In a more normal market a 30-40% increase in new listings would be cause for concern. But not the case with our wild and crazy market that pumped out unit sales increases of 47% for residential properties and 65% for condos, during March. This obliterated the new listing surge and pushed already soaring prices in to the stratosphere: The average residential property sold for $758,802 during March up 35% vs last year and the average condo sold for $437,046, up 18%.
Unfortunately, 80% of listings sold at above listing price during the month (vs 60% a year ago) We say, “unfortunately” because this reflects the fact that the market has proven that the lowest listing price generates the greatest buyer interest and number of offers, therefore yielding a higher sales price.
Time and time again, we note listings where a cursory look at recent sales for reference properties show a pattern of selling in the high $500’s, (for example) yet the new listing comes out at $450 or $499K…what’s the point? Why not list at $550 or $575K? …because if one does that, the market has shown that you don’t get as many showings or offers, nor a healthily higher than list price result. So while it is very unkind to buyers, (who will always believe they have a chance) if it is in the sellers’ best interest, then that is what many listing agents feel compelled to do. There is a strong sentiment among Realtors, however, that properties can still be properly priced and we have seen instances of online “price shaming” where some Realtors call out another for an obviously way underpriced listing.
Sellers: do your best to temper expectations
Side note: just did a quick survey of 500+ residential sales over the last 7 days. The selling price to listing price was a healthy 111.3% and properties sold almost $60K higher than the list price…. but how much of this $60K overage is accounted for by the underpricing practice noted above?
There is a bit of a trap here for sellers: if you believe you have priced your property for what you really hope to achieve and is reasonable then don’t expect that you will still get the $50-$75K-$100K over list price result (or more!) that you read about daily. Not everything is selling $100K or $200K or $400K above list. Getting a full list price result, with a strong buyer and favourable conditions (usually, none at all) should still be considered a fully satisfactory result. Anything more is a bonus and expectations should not be that every listing results in a lottery win. If something sells for way too much over list, there is the potential for appraisal issues or buyer financing issues.
The listing cupboard is bare…especially for residential property:
At the end of March, our residential listing inventory was only 868 properties, down 46.7% from 2020, which was already down 37.9% vs 2019. Current on hand inventory is barely enough to satisfy two weeks of expected sales! In a “balanced” (equal supply and demand) we expect to have at least 2 to 3 months of expected sales on hand. So no surprise the average days-on-market (DOM) to sell is down to 10 days for residential properties and 14 days for condos. It would be much lower than this but for holding back offer dates.
Wildest Q1 ever?
Prices for the quarter were record setting at an average of $729,897 for residential, up 32% year to date and the average condo sold for $415,054, an increase of 17% over the same quarter a year ago.
Unit sales were up by 33.5% for residential properties and 40.5% for condos. Rentals by members of the Board also soared by 44% during the quarter.
Conditions? …what conditions?
A scary attribute of this market is the almost total lack of buyer conditions. Though the Board does not track this, my back of the envelope guess-stimate, concludes that approximately 60 to 70% of deals are being done with no buyer conditions. A lot of risk being taken on financing approval, appraisal, lack of inspections or heaven forbid, the sale of a buyer’s existing home. In most cases, this risk is on the buyer and their agent…but what happens if the buyer doesn’t get financing? Doesn’t sell their existing home for what is anticipated?
A “semi-senior” moment? ….how about an almost $300K hike in 2 years!
I am sure that many must be shaking their heads and asking themselves: “how did this type of property get to that price level? Have I been asleep at the switch? If one compares the average residential sale price in March 2021 of $758,802 to only two years ago when March 2019 yielded an average selling price of $480,589, the difference is a staggering gain of $278,213 or 57.8%
Where do we go from here?
Buckle up….it looks like more of the same in the weeks ahead, as we start our peak 10-12 weeks of real estate activity for the year. We’ll be keeping an eye on listing inventory and reporting on it regularly, as this statistic, combined with sales absorption, are always key indicators of market direction.
Be realistic and take what the market can provide:
Buyers can have many frustrations in this market, but also must temper their own expectations. If your financial plan says you don’t want to spend more than $500K, then don’t rush out to see every $499K listing, if it is clear it may sell for $600. Your agent should be able to help with this and sometimes even a call to the listing agent, may give an idea of what the seller expectation is for a selling price. If they want a minimum $600K and your top point possible is $525K…why bother frustrating yourself?
As mentioned earlier, sellers can also moderate their own expectations. Obtaining a winning offer well above list, is best treated as a nice surprise, rather than an expected or guaranteed result, as there can well be differences in expectations and results. The market (buyers collectively) will decide what it is willing to pay for a property/product and seller expectations have very little to do with it.
Gord McCormick, Broker of Record
Oasis Realty Brokerage
Ottawa 613-371-9691 www.oasisrealtyottawa.com