Looking Ahead… - Issue 394

Hmmm.

I’ve had a couple of comments these past few weeks that my posts have become a little down and somewhat negative. Looking back, I can see the logic of those comments.

Normally, I am very optimistic and definitely a “glass half full” kinda guy. That’s been my weltanschauung for as long as I can remember. That said, 2023 was a year that had a bit of every emotion.

We had predicted that market activity would stay constant in 2023 and that the market was a far cry from collapsing. We predicted that tight market conditions and competition would continue to persevere. While we thought 2023 would continue to be difficult for buyers, we were sure that sellers would be back in the game.

So, how did our predictions pan out?

The story of last year can be summed up by the two graphs below. All 4 of our local markets experienced additional declines from 2022. The 2023 real estate market was like a hot trendy thing that was all the rage and now suddenly no one can understand what the appeal was.

While we were right in our prediction & the market didn’t collapsed, it hasn’t remained static either. With the exception of Waterloo, down only 8.9%, the balance of the region slowed by double digits in terms of overall units sold. Guelph, for example, had almost 2,700 homes change hands in 2021, 1,961 homes sold (down 27%) in 2022, and down to 1,663 homes sold in 2023 - a further decrease of 15% in total units sold!

2022 sales for the year were on par with the long term trend, while 2023 total sales dropped significantly below the long term trend. Not surprising given the huge spike in sales during the pandemic.

Affordability and confidence were the twin issues in 2023. Interest rates remained relatively high, while housing prices have been slow to retreat. Demand for housing continues to grow with the next generation entering their peak first-time homebuyer years and large scale immigration. The net impact has been that prices have not dropped much as demand remains strong and inventory levels are still lower than the long term averages.

Public policy around increased immigration is bringing younger, well educated families to the country and has helped to fuel the housing market and the economy. Don’t get me wrong, we truly need the immigration and growth if we are going to keep our economy strong and growing. The challenge, typical of most governments, is that they think short term and in silos. Increasing immigration without anticipating the impact on housing makes good policy look bad.

So all that said - what do we see as the story of 2024?

The first 6 months are going to remain relatively slow and we may even see a further slide in prices and overall sales. It’s going to take the predicted interest rate reductions to get people back into the market.

What makes this market different from any of the other shifting markets we’ve experienced over the past 30 years will be driven by the large number of buyers looking to get into the market for the first time. Demand will continue to remain strong. What will be different is that buyers will no longer be blindly bidding on homes or lining up like they did in 2021. This year will be the year of the pragmatic buyer. Ready, willing, and able to buy, if they can find the right home with the right terms and conditions.

The new rules around representation and releasing offer information will cause a bit of confusion as both REALTORS and consumers get educated and understand how the new rules will impact sales. Off market sales are going to be more challenging to find as a result of these rule changes. The Canadian Real Estate Association has mandated a REALTOR cooperation rule that stipulates marketing any property publicly as “Coming Soon” will have to be listed on the MLS® system within 72 hours or REALTORS will face fines and sanctions. Exclusive listings now mean no signs, no outside marketing, and only within my own database.

This rule change was meant to stop rogue agents from marketing properties without using MLS® in order to limit competition for the property. It was a big issue in 2021 - maybe not so much in 2024.

2024 will be an interesting year; one that I believe will see the real estate market return to a more positive environment. More opportunities for buyers, a balanced market, and for sellers, likely a small increase in price levels. Expect a decent drop in mortgage rates later in the year, which means a little something for everyone.

Kinda reminds me of a typical election year.

We will keep you fully informed, educated, and hopefully even entertained. As we approach our 8th year of doing these weekly blogs, expect us to keep evolving and adding value. As always, we’re here to answer any questions and to assist you with your real estate needs.

Happy New Year

Paul Fitzpatrick

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