings are 81.4% lower…that represents over 8,000 fewer listings! No wonder buyers and their representatives are pulling their hair out and we are still seeing fairly significant multiple offer activity.
New listings also down significantly: New listings during the month were also down almost 50% vs last year, with 49.2% fewer residential properties being listed and 47.2% fewer condos, so there is no let-up in sight and no sign that listing activity is strengthening. Anecdotally, some realtors report having lots of listings ready to go but these sellers cannot find anything to buy.
Average prices up strongly for the month and year to date: The average residential property sold for $548,140 in May, an increase of 11.2% over last year. The average condo sold for $343,589 a 15.5% increase. On a year to date basis, the average residential selling price is up 13.8% and the average condo is up 17.8%.
Dark Forecast from CMHC and toughening of mortgage qualifying July 1. Contrast these statistics with the gloomy forecast by CMHC (the federal housing experts) who have predicted a 9-18% price drop (over the next 12-18 months) and you can see why many buyers must be confused that instead of a COVID-19 “discount”, prices continue to escalate on the back of dwindling supply.
CMHC warning: On top of their prediction of a 9-18% national price drop over the next 18 months, CMHC also announced several new measures restricting qualification for insured mortgages. (those with less than 20% down) These changes are fairly significant and one mortgage industry source has suggested that this will curtail buying power by between 9 and 13% for this category of homebuyer. This will likely seriously impact the first time home buyer market and as they account for something like 30 or 35% of sales, this could really hurt the market. If the supply of new first time buyers dried up, how can those who wish to move up to a larger home to so, if there are fewer buyers for their existing home. This bears close scrutiny in the months to come.
Expect a wild June: With the tightening of the CMHC qualifying rules, low cost of mortgages and low listing inventory levels, we can expect to see a wild month of June with lots of bidding wars and frantic activity, as many buyers seek to get a deal done prior to the July 1st cut-off date for the new CMHC rules. (Happy Canada Day, eh?)
Golf Analogy: “hit the ball where it lies” The best way to tackle this market is not to have too many pre-conceived notions about how the market should be functioning but rather playing to the market conditions. Just because some headlines are blurting doom and gloom, doesn’t mean those are correct, so play your shot according to the conditions you see at the time of sale or purchase and your Realtor is your best caddy for helping you make a good score! If market indicators shift then one can adapt to the changing conditions.
Gord McCormick, Broker of Record Dawn Davey, Broker Oasis Realty Brokerage 613-435-4692 www.oasisrealtyottawa.com
What is an “exclusive” listing anyway?
An “exclusive” listing is one which is not listed on MLS® but is being marketed by a single Realtor, who has a signed listing agreement from a seller, allowing/directing them to market the property. (by law, Realtors must have written instruction from a seller to market their property) In balanced markets or buyers markets, it is rarely used, as one of the many strengths of the MLS® system is to generate the widest possible exposure and this it does via an MLS® listing on the realtor.ca site and affiliated real estate websites in the realtor.ca ecosystem or network. By employing the “exclusive” listing, the listing sales person and brokerage are not posting the property on realtor.ca and instead are relying on only their own marketing efforts to find suitable buyers for the property. It has historically meant that other Realtors are not providing buyers for the property, so in essence, that listing is proprietary or exclusive to the listing agent and brokerage.
While there are some circumstances where the exclusive listing makes sense, it is impossible for a single agent or brokerage to generate the same interest or number of buyer prospects as can be generated by the other 3,000 sales people in our Board and the ubiquitous online power of realtor.ca and its affiliates.
So why are we seeing more exclusive listings in our current market? Our listing starved market has spawned the ever increasing use of holding back offers and bidding wars, due to the imbalance of supply and demand. This means that properties are selling very quickly and there is also a relatively limited level of listings available for real estate professionals to represent.
