SIGNS OF CHANGE
A Friday afternoon nod to Bob Dylan:
…the times they are a-changin’!
The local real estate market, that is. Slowly but surely, we are seeing some subtle changes occur – and this is probably the best news buyers have received in the past 18 months!
That change?
Uncertainty.
Line ups on offer night are no longer a forgone conclusion. Double digit sale price percentages above list price, ditto.
Unpredictable. Shocking. Confusing.
Just a few of the family-friendly adjectives being used by Realtors and clients over the past couple of weeks.
One of the biggest factors? Simply put, more homes are being listed. Buyers are noticing that they’ve got additional homes to look at, and are feeling a little less pressure than before.
Another factor is that the sales tactics that have been employed in the past year just don’t have the same effect. Noticeably, more listings are coming onto the market with higher list prices and offers being welcomed at any time. I’m aware of over a dozen homes in the past 2 weeks that offer night arrived and left sellers sitting at an empty table with no offers to review.
The most ominous warning of a market change has been the number of homes that are coming back on the market a day or two after offers had been accepted. The buyers didn’t pony up the deposit, as promised in their offer. While these buyers may think that not delivering the deposit will result in a firm deal being negated, that is not the case. (That’s a whole different post to be explored around contract law.) There has been a noticeable increase in deals that are being frustrated, and homes are popping back on the market within days of when they should have been sold.
What does this mean for you, homeowners, buyers, and real estate observers?
Buyers have become extremely tired of the constant losses they’ve taken over the past months. Constantly writing offers, bidding tens of thousands over list, only to lose by multiple thousands more.
Sellers, in some cases, have been drinking too much of the marketing hype kool-aid that has been spun by some representatives of our industry – they have come to expect that regardless of the price they set (deliberately under-listed or priced accurately at market value), they should still expect another $100K tacked onto their sale price.
The real estate industry needs to own their role in this as well. Too many agents deliberately pricing below realistic market values, and then crowing about how many offers and how much over list price they single-handedly achieved for their clients.
Yes, the hype and frustration have finally caught up.
I believe this is the early warning of a market that is slowing. And before you panic, I’m not calling for a massive price correction, or severe drop in activity. I believe we are witnessing a market that is slowing down and bringing a much needed bit of breathing space to both buyers and sellers.
We’ve talked about the supply and demand imbalance in this market a number of times. That hasn’t fundamentally changed. What has changed is that buyers are taking a more disciplined and longer term approach to finding the right home for their needs.
This pandemic – yes, we are all frustrated and fed up with it – will continue to drive demand for some time. The pandemic has changed the way a lot of people are approaching life and life decisions.
We’ll see the migration from the GTA eventually slow down. Some people will embrace the remote work culture and thrive. Others will jump at the chance to be back in the city and the office.
Equilibrium will eventually be restored in our real estate market.
I wouldn’t bet the farm on a wholesale price drop, and I certainly wouldn’t bet on double digit price increases continuing.
What I will bet on is that over the long term, the next 5-10 plus years, real estate values will continue to increase, outpace inflation, and settle into the 3-6% annual increase we’re used to.
Stay safe and let’s get through this.
THE PAST WEEK IN THE GUELPH REAL ESTATE MARKET
This past week in our local market, 68 homes were sold – a dramatically busier week than the same week in 2020, where a mere six homes sold. It is relevant to note that last week, 50 homes sold, and during the same week in 2019, 60 homes sold. As we noted last week, as we begin to overlap on the “market pause” we saw in spring 2020, it’s perhaps more relevant to take a look at the median home stats in reference to a few other key weeks. See those comparisons below:
In the past, we have often used year-over-year comparisons on this blog. As we move past the one-year mark of the global pandemic and begin look additionally at data from previous years, an interesting story emerges. While the initial thought was that 2020 would be an outlier year in the real estate market, it seems that the most remarkable changes in market activity and sales data are appearing in 2021.
One interesting statistic that we’ve been following is the number of $1M+ homes for sale in Guelph. Looking at the number of homes that sold for over $1,000,000 in the first 3½ months of the year, we saw the percentage increase from 1% to 2.6% to a staggering 10.6% over the course of three years!
Two factors to consider here. The first is home size: we’ve noticed over the past few months that the median home size has been consistently higher year over year. This could be driven by a several factors, namely that empty nesters still living in the larger homes were given incredible incentive to downsize this past year. Other considerations are that a number homes built in the last decade are now entering the resale market for the first time, and that the popularization of home renovations has boosted home values as well.
Of course, price plays a major role in this shift. While we have seen larger homes to the market, we’ve also seen a significant increase in price per square foot: from $377/sqft in 2019, to $417/sqft in 2020, to $475/sqft this current year (average price per square foot, from January 1st to April 16th).
There is certainly more to explore on this topic, but an interesting figure to look at nonetheless.
IN CASE YOU MISSED IT
Our March 2021 Market Report is now available. The report summarizes the market activity for all home types in Guelph, the townships, and the Tri-Cities, plus a look back at our market over the past year, and a price breakdown for all of Guelph’s neighbourhoods.
View & download the full report below:
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