AUGUST TRENDS

If you’re a regular reader of this blog, you’ll know that I really like my statistics, and do my best to make sense of the market conditions in order to better educate out team members, and ultimately, out clients.

Recently, I was reviewing the Housing Market Snapshot for August as released by the Canadian Real Estate Association (CREA), and I had to do a double take.

August 2021 was considered a typical pre-pandemic summer market for house sales. It’s the last of the great summer weather, and most people will be focused on vacation and time off rather than the real estate market – which typically heats back up after Labour Day weekend.

Looking at the national results for August, the first two numbers in that context make sense. Sales are down an average of 14% across the country compared to the previous year. For context’s sake, last August we were in the middle of a COVID-induced real estate buying spree that began in early summer and held out through the fall.

The second number, new listings, are down 22.2% from August 2020. This number in itself is kind of surprising, given how low inventory was last year. You may recall we were setting records for the lack of inventory. We had anticipated a strong rebound in the number of new listings hitting the market this year. After all, the market had adapted to the pandemic, we’ve optimized the way homes were bought and sold, and there seemed to be no lack of confidence in the strength of the market.

In Guelph, the number of new listings that came to the market in August of this year totaled 197 – down 34.1% from the previous year’s results of 299.

Sales prices are what we call a lagging indicator. Sales prices adjust up or down according to how many buyers and sellers are in the market during that time. Intuitively, with supply (new listings) down 22.2% and demand (homes sold) also down 14%, you would not be faulted for expecting prices to have started to drop (or at the very least, stabilize) as a result.

The reality is that August home prices were up by 13.3% on average across the country, and 15.1% in Ontario.

The double take!

How do prices go up when the number of sales and inventory drops as well?

Once you dig into the numbers, you realize that despite sales dropping by double digits, the number of new listings dropped even further, and left those still actively looking to buy in August desperate to bid on the few good listings that were available. Those anticipating a slower market with rising inventory levels were blindsided when they saw the line ups on offer night, and even more astonished when they saw some of the prices.

The market imbalance is actually becoming more volatile, particularly around new listings coming onto the market. Monthly new listings used to fall in the 80s in quieter months like December, and around 300 in peak months such as April. Over the last six years, the low months for new listings has stayed in the 80s, while the peak months have jumped to over 400 new listings.

Large market fluctuations don’t make for a stable market. The large monthly variance in listing inventory is one of the culprits, causing some of the pricing issues we’re seeing.

This is actually one of the few times we can blame the internet and the speed of information as being a contributing factor as well. We now live in an age where REALTORS® and clients get instant notifications when a property is listed. It wasn’t actually that long ago that we got rid of the weekly printed MLS® catalogues!

In combination with dramatically fluctuating home inventory patterns, these lightning-fast reactions are contributing to the heightened anxiety a lot of buyers are feeling in the real estate market.

Next week, we will have the September reports available.