This brings a couple of challenges for Realtors who typically “list to exist”: The shelf life and personal marketing/advertising value of each listing to the Realtor is greatly diminished. It does not allow much time to be able to leverage that listing to gain ancillary prospects, who contact the listing agent and even if they don’t buy that particular property, could end up buying another or listing their current property with that Realtor. The exclusive or non MLS® listing, gives the listing agent the opportunity to leverage that property and try to gain a buyer to “double end” the sale or generate additional buyer or seller prospects. With high demand and use of social media and other advertising/market campaigns, the listing agent can generate additional footsteps or buyer traffic to their own “store” (so to speak)
Secondly, with many properties selling in only a few days, it is important to get as many people as possible exposed to the listed property prior to the offer date. The “exclusive” listing is most commonly used in this market, simply as a “pre-marketing” campaign and this is one sees so many of those “Coming Soon” sign toppers on For Sale signs. Listing agents publish the listing a week or two (sometimes more) ahead of the anticipated MLS®/realtor.ca launch date on their own websites and other marketing channels, including a large variety of online realtor groups that act as a portal for such properties. Savvy buyer agents stay on top of these on a daily basis.
Why exclusive is not really exclusive these days!
this pre-marketing of the non-MLS® listing is done under the contracted agreement called an “Exclusive” (as opposed to an MLS® ) listing but will in most cases contain provision for a payment to a co-operating brokerage and salesperson who brings a buyer to the property during the pre-marketing period. So while the type of listing falls in the “exclusive” category, it does not really preclude other Realtors from participating and bringing their buyer to the property. This can vary by listing, however, so buyers should have their buyer representatives contact the listing agent when they see a For Sale sign that shows the words “Exclusive Listing” &/or “Coming Soon” Note: Buyers please try to stop and get the address and name of the listing agent on these signs. We frequently see on our Realtor groups, postings that say something like: “my buyer saw a coming soon sign on Smyth Rd., does anyone know who is listing that property?
“The secret or off market listings” spiel: Creative buyer representatives are often spinning their services as being unique in having access to listings “not yet on the market” and use this as a ploy to generate buyer (and seller) leads. In a market where we have a dire shortage of listing inventory, it is understandable that some buyers will succumb to this type of mantra but most will recognize it is simply a slick sales pitch.
Buyers should always consider Exclusive listings, sellers not so much: A buyer should definitely go and see any property that meets their requirements (if allowed) but should be careful not to sign any representation agreement that binds them to that particular listing agent. Some agents may ask you to sign a “Buyer Representation Agreement” if you want to see this special property to which “only their buyers have access”.
Sellers should rarely consider accepting an offer via an exclusive listing unless it totally blows their minds. Why? Because until you have exposed the property to the complete market via an MLS®/realtor.ca listing, then you don’t really know what the true market value is and that seller could well be leaving “money on the table”. Granted there could be situations that warrant an exclusive listing and sale and whatever a seller and their listing agent agree is fair ball. However, a seller should be 100% sure they are getting full market value and not simply a quicker sale, double-ended sale or are being used to generate more clients for their listing agent.
Does a listing agent advertise their listings or vice versa?
A good way to tell if a Realtor advertises their listings or uses their listings to advertise themselves, is to look at previous or current listings and marketing materials and see whether the property or the listing agent is most prominent. In many cases, it is clear that the listing agent accomplishments, photo, logo, tag line etc. are more enhanced than the particular property being marketed. Does the listing agent leave out key information like address or selling price or interior photos? This can be a key clue, as it means the ad is intended to generate enquiries not simply sell the property.
Our approach: We like using the Exclusive listing and “Coming Soon” marketing as a pre-announcement (assuming our seller is in agreement) but only a relatively short time ahead of the MLS® launch. (perhaps a week ahead) During that pre-announcement period we can then advertise the property via our own channels and generate interest but we typically do not provide access to the property to any buyers during this time. Making the property available for showings with the MLS®/realtor.ca posting, is to us the most sensible way to provide equal access to all buyers and generate the maximum marketing opportunity for our sellers and thus generate the best market value possible. While it is nice if we generate additional prospects, it is a totally secondary issue, though we would not say this is true of all Realtors and we believe too many are trying to manipulate sellers for their own ancillary purposes by leveraging the listing and the exclusive listing process in a way that is not always in the best interest of the seller.
So sellers should be a little leery of the ulterior motives of a prospective listing agent pitching the Exclusive listing and buyers should likewise be very careful about signing up to see the exclusive listing, private listing, pocket listing or off market listing being touted by some agents.
