THE STORY OF 2020
2020 – what a year indeed. The local real estate market has defied expectations and set new records across a variety of metrics. Looking back, the first 60 days was probably the best indicator that the market had strong legs and plenty of gas in the tank. As we came out of the brief lull that typically characterizes the holiday season, buyers quickly flocked to the market in what felt like an early Spring Market. Driven by historically low interest rates and perhaps a fear of rising prices, buyers were also starting to feel pressure from a new direction. An influx of buyers from outside of our traditional market – primarily from the GTA – is a trend that has been coming to a boil over recent years, and only exacerbated by the pandemic. Buyers of all types flooded from the GTA to Guelph, making the move to either get into the market or to get ‘more house for their dollar’.
The story of the year, as we see, it is not simply fueled by COVID-19, but the continuation of the mounting trend of a tightening marketplace. A balanced market is usually defined as having a months supply in the 4-6 month range – meaning if no new listings came to the market, it would take 4-6 months to sell out the supply of homes available. This translates to a sales to new listings ratio in the 40-60% range – meaning 1 out of every 2 homes listed will sell. A buyer’s market shows up when inventory levels creep above 6 months, and the sales to list ratio drops below 50%.
For example, in 1980, the sales to list ratio was 40%: 2,876 homes were listed that year, and only 1,156 of them sold. In contrast, 4636 homes were listed and 3,225 sold in 2019 – that’s a sales to list ratio of 70% and inventory level of 2 months.
2020 is a continuation of that trend, with the sales to list ratio topping out at 79% and inventory hovering at 1 month for the bulk of the year. COVID-19 was like throwing gasoline on the fire, as hundreds of buyers left small and densely-populated condo towers for bigger and more spacious homes that could accommodate the new trend of working from home. The already-tight resale market in Guelph struggled to accommodate the demand, as the population sought out larger homes and out-of-town buyers set their sights on the Royal City.
While we did see a 5.6% overall increase in sales across the city, an 8.1% drop in new listings, paired with an already low-inventory market meant the scales of supply & demand continued to tip. The result? A 16% increase in the overall sale price of Guelph homes. Fabulous conditions for sellers that stepped forward and listed (especially those that moved out of our hot market) – not such a great setting for the countless frustrated buyers who competed for the diminished supply.
GUELPH HOME TYPES
Detached homes – the star of our local market – continued to carry the torch in 2020. Unimaginable sale to list ratios upwards of 120% were seen throughout the detached market, from cozy bungalows to million-dollar family homes. Smaller footprint homes in particular saw an astonishing increase in value: all six Downtown and adjacent neighbourhoods – characterized by older, smaller bungalows, 1½ & 2 storey homes – saw a price per square foot above the city’s average of $394/sqft.
Across the region, detached homes led the increase in sale price. In the tri-cities, Cambridge, Kitchener and Waterloo saw year-over-year median sale price increases of 19.8%, 17.9% and 11.5%, respectively, in their detached cohorts. In our local townships, where the majority of homes are detached, we saw dramatic increases in homes values and market activity across the region. Most noteably, Puslinch township (with its ‘getaway’ feel and fantastic highway proximity) saw a 28% increase in the number of sales and a 29% increase in median sale price.
Digging a little deeper into the story of 2020, the spotlight also shines on a new group: semi-detached and townhomes. This segment of the market led the growth in number of homes sold, at 12.7% YOY, with an increase of 13.6% in median sale price, to $520,000. This prime entry-level market was dominated by buyers across the region, with the highest sales to list ratios in each city (vs. detached and condos).
In terms of buyer demand, condo apartments lagged across the board, with higher days on market, lower sales to list ratios, and smaller price increases. A combination of factors might explain why hungry buyers are passing up these homes: not enough square footage, lack of outdoor space, COVID-induced awareness of the population densities of condo buildings. Perhaps, growing condo fees (some upwards of $800/month in Guelph) make it more difficult for buyers to justify the price tag on the condo itself. The good news, for buyers seeking the maintenance-free lifestyle of a condo, is that the competition is less fierce than other areas of the market.
GUELPH NEIGHBOURHOODS
Guelph saw an average sale price per square foot of $394/sqft for 2020. By neighbourhood, the top three price/sqft appeared in General Hospital ($466/sqft), St. George’s Park ($451/sqft), and Riverside Park ($450/sqft). All three neighbourhoods are well-established and highly desirable areas, with a mix of charming and historic homes, generous lot sizes, and mature tree-lined streets. Just around the corner, the neighbourhood that saw the largest increase in price/sqft was St. Patrick’s Ward, with an astonishing 23.9% YOY increase (up from $347/sqft in 2019 to $430/sqft in 2020!). This change was largely due to the resales and new sales starting to filter through the MLS® system from the Metalworks, the popular luxury condo project now in its third phase.
Another interesting discovery from the neighbourhood breakdown was that the newer South end subdivisions, Westminster Woods and Kortright Hills, lagged behind the Guelph average in price/sqft. Our takeaway? The homes leading the price per square foot metric tend to be smaller and older than the new subdivisions. The historic Downtown area is a testament to the idea that size doesn’t always matter, and pays homage to ‘location, location, location’.
Interestingly, another story emerges when we examined the median sales prices and percentage growth throughout the neighourhoods. Leading the way is Kortright Hills, with a median sale price of $769,000 – well above the city median of $589,900. This sought-after neighbourhood lies west of the Hanlon in the city’s South end, and is best known for it’s grand family homes and pool-sized backyards. While this neighbourhood had one of the lowest price/sqft in the city, these grandiose homes still manage to elicit the highest price tags in the city. Perhaps size really does matter?
