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