Are we seeing a market shift in Ottawa?

Are these key indicators suggesting a market shift in Ottawa real estate?

Will we look back at the fall of 2020 and say:  “yes, we can see the beginning of the market change in the results posted in September and October?

New listings surge in October:
For the 3rd straight month, new listings continue to increase significantly, compared to a year ago.  Fortunately, unit sales increases have mostly absorbed these new listings and our sellers’ market continues, as does historically strong price increases.

New listings for residential properties were up 47.9% vs last year in the month of October, though were slightly less than the number of new listings recorded in September, so the typical seasonal easing pattern seems to be taking place.  New listings were up 18.4% in August and 31.8% in September.

Condos on the other hand, registered an increase of 69.8% in new listings in October after posting 45.3% and 41.4% gains in the previous two months.

Listing inventory at month end:
The total of residential listings available for sale is 45.7% lower than a year ago and represents approximately only one month of expected sales, which is still very low.  A more typical balanced market would have us with something like 2.5 to 3.5 months of expected sales on hand.

The number of condo units available to start November are 15.4% higher than a year ago, and equate to approximately 1.5 to 2 months of expected sales.

The most surprising stat of all:
With all the recent history of bidding wars and rapidly escalating prices, one would expect that we have had a runway year in total sales…. but guess what?  Though we have registered some strong unit sales increases in the last couple of months, the year to date numbers may surprise many.  The total number of residential sales sold* via MLS® shows that we are dead even with the same point in 2019.  The number of condos sold year-to-date through October is 5% lower than last year.

Why is this?

We had a major sales drop in two of our 3 biggest sales months in April (down 55%) and May (down 44%) at the start of the pandemic and have gradually made up that shortfall.

Also, we believe that a slightly larger number of properties are being sold “off market” by exclusive listings and other private or FSBO, sales that do not get captured in MLS™® stats published by the Ottawa Real Estate Board. (OREB)  While these types of transactions have always occurred, we believe the % may have ticked up, due to the scarcity of listings and the desire for some sellers to avoid the volume of visitors generated by an MLS® listing, during the pandemic.

Sales to new listing ratio still indicate sellers’ market:
This ratio is used to roughly approximate the overall market, as being either a “sellers’, “buyers’ or “balanced” market.

A sellers’ market is said to be occurring when the ratio exceeds 60%.

If the ratio is between 40% and 60%, we are experiencing a “balanced” market with a roughly equal number of buyers and sellers.

If the ratio is below 40%, then we are in a buyers’ market, with more sellers than buyers.

Our current ratio based on October 2020 sales in Ottawa shows the following:

Residential sales: 85.9% sales to new listings

Condos: 67.9%

So both are still showing sellers’ market conditions, though condos are slipping closer to a more balanced market, which favours neither buyers nor sellers.

What’s ahead?
Sales typically start to ease in mid-November, as our seasonal pattern shows that December and January are the two slowest sales months of the year…but it’s 2020…so who knows?  We still have a strong sellers’ market for residential properties, while condo sales seem to be trending towards a more balanced market.  Both buyers and sellers will want to keep a close on market trends and new construction buyers, especially will want to assess their risk tolerance for purchases that will not conclude until late 2021 or even in to 2022.

Are prices going to drop?

The economic fallout from the pandemic, has yet to drastically intervene in the real estate market (though there are signs in the condo market, especially in Toronto) , other than to drive mortgage rates down, which has only further fuelled demand.  One has to believe our significant price increase percentages will have to slow eventually, as we are on a pace of home price inflation not seen since 1983.  Year to date average prices are up 19.4% for both residential properties and condos this year.

Keeping a close eye on the supply and demand factors (sales, new listings, overall listing inventory) will help gauge whether we are seeing a distinct market trend which may balance supply and moderate price increases or in the extreme case, where supply grows significantly and outstrips demand which then results in downward or at least flattening of prices.

Our market tends to be buffered from the larger ups and downs in prices, experienced by some other cities and if fact, we have only seen an annual price decrease 5 times since 1956 and the largest of those was only 4.3%, way back in 1961 and the other years were in the 1-2% range.

Make sure to check all your assumptions with up to date market data, before completing  a buying or selling plan and your Realtor is your best source for both data and front line day to day experience in the market.

Gord McCormick, Broker of Record
Dawn Davey, Broker
Oasis Realty Brokerage
613-435-4692 or mobile 613-371-9691
oasisrealty@rogers.com
www.oasisrealtyottawa.com
https://www.facebook.com/oasisrealtyottawa
@OasisrealtyOTT

http://blog.oasisrealtyottawacom/

Ottawa average residential selling price approaches $600,000 during August

residential average sale price jumps 22%…how long can this continue?

