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.
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