SUNNY WITH A HURRICANE WARNING
What a difference a week and some nice weather can make.
Up until this week home, sales in Guelph and area had been lagging behind the previous year by around 30%. Throughout the spring, we would typically see 60-90 homes a week selling – that’s peak spring real estate market for us. We’ve been hoping and waiting – as the weather finally warms up and we better understand where we stand, at least locally, with the pandemic – that the market would pick up and get back to “normal”.
Thankfully our market appears to have turned a corner, for now at least.
However, the next storm is imminently upon us. More on that in a moment.
We are thrilled to report that 51 homes sold in Guelph and the surrounding townships this past week. 50%, that’s right, half of the homes sold went at or above list price, which speaks loudly of the current inventory conditions.
We broadcast a Virtual Home Seller Info Session last night, where we answered the Top 10 Questions Homeowners Have About Selling During COVID-19. You can watch the recorded webinar at the link below.
In this session, we spent considerable time showing how current market conditions are still favouring sellers by a long shot in most categories. Inventory levels in our industry are measured by months. A balanced market would have 3-5 months of inventory, which means if no other properties were listed it would take 3-5 months for all the currently available homes to sell out. This gives buyers lots of choice and a fair bit of negotiation room. A seller’s market typically has less than 3 months worth of supply, and buyers will typically compete for the best listings, driving prices up and favouring those with more relaxed conditions in their offers. As of the end of May, the supply of available homes for sale in all price ranges sat at 1.2 months. Essentially, 5 weeks of sales and we’d be sold out! In the Under $700K bracket we’re talking less than a month.
So it seems buyers have jumped back into the market, while sellers appear to be sitting on the sidelines – as if they are waiting for the market to improve!
Here’s where I date myself. Not too long ago, 10 years maybe, the average days on market for a home in our area was 75-90 days. Buyers didn’t start questioning what was wrong with a house until it sat for almost 4 months. Buyers today ask that question after a week on the market. Sellers seem to have forgotten what normal market conditions and timelines are like. This could and likely will come back to haunt those sellers still waiting for conditions to get even better.
Remember that storm I mentioned earlier in this post?
It’s here in the form of CMHC once again tweaking and tinkering with mortgage approvals. Anyone with less than a 20% down payment needs to have their mortgage insured by CMHC. This is protection for the banks lending the money for the home purchase and essentially backstops that you will pay the mortgage back.
Today CMHC announced that they are increasing the minimum qualifications for CMHC backed mortgages. Qualifying credit scores have to have a score of 680 or higher (up from 600), and the debt servicing ratios have increased to 35% GDS and 42% TDS. These key changes will take effect July 1. Rumours were circulating over the last couple of weeks that CMHC was going to make changes, and that they were considering bumping the minimum downpayment to 10% from 5%. I believe these soon-to-be implemented changes are better than raising up the minimum required downpayment. This will take a lot of the credit risk out of the market. But, it will also mean that we’ll lose a number of potential buyers as well.
This will partly explain the quick ramp up in sales last week and will help push sales over the next 3 weeks as marginal buyers rush to get deals in place.
I get where CMHC and the banks are coming from. 15% of homeowners took advantage of the mortgage deferral program. Those start coming due in late August and September, and the question being is how many of those people will not be able to resume their mortgage payments and will be pressured to sell?
For the time being, we see a steadiness to the market that, as a seller, if you’re waiting on the sidelines for better, I suspect you will be disappointed. I suspect the moves by CMHC will take enough steam out of the market to keep prices from ratcheting up further.
Once the market digests this news, I anticipate the inventory levels to slowly start building and days on market (DOM) to start moving higher. Is that a bad thing? In my opinion, not really – a stable market is predictable and easier for all parties to work with. After all, with the unpredictability that COVID-19 has injected into our lives, a stabilized real estate market is a welcome respite.
Time, as they say, will tell. Stay tuned as we monitor this story and the effect on the Guelph and region real estate market.
THE PAST WEEK IN THE GUELPH REAL ESTATE MARKET
51 homes sold this past week, with 25 of them selling at or above list price. The median home was a 3 bed, 2 bath 1,276 sqft home that sold for $583,375 ( or $443.47/sqft), took 12 days to sell, and homeowners achieved 99.87% of their list price.
Compare to the same week in 2019, when 59 homes were reported sold, with 28 or 47.5% of the homes sold going at or above list price. The median home was 1,441 sqft, sold for $515,000, took 13 days to sell, and sellers negotiated 99.72% of their original list price.
Besides the fact that homes are selling for 13% more than last year, not much else has changed in terms of sales to list percentage or days on market, despite the COVID-19 situation.
Thanks for reading.
Watch yesterday’s Virtual Home Seller Info Session at homegrouprealty.ca/virtual-homeowner
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