Just released February results show a continuing and worsening trend in listing inventory shortages in Ottawa real estate. A relatively strong unit sales increase of 13.9% was recorded during February and average selling prices shot up over 20%, as a result of strong demand and bidding wars on properties.
Prices: Average prices for properties sold in February soared 21.1% for the average residential property to $563,694 and the average condo sale recorded was up 21.3% to $349,813.
“FOMO” creates Bidding Wars:
Once a bit of a rarity, this is pretty much the standard in the current limited inventory market. The Board press release quotes that 58% of properties sold in February were as a result of multiple offer/bidding war situations up from 32% a year ago.
While many do not like aspects of the “holding offers” bidding war process, it is really somewhat unavoidable, as one cannot really know what market value is going to be, unless all buyers have a chance to consider a new listing. This can only happen if at least a few days are set aside and provide for reasonable opportunity for buyers to visit the property, while accepting offers at a pre-specified day and time.
There is also the natural inclination for a seller to experience FOMO (fear-of-missing-out) if they do not wait for a reasonable number of buyers to tour the property and accept the first interested buyer offer. The only way to mitigate the potential of “maybe-I-listed-too-low” thinking, is to establish an offer date and hope to hear from a reasonable cross section of potential buyers.
Less than 1 month of expected sales in inventory:
Our current listing inventory levels are pretty anemic, with residential properties available for sale down 36.7% vs 2019. Condos are even worse, at 60.7% lower than last year.
This means we have less than one months’ anticipating sales on hand, so March would be a great time for someone to get their property listed. In a typical balanced market, we have something in the neighbourhood of two months anticipated sales on hand to start a month.
New listings levels:
no sign of help on the horizon. No sign of any significant bump in new listings coming on the market, either, as new listings for residential properties in February were down 9.9% compared to the previous year. Condo new listings were up slightly by 2.5% vs 2019 but given how few condos are available (60.7% below a year ago) this is not enough to help balance supply and demand.
Rentals an interesting part of the market:
The only listing inventory category where we see any growth is in the rental property category where listing inventory is up 31.3% vs last year and new listings during the month were also up 38.3%. This is an appropriate inventory level however, as Board members have assisted in almost 500 rentals in the first two months of the year an increase of approximately 40% from a year ago.
Whether this large increase is a result of Airbnb owners moving properties in to the long term rental market due to the pending new City rules, remains to be seen but is probably somewhat a factor.
Unless there is an unusual economic event or a seismic shift in Federal Government policy or makeup, it looks like we can expect more of the same from the Ottawa market this spring. In fact, we are right at the start of the peak spring market which gets revved up in March but really kicks off in April with the start of government and military moving season. While this creates a bump in new listings, sales also surge upwards by 50% from February to March and another 50% March to April.
Most will think that Realtors must be rejoicing in this sellers’ market and that it is just a matter of fast sales and big commissions. Must be “easy street”, right? In reality, I think we would find that the larger % of real estate professionals would be happy to see a more “balanced” market that features a more equal number of buyers and sellers. While it is true that listings sell quickly and for top dollar, there are many aspects to this market that cause Realtors heartburn, if not heartache.
Not a lot of listings to go around: At the end of January 2020, there were something like 2,100 residential listings posted on the Ottawa Real Estate Board. When you compare that to almost 3,100 members that means there are not a lot of listings to go around. Given the real estate mantra of “you list to exist”, this means many Realtors are scrambling for fewer listings and those listings sell quickly, so the marketing reach and prospect generation value of those listings is very limited. If fewer listings=fewer sales, then despite rising prices, there may be fewer commission dollars being earned out there by many Realtors.
Being on top of new listings and immediately available for showings: Finding a property for qualified buyers, always has its challenges but these are magnified 10 times in this sellers’ market environment. Buyer agents have to be really on their toes and alert to pending listings and being available to immediately get their buyers in to see new listings. The watchword in this market is “you snooze, you lose” and if a buyer misses a property and their perception is that it is their agents’ fault, the agent could potentially lose that buyer. This results in buyer agents doing a lot of “one-at-a-time” showings, whenever a new property of interest comes out on the market, which is pretty time consuming and may require a lengthy search period, particularly if buyers have a pretty tightly defined geographic, property or price point criteria.