Moving east to the other side of Gordon Street, Kortright East leads the neighbourhoods in sale price increase year-over-year, at a whopping 23.6%. We suspect that 2020 was the year of significant turnover in what is an established and mature neighbourhood of the South end. In a neighbourhood that typically sees its residents stay put for decades at a time, many homeowners took advantage of the demand and chose to downsize last year.
AROUND THE REGION
The trends we see in Guelph are not unique to the city, or even the province. A similar tightening of the market, with dwindling inventory, rising home values, and added demand from metropolitan areas, is seen throughout the GTA as well as other population-dense cities like Montreal and Vancouver.
Regionally, Puslinch township led sale prices, increasing by a whopping 28.6% for a median sale price of $1.34 million! Clearly, the supply & demand issue is not just an entry-level phenomenon. In fact, Guelph-Eramosa township and Centre Wellington also saw double-digit increases in median sale price, 11.9% and 16.3% respectively. Inventory shortages are echoed across the three townships, with increased number of sales and decreased number of listings throughout.
Again, the Tri-cities told the same story in 2020. Cambridge experienced a median sale price increase by 18.9%, Kitchener 17.0%, and Waterloo 15.6%. All three markets experienced an increase in number of sales YOY and a decrease (or relatively low increase) in the number of new listings. Cambridge in particular saw a substantial increase in demand, with sales up 11% and listings down 5%. The result: an extremely hot seller’s market with an 83% sales to new listings ratio and the second highest sale price increase in the entire region (after Puslinch’s astounding 28.6% increase).
Not only were buyers competing on price, they also had to make their decisions incredibly fast. The median days on market was between 10-12 for the region – that means from the day the home hits the market until all of the buyers’ conditions are met, if any at all. Another ‘trend’ in our market – often accompanying buyer competition – was the practice of holding offers. By setting an offer date (and hopefully an end date for the selling process), some homeowners were able to vacate the property for a week, allowing safe and flexible showings. On the flip side, the offer dates cranked up the pressure for buyers, who were forced to make the greatest financial decision of their lives in less time than most folks spend buying a new appliance.
2021 PREDICTIONS
As we leave 2020 in the history books and move forward into 2021, the only thing we know for certain is that we need to be prepared for the uncertain. Our local real estate market showed incredible resilience through the pandemic, despite predictions of double-digit price drops. Homes values are strong, for the time being, but our market faces a new problem, one that has been quietly building over the past decade: inventory. Or, lack thereof.
The solution to the problem – at least, in theory – is simple: Guelph needs more homes. Whether your real estate goals are imminent or long-term, the most important metric you can watch as a consumer is inventory.
The demand is constant in our market. Local buyers and GTA buyers have shown their desire to move to areas that offer more home and space for their dollar. In particular, we will be watching neighourhoods that have not shown high levels of sales over the past years, in the hopes this will be the year that ‘for sale’ signs spring up.
We’ll also be watching to see if more people begin to sell due to the effects of the pandemic on the economy – whether to avoid a mortgage default, or a readjustment of investments. While unfortunate, the banks have all increased their reserves for bad mortgage loans. Reading between the lines suggests that, depending on how quickly certain sectors can recover economically, some homeowners will be selling out of necessity, and not out of choice.
Like many parts of daily life, the pandemic has forced the real estate industry to embrace technology. You can expect more business to be conducted virtually, an increase in the quality of listing marketing, and perhaps we’ll bid adieu to open houses (or, at least, stop seeing them as a requirement of selling a house). The real estate industry was a laggard in respect to embracing technology, and the pandemic forced the industry to leave behind outdated practices and find new ways to service clients’ needs. Those brokerages and Realtors that embrace today’s technologies to keep up with the ever-growing consumer will continue to dominate the market.
Tighten your seatbelts, this is going to be an interesting ride.
With this blog, we’ve released our 2020 Year in Review Market Report. This comprehensive report breaks down sales activity in Guelph by home type and neighbourhood, plus detailed reports for Kitchener, Waterloo, Cambridge and our surrounding townships.
Click below to view and download the entire report, and as always, reach out to us if you have specific questions or you’d like to know more about a certain area.
THE PAST WEEK IN THE GUELPH REAL ESTATE MARKET
Last week in our local market, 23 homes sold – down a bit from last year’s 32 sales. Keep in mind that 2020 had a busier start to the post-holiday market than we usually see. Plus, inventory levels are currently at record low after less than 100 homes were listed in the entire month of December 2020.
The median home last week looked like this: 3 bedrooms, 2 bathrooms, and 1,390 square feet. This home sold in 6 days for $676,700 – that’s $457/sqft and 113% of the original list price. Pretty staggering numbers, and a clear sign that the market is not starting the year quietly.
Same week last year, the median home was slightly smaller, with 3 beds, 2 baths and 1,225 square feet. In contrast, this home sold in 15 days for $476,500 – that’s $389/sqft and 100% of the original list price.
All but one of the 23 homes sold last week went at or above list price, while just 18 (of 32) did the same week last year. In addition to the 13% increase in sales-price-to-list-price ratio, the median list price itself grew a whopping 42%, from $476,500 to $676,700. Quite a difference a year makes, and well exemplified by this past week’s activity.
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