Have things really changed over the past 6 months? Here is a “shocking” headline from the Toronto Star, “New report predicts that Canadian home prices could drop by 30%- or more.” This is a juicy, sensational newsflash.
When people see headlines like this, they tend to fall into several camps.
- They believe it wholeheartedly and share with everyone in their circle the doom and gloom news as if it were fact.
- They see some truth in it and may not believe the prediction, but feel that it will happen to some extent.
- They see it for what it is – a newspaper selling newspapers.
My favourite reply is “looks like whoever was in charge of the weather news is now writing articles relating to Real Estate.”
I have seen many cycles in my career spanning almost 40 years selling Real Estate and a constant has been the commentary as markets cycle. It goes something like this:
- Values are flat and not increasing. – “Don’t buy a home, invest in the stock market where the real returns are.” I knew the Real Estate market would not go up.”
- Values are starting to edge upward. – “How will our children be able to buy a home?” “I can see a drop in values coming.” “Now is not the time to buy.”
- Values begin to skyrocket. – “The bubble is about to burst.” “There is no way this can last.” “We will see foreclosures soon as people begin to lose their houses.
- Values start to decline. – “I told you so.” “It was the investors that caused this to happen.” “I am happy, the Sellers were getting too greedy.”
As our market cycles, so do public comments about the current conditions. They seem to go hand in hand and the media loves to stoke the fires of fear. My question is, “Is there truth that the market is going to lose 30% of its value?” For context, this article was published on February 14, 2022.
Let’s start with an environmental scan. At the beginning of the year the average detached home in Oshawa was selling for $841,500 with Whitby prices at $1,182,000 and Clarington coming in at $813,000. Currently, Oshawa prices are $843,000, Whitby is at $1,031,000 and Clarington homes are selling for $968,000. Breaking the current numbers down, Oshawa prices are up by $1,500, Whitby has declined by $151,000 and Clarington prices have jumped by $155,000.
Prices are a reflection of what is selling for given a snapshot in time. A trend I see happening in Whitby is that lower-priced homes are moving quickly, hence the results are a drop in average selling price. Seeing the average in Whitby drop since the first of the year is a direct impact of lower priced homes selling. In the past week, the average detached home sold for $930,000, and these smaller homes are impacting the average.
The numbers that really give us a peek into the future are how many homes are currently for sale and how many are selling. The number of homes for sale typically increase dramatically from January – April as we build inventory for spring Buyers. When we notice the number of homes for sale not increasing, it gives us an indication that bidding wars will be back along with price increases. Currently, we have 16 more homes for sale than we did at the beginning of the year and looking back to the same time period in 2021, we saw inventory jump from 95 active homes for sale to 400, 100 more than our current inventory! This is a more common build-up.
Currently, in Oshawa, Clarington and Whitby’s sales are up 25% from the end of January to February 27th.
Reading into the numbers reminds me of the rule that governs patterns of Real Estate is the “law of supply and demand.” When you have a low inventory of any product, and high demand, the value of the product goes up. We have seen this pattern with used cars during the pandemic and the price gouging of hand sanitizer. Real Estate is no different. When Buyers are buying and Sellers are hesitant to place their homes for sale, we see prices spiking and bidding contests return.
As for the headline about prices dropping 30% – I feel the author should do a bit more homework before shocking the readers like she did – or maybe that was the objective.
If you are a homeowner and planning a sale, I would love the opportunity to share with you how knowing the market as I do, and with experience gained over the past 4 decades, can help you maximize your selling price. I can be reached at lindsay@buyselllove.ca
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