MAKING SENSE OF THE YEAR

We’ve been spending the last few weeks reviewing the year and compiling our year-end report for you, and we couldn’t help but notice the plethora of conflicting real estate headlines in the media. 

There is a lot of conflicting information and noise in the local and national real estate market lately. 

Current conditions, with record setting sales prices and sales volume, have been leading the headlines as one of the ‘good news’ stories during the pandemic. Those headlines have overshadowed the underlining story of the pandemic, which is the massive hit to the economy and job market.

Who do you believe?  Consumer facing companies, ours included, have been more bullish about the market – a stance which we’ve discussed and supported in our blogs over the past few weeks.  Our area is doing ‘better’ than most, all things considered, and we are a benefactor of the larger and more expensive GTA market.  However, when you look at the institutional side – like the rating companies, banks and lending institutions – the feelings are much less optimistic.

Starting with the big banks in Canada, TD is predicting a 12% increase in prices next year, Scotia is predicting 11% and RBC 4.9%.  Others like CIBC are negative predicting 5-10% decreases, Fitch, Moody’s and DBRS (credit rating agencies) are predicting price drops from 5-30%. 

Canada Mortgage and Housing Corporation (CMHC) led the way earlier this year with a predicted 18% decrease in prices this year and have now tempered that comment in that they expect price adjustments to materialize in late 2021, and recovery not until 2022.

Glass half full or half empty? 

There are arguments to support both sides of this story – we’ve talked about that in previous issues.  The bears in this market also have reams of data centred around job losses, mortgage default rates and affordability that are logical and rational.

In my opinion, this is part of the problem.  Our real estate market is not always rational or logical.

The pandemic has forced changes in the way we work, live and “shelter”.  The overall effect on the population has not been equal across the economy.  Service sector jobs in hospitality and entertainment have been decimated. Manufacturing and the high-tech sectors are running full out.  Government subsidies, mortgage deferrals, and support for business have all helped cushion the blow to the economy, yet at some point this flow of money will cease, and when that tide of money recedes, we’ll see what lasting damage has been done to the economy. 

In a rational market, the activity in our real estate market should have slowed considerably.  What it didn’t predict was that a huge number of people forced to work from home, the density in the city, and the desire to have more space would drive people people from other cities to seek alternatives, like our local real estate market.

What’s irrational is that demand is now being driven by FOMO, fear of missing out, and a lack of patience.

I’m convinced that 2021 will be a ‘good’ year for the local real estate market.  It likely won’t be a record-setting year, and it won’t be a catastrophic year either.  I’m coming in at somewhere in the middle of all the headlines.

The first quarter will see continued high demand from consumers, as the vaccine gets rolled out and we heave a collective sigh of relief.  Prices will remain high, because inventory and interest rates will remain at all time lows.

I expect Q2 will see increased levels of homes for sale, and as government stimulation starts to disappear, the full negative effects on the economy will start to be felt.

Wholesale decrease in prices? Not likely.  Price stability will be our expectation, as inventory levels rise and new construction starts to ramp up again.

Our take away from all the noise?  Proceed with caution, stick to your budget.  The sky isn’t falling, and remember that markets can and will go both ways.

THE PAST WEEK IN THE GUELPH REAL ESTATE MARKET

Last week in Guelph, 35 homes sold – up from last year’s 28 sales.

The median home last week looked like this: 3 bedrooms, 3 bathrooms, and 1,349 square feet. This home sold in 7 days for $640,000 – that’s $409/sqft and 103.7% of the original list price.

Same week last year, the median home was only slightly smaller, with 3 beds, 2 baths and 1,430 square feet. This home sold in 30 days for $515,000 – that’s $389/sqft and 98.1% of the original list price.

74% of the homes sold last week (that’s 26 out of 35) went at or above list price; in the same week last year, only 25% of homes (7/28) sold at or above list. Even as the number of sales decreases as we wind down the year, we see competition remain steady.

As always, thank you for following along with our blog. As we head into the holiday season, we’ll be putting our blog out a few days early and spending some time with our families. Join us next Wednesday, as we profile a local group of community-minded people who have had a massive impact on local charities and non-profit organizations. Plus, if you didn’t get a chance to read our latest blog post, 5 Ways to Support Local This Holiday Season, find it below. Enjoy the weekend, and the snow!

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KITCHENER, ON

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Note: offers held until Sunday, December 20th. Contact listing agent for inquiries & showings:

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