Back to Reality Tour for Guelph Real Estate - Issue 342

As the holiday season slowly fades away and we head into 2023, many people are looking toward the new year with a mixture of excitement and anticipation. A new year means new opportunities and new possibilities, but it also brings with it new challenges and uncertainty about what the new year will bring.

If there’s one thing we learned in the past couple years about the real estate market, it’s that this mixture of excitement and anticipation is well deserved.

We’ve talked extensively about affordability, the effect of loss aversion, and the game of musical chairs that buyers and sellers have been playing. So how can we determine what this year might look like in the real estate market to relieve some of the uncertainty?

Looking back at the 2022 Real Estate Market will not only give us a bigger picture of the market trends, but also help to predict where the 2023 Market will go.

So without further ado, here is your 2022 Market Recap.

*Charts from ITSO Matrix*
*Market Stats by ShowingTime*

The story of 2022 was a story that everyone knows at this point: coming back to reality. Sales were down substantially from 2021, and gains made during late 2021 through to Q2 of 2022 have been erased. Sales were down throughout the region, with Guelph sales down close to 26%. It’s a big decrease compared to the spike in sales that was happening in early 2022. The reality is that sales numbers are now back in line with sales levels from 2016. But what these numbers don’t show is how much the market has grown since then.

The median sales price in Guelph was down just over 10%, with Kitchener and Cambridge hovering around the same. Prices retreated by almost 12% to 2021 Q1 levels. The reality here is that if you bought prior to 2021, you should still be in positive equity territory…for now.

The Sales to List Ratio remained stubbornly high, even today. Sellers were holding out and buyers were still willing to bid up the sales prices in some price points. This is evident in the entry level and down sizing segments of the market, where multiple offers were still happening. However, the sale to list ratio has returned to historic levels on a month to month basis, which is good news - for buyers, that is.

Sales numbers have returned to the historical average - which is actually good news! This means that the market is correcting and people are negotiating again. Although that message hasn’t gotten through to everyone. Historically, in a normal market, sellers would on average achieve between 93-95% of their list price as their ultimate sales price. In the markets leading up to 2017, negotiating was a real skill that REALTORS® would bring to the table to find a win-win for their clients. This skill is quickly coming back into demand as the market begins to balance once again.

The supply of homes remained tight and was still nowhere near historical averages. The market is still considered to be a seller’s market. The months of inventory is measured by how many months it would take to sell all available homes without new homes entering the market. The market is said to be balanced when there is between 3-5 months of inventory. A buyer’s market exists when there are 5 or more months of inventory available. The Guelph market in particular has not gone over 3 months of supply in well over a decade. Cambridge, a similar sized market has historically had multiple times more inventory than Guelph and Waterloo. This is not a new phenomenon and a situation that won’t easily be changed.

New listings were up across the region, but new listings have not kept up with the population growth and demographic of new entrants into the market due to millennial buyers. Guelph’s population has grown an average of 2% per year and is now just over 145,000 - the 5th fastest growing city in Canada! While the amount of new listings has increased marginally, the housing market certainly hasn’t kept up with the population growth.

So, what is the emerging story for the 2023 market?

Activity seems like it will remain constant for 2023. The market is far from collapsing.

In the past year, we’ve seen the regional market begin to converge. While Guelph, Cambridge, Kitchener, and Waterloo used to be distinct markets, they are trending towards consolidation and becoming a more homogenous market.

With the trigger rates coming in the next 6 months, it will be interesting to see how many people will be pushed to sell.

First time buyers will likely continue to struggle, and the climbing interest rates won’t help. Tight market conditions will continue, as will competition, making it difficult for first time buyers to break into the market.

Sellers should be back in the game in 2023. Don’t expect any more price increases, and remember that if you bought before 2021, you’re still net positive - for now!

In conclusion, the local market is far from being dead or collapsing! There are still people that need to buy and sell, and even more that want to buy and sell. There are opportunities for both buyers and sellers if you are willing to be prepared and patient, and to jump when the opportunity presents itself.

Hopefully the excitement of entering a new year and a new market will triumph over the uncertainty, but who can say? Stay tuned to see how it all unfolds.

And remember that fortune favours the brave.

Have a great weekend.

Paul

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