Ottawa’s market continued red hot through August with the average selling price of residential properties during the month rising 22% from a year ago to $592,548.  Residential sales recorded a 21.8% increase in transactions, while condo sales grew at just over 2% but recorded at 24% increase in average selling price to $383,640.

Some good news on new listings….but…
We had our strongest month of the year for new residential listings which grew 18.6% vs 2019 but alas, residential sales growth pretty well absorbed all those new listings.
New condo listings for the month were also up 41.4% for the month.

Month end inventory still scarce for buyers:
At month end, we still have a huge deficit with residential properties down 49.8% vs August 2019 and the number of condos available for sale down 17.6%.  Though each grew slightly from the figures posted at the end of July this year.
The only significantly growing month end inventory area is rentals which were up 31.6% vs a year ago.

Key performance indicator:  sales to new listings ratio
This metric compares the number of new listings during the month to sales.  In August 2020 this ratio came in at a super high 83.2% for residential properties and 72.5% for condos.  A balanced market would see this ratio in the 40-60% range.  By comparison, the Toronto Real Estate Board, reported a sales to new listings ratio of 58% and with a surge of new listings of 56.8%.

Do I buy? Do I sell?  Do I wait?
Tough conundrum on many levels for those considering a move in real estate.  Will the economy worsen?  What factors am I risking by buying or not?  Will prices ease, if the economy softens or will government spending and support programs keep the economy rolling and with cheap mortgage money and scarce inventory of housing, the average house has been going up some $20,000 per quarter in 2020.  Am I a fool to miss out on this market?

Aug 2017 vs Aug 2020 pricing snapshot:
Can you believe that the average residential selling price in Ottawa only 3 years ago during August was $420,337.  This means average selling prices have grown 40.9% over just 3 years when comparing this August 2017 figure to our current month which saw an average residential selling price of $592,548.

Still room to grow?
This seems super high by Ottawa standards but when one compares it to Toronto at $951,404 and Vancouver at $1,038,700, our prices still seem to offer pretty good value.  Our blended average price, once condos are added is $542,872 during August

 

No one has a crystal ball?
We all wish we could accurately predict where this market is headed and it could certainly take some widely divergent directions.  While one intuitively, cannot see these kind of price increases continuing, our market is still growing and our price levels are still significantly lower than major centres.

Taxes:

We do not yet have the Municipal Land Transfer Tax (MLTT) or the Foreign Buyer Tax or vacant property tax, so that makes our market attractive for foreign investors.  There is some concern that immigration may stall with COVID and limited housing requirements for new Canadians or those with visas coming to study or work here.
Will the Federal Government follow through with the rumoured capital gains tax on (some?) residential home sales?

New government in town?
Government action (or lack thereof) can have a profound effect on housing and our Ottawa market is even more reliant on government activity than other markets.  If the current Federal government minority continues with its social aggressive benefit plans and other spending, our market should continue to rock and roll.  We believe that for every government headcount added, at least one more job or full time equivalent is added in the private sector.  Should a sea change on spending occur at the Federal level due to political pressure or a change in government, then one might expect some kind of budget tightening exercise which could impact Federal headcount and program funds.  Every headcount lost also has a ripple effect in the Ottawa economy, too and further dampen market outlook.

On the surface, the current Liberal-NDP coalition seems likely to likely to continue which probably means good news for Ottawa real estate.  But as the 1990’s demonstrated in spades, even Liberal governments have to wield a budget axe, if sufficient political and market pressure is applied and that is another scenario we would prefer not to encounter again.

Even if our market plateaus or flattens, Ottawa is still a very safe and reliable real estate market.  Prices tend to be “sticky” (i.e they don’t drop that much, regardless of market conditions)  What tends to happen is that the whole market simply stagnates, demand dries up and the number of sales transactions drop, should economic or job uncertainties appear to be greater or banks or governments tighten lending practices.

Buyers and sellers will have to assess a lot of factors in making their decisions and Realtors are here to help with the most up to date statistics that can help make better long term decisions.  The key stats to follow are the sales to new listings ratio and the overall listing inventory, as these will often signal a swing in market supply and demand factors.

Gord McCormick, Broker of Record
Dawn Davey, Broker
Oasis Realty Brokerage 
613-435-4692 or 613-371-9691
 oasisrealty@rogers.com