Many showings and offer submissions: The supply/demand imbalance has resulted in multiple offers in 35-50% of listings, so buyers’ agents invest a lot of time in researching listings, doing showings and preparing offers on properties, only to lose out to other more aggressive buyers/agents. This can be very disheartening and frustrating for buyers.
No time to decide and hasty decision making: Buyers often get only one chance to view a property and after a 30 to 40 minute visit then make a critical decision on their largest purchase? This alone has pushed the numbers of conditional sales that fall through to double or more the regular rate. (easily 10% of conditional sales are falling through over the last year)
How do you figure out a price in this “crazy” market? Buyers and sellers count on Realtor expertise to establish appropriate list prices when selling and also what offer price (and terms) is necessary to be successful in submitting an offer on a listed price for a buyer. The listing side is somewhat easier, in that the market and collective buyers will determine the market value, so there is less pressure on the listing agent.
Realtors normally do extensive research on comparable properties sold but in this market, much of it becomes old news and even a sale a month ago, may no longer be very useful in providing guidance on what to offer for buyers on a current listing. If buyers are not successful over a period of time they may choose to blame their Realtor or they may refocus their search in a different geographical area or property type that is not as readily serviced by the buyer agent. Ie. New construction, out of town properties.
Temptation to go “all in” with a “no condition offer” Though highest price still generally rules, offer terms are always a critical component and a totally “clean” offer with few/nil conditions, is bound to surface in the most sought after listings. Most sellers don’t mind waiting for a week or so if the price offer is significantly better but many are happy to know that they accept the offer and their house is sold. This is why we see so many listings with offer dates then showing up as “sold firm”, the next day after offers are due.
We had a buyer last year, who actually offered $25K less than at least one other offer but our buyer won, since our offer had no conditions and a 30 day closing which was a critical factor for that particular seller. This place was a total fixer upper and not including an inspection clause, was a risk our experienced reno buyer was prepared to accept. Many buyers (and their agents) are just not able to do this and of course, the risks can be significant.
New construction sales are very strong: Though we don’t have proper stats on this, we believe there are a larger % of sales being done in new construction than normal right now. This is partially due to the limitations on resale listing inventory and also the fact that new construction options are plentiful and widespread. (though delivery dates may be getting pushed out by some builders)
Buyers actually start gaining equity, the day they sign their builder sales agreement, even though their possession date may be a year away. Those with existing homes to sell, are effectively “double dipping”, as both the new construction property “on order/to be built” is gaining in value, as is their existing property which they will only sell close to the possession date. With prices rising 8% or 9% in 2019 and 5% or 6% forecast for this year, these homeowner/buyers are earning a nice tax free equity bump on both properties.
A surprisingly small % of new construction sales involve Realtors (perhaps as low as 15 to 20%) where resale buyers are represented by Realtors at least 80% of the time. On top of that, builders do not offer the same level of Realtor compensation, as do MLS® listings, so Realtor paydays are much less when their buyers are buying a new construction property.
Builder compensation for Realtors tends to ebb and flow with the ups and downs of the market. In tough times, builders are mostly happy to see buyer agents with their buyers but in this market, most builders view Realtors as a cost factor to be minimized or eliminated.
Managing showings and multiple offers: Listings are getting a lot of attention, of course but this can put a load on a listing agent. Lots and lots of showings, phone calls, texts and emails from prospective buyers and also buyer representatives. There are strict rules to follow in properly and fairly managing offer processes and this takes a lot of organization and discipline on the part of the listing agent. While it is fun to provide an over list price offer to your seller, having to make the calls to other agents whose buyers were unsuccessful is not nearly as much fun.
Buyer agents can be very aggressive in representing their clients and this can result in some not so fun moments, too.
Managing “bully” offers (those submitted prior to offer date) and multiple offers can be challenging. Any time there are many losers and only one winner, frustration and tension can be high.
Overlapping showings: As a buyer representative, one is almost always stuck with overlapping showings with another buyer agent and their buyers in the property in the same time window. Normally, this is not too difficult to manage but with the volume of showings on many properties right now, it can be tough to get an appropriate amount of time to have a really good look at a property in private and communication between agent and buyer is constrained when others are also in the property.
So while our challenges in this market are vastly different and more positive than the other side of spectrum in a buyers’ market, it is not all easy days and big commissions for Realtors in this sellers’ market. Your Realtor will have adapted to these market conditions and help you navigate these oft choppy waters.
There are some important decisions to make with your listing broker to help you plan to accommodate winter showings, in this busy sellers’ market in 2019/2020. Here are just a few:
Initial showing period: How will you manage access to accommodate the largest number of buyers to your property? High demand and low listing inventory right now means properties are highly sought after and buyers will want to see the property as soon as possible after it is listed. 8 to 10 showings a day (or more!) in the first few days is not out of the question.
Some buyers are even vacating their properties for the first 4-7 days to provide for easiest access for buyers.
Are you holding offers? If you are holding offers back to a certain date, you will want to take this in to consideration also.
Do you want to schedule overlapping showings? Realtors normally book a 1 hour showing window. Do you want to allow for potentially overlapping showings where more one buyer and their agent may be in the property at the same time? This is a quite normal practice but if you want individual buyers to enjoy a private showing, you may request that your listing broker does not schedule overlapping showings.
What part does an open house or open houses play? Open Houses work for most properties and provide a scheduled time for buyers to visit. When trying to maximize or optimize the number of visitors in a short time frame, they can be very strategic. We often hold dual open houses on listing launch weekends, as this gives buyers two choices to visit plus it may help us, if a winter storm impacts a single open house day and time.
Do you continue showings after a conditional sale? Do you continue with buyer showings (and open houses) if you have signed an agreement for a conditional sale on the property? Sales cancellations are at an all-time high of 10-15% of conditional sales, so it may be a good idea to continue accepting showings and holding any already scheduled open house, just in case, the buyer financing does not come through or for some other reason the buyer chooses to opt out of the agreement.
Do you have any time-of-day restrictions you wish to add to your listing? In most cases, you want to make the property as accessible as possible for buyers but there are circumstances like children’s bedtimes, shift work schedules and other family matters may dictate a time window where showings cannot be accommodated. Discuss these with your listing broker.
What is your pet management plan for showings? Discuss with your broker, how best to manage pets to accommodate showings.
Here is an update to a previous post with specific tips for prepping for buyer visitors in winter:
Here is a checklist to things to consider when prepping for winter showings:
Please shovel the driveway, walkway, front porch, decks and patios and make sure it is both accessible and safe for visitors. Ditto for snow or ice on roofs, eaves, overhangs or garages. Also, please make sure all windows and patio doors are frost and ice free and can be opened by visitors, if they wish.
check to make sure the house numbers are visible as is the real estate “For Sale” sign and not obscured by snow, ice or snowbanks.
For evening showings, please leave an outdoor light on so it is quick and easy to access the lockbox and then open the front door.
Leaving all house lights on, saves time and shows your home to its best. Best to turn off the security system for scheduled showings also.
Please make sure there are ample floor mats and boot trays to accommodate visitor footwear, especially for Open Houses.
Please keep floors dry and clean! Few things are more irritating or distracting than walking through a puddle or having to walk through a dirty basement.
Keep a moderate temp in the 19-20 C range (65-68F). Many vacant properties are like meat lockers temperature wise and this does nothing for a buyer trying to “warm up “to a property, particularly when walking through in their sock/stocking feet on a cold floor. Visitors are wearing coats at this time of year, so please don’t make it too warm, either.
Keep curtains and blinds open to admit as much natural light as possible, this is especially important in our low light winter conditions. Light, bright homes show better and buyers are very much interested in this.
Have a pet management plan which includes daily removal of any pet droppings that are emerging through the snow and ensure cat litter boxes and the area around them are cleaned regularly.
Check for cooking, pet or other odours (hockey equipment?) and ventilate the home using your HRV, as home odours are more noticeable during the winter when houses (particularly newer more air tight ones) do not get as much fresh air from opening windows and doors. Moisture control is also important, as excess condensation on windows can be a worrying sign for buyers.
Minimize distractions: we don’t need cooking smells, music, vanilla on the stove, excessive air or carpet deodorant, personal photos, etc.
Leave out some good colour photos of what the house and yard look like in the summer time, this really helps a buyer “see” the property.
Have a plan for any fireplace. Wood burning fireplaces don’t need to be lit but should be clean and with wood or fire log ready to light. Gas fireplaces should also be clean and ready to turn on with directions on how to do so but resist the urge to leave the gas fireplace “on” or a wood burning fire going.
No smoking…even in the garage!14.don’t run dishwasher or laundry when showings are anticipated
Leave out copies of any pertinent neighbourhood information, your property survey or other items that may be potentially of interest for buyers or their representatives.
Don’t be afraid to post a note about turning off lights or not locking inside garage door.
We would love to share our other thoughts on how to get your property sold, so feel free to give us a call at 613-435-4692 or email@example.com , if you are not already working with another real estate professional.
The Ottawa Real Estate Board (OREB) results for November show another strong sales month, despite the early onset of wintry conditions. Unit sales and average home prices both approached double digit gains, compared to November 2018. The market shows no trends of flattening out, except for the usual seasonal fluctuations.
Key average price milestones reached this year: The average detached home price has sold this year for $510,975, an increase of 8.4% or $39,693, breaching the $500K mark for the first time.
The average residential row townhome has sold for $408,905, an increase of 9.8% or $36,620, topping $400K.
The average residential semi-detached home has sold for $489,656 an increase of 9.5%. or $42,447
The average condo sold this year has topped $300,000, coming in with a 9.1% price increase to 303,817 which is up $25,459 from a year ago. Apartment condos lead the way with an average price of $324,459 up 5.7% while row units and stacked condos also showing similar $ price gains at $268,613 and $274,860 respectively.
Listing inventory continues to languish: The number of new listings in November are pretty flat with a year ago, so while they are not getting any worse, they are not improving, either. This means our supply/demand imbalance should continue for the short term, at least-given the strong sales demand.
At the end of November, our residential listing inventory was 22.6% lower than last year at the same time and condo listing inventory was 43.9% lower.
About the only listing category that was higher was the number of rentals that are MLS® listed, which are up 53.9% vs 2018. Year to date rentals done via MLS® are basically flat vs last year, so that category is not seeing the same growth as the resale market.
City policy on short term rentals may put more inventory in the market:
Though there will no doubt be ongoing appeal action via OMB or other legal avenues, there could be a slight bump in available listing inventory and long term rental properties, from investors losing their ability to rent their (non resident occupied) properties via Airbnb or VRBO. Numbers are not readily available of how many housing units fall in this category but this could have help the condo and urban market inventory where most of the short term rental properties are located. Airbnb totalled some 4,600 listings in Ottawa over the last 12 months, so the number of investors involved might easily be 500-1,000 (or more) which would be welcome in the long term rental or resale markets. Stay tuned!
New home construction: New home sales continue to flourish and with the upward trajectory in the market, many new home buyers feel they are kind of “doubling down”, in that both their current home and the one “on order” or “to be built” are appreciating in price, while they wait for the new home possession which typically is 8-12 months or more, down the road.
Cost of waiting makes buying even more expensive: Strong markets like this make it tough on all buyers, particularly first time buyers and those that are “fence sitters”, who are considering a move but don’t really have a compelling reason to do so, until they find the “right” property. The upward price trajectory, however, makes the cost of waiting potentially significant. For example, even if current prices only increase by 6% over the next months (a Re/Max projection for Ottawa), the average prices overall could look something like this:
The average detached single home will jump to $541,633 and a further hike of $30,000+ over current prices.
The average two storey single detached home could top $600,000 next year, with a 6% hike from this years’ average price of $567,456.
The average townhome would jump to $433,439 up $25,534
The average condo would increase to $322,026 overall and the average apartment condo to $343,926, each up almost $20K.
This means more down payment needed to qualify for appropriate financing, more to generate 20%+ down payment for investment properties, higher land transfer and mortgage insurance costs and a longer period to pay off mortgages taken out against these purchases.
These also represent only “average” price increases and higher priced properties could easily be going for $50-$100K more in the immediately foreseeable future, especially, if the current inventory shortage continues and the market generates another 8-10% price rise.