Uncharted territory

With so many unique elements contributing to housing market conditions, both buyers and sellers continue to hesitate

THE BANK OF Canada (BoC) lowered its overnight lending rate a further quarter point last week, showing confidence that inflation is no longer a problem, but illustrating the weakness of the Canadian economy. That rate cut was widely expected and already baked into the public’s planning. Further rate cuts are expected to follow between now and the end of the year (two more), and the only question is whether they might accelerate the impact with half-point percentage cuts rather than quarter-point reductions.

Given the BoC’s cut was anticipated, and followed a previous cut in July, common wisdom suggested there might be an uptick in real estate demand as “affordability” is improving. That is not the story the numbers tell from the month of August. In the London and St. Thomas Real Estate Board trading area, home sales were at historic lows: 577 units for the month ― a ten-year low and an 18 per cent decline in volume compared to 10 years ago in August of 2014! With all the population growth our region has seen in the last decade, the decline is astonishing.

Depressed sales volume was matched by price reductions.  The average sale price fell from $654,593 to $629,259. In one short, low-volume month, the average price of a home fell 3.9 per cent! That’s the kind of price change we used to see over the course of a year ― now experienced in just 30 days.

As demand was limited, inventory continued to climb. We now have five months of housing inventory for sale in our region, with 2,883 homes currently on the market. Year-to-date there have been 11,811 houses listed and less than half have sold (5,577). Household debt is at historic highs. Lending institutions are foreseeing loan losses in their future as loan loss provisions grow to historic highs. The tightening of credit by lenders is inevitable as unemployment rates increase and their own loan portfolios become more “stressed”.

We are in a buyer’s market. Home listings are sitting an average of 26 days, a full seven days longer than just one month ago. Part of the reason is that sellers continue to be overly optimistic that lower interest rates will bring demand and therefore higher prices back to the market. We have another fall market waiting for the bounty of spring to bring relief in the way of a booming real estate market.

There is general desire among agents, lenders, politicians, homebuilders and of course sellers that two years of deflated housing demand means there’s a robust real estate market on the horizon ― it’s just one more rate cut away! We can’t predict the future but given the historic “slow and steady” appreciation the Canadian real estate market has experienced, any change in the direction of our market may be very slow in coming. We experienced a Covid bubble, and we have yet to fully digest that run up in demand and those skyrocketing values.

Be cautious as you approach this market. Look for the opportunities that are inevitably available with so much inventory in play. As a seller, be realistic and don’t let the “hope” of future price gains cloud your current judgment.

Market analysis provided by Marcus Plowright, Sales Representative, A Team London. Marcus can be reached at 519-872-8326 or marcus@ateamlondon.ca.

High- and low-priced real estate listings around town this week

London East

Low

Address: 173 Elgin Street
MLS number: X9309333
List price: $249,900
Days on market: 4
Size: 2 bedroom, 1 bathroom
Listing agent: Patrick Lexima, Sales Representative, One Percent Realty Ltd.

High

Address: 129 John Street
MLS number: X9234740
List price: $5,595,000
Days on market: 40
Size: 9 bedrooms, 19 bathrooms, 5,000+ square feet
Listing agent: Trent Forristal, Salesperson, Sutton Group – Select Realty, Brokerage

London North

Low

Address: 28 Ranchwood Crescent
MLS number: X9271718
List price: $449,900
Days on market: 14
Size: 4 bedroom, 3 bathroom
Listing agent: Patrick Lexima, Sales Representative, One Percent Realty Ltd.

High

Address: 864 Clearview Avenue
MLS number: X9298104
List price: $4,675,000
Days on market: 6
Size: 5 bedrooms, 6 bathrooms, 5,000-plus square feet
Listing agent: Michael Reis, Sales Representative, Sotheby’s International Realty Canada

London South & West

Low

Address: 507 Osgoode Drive
MLS number: X9303040
List price: $369,900
Days on market: 4
Size: 3 bedroom, 2 bathroom
Listing agent: Vinay Third, Sales Representative, Re/Max Realty Specialists Inc.

High

Address: 1011 Cherrygrove Drive
MLS number: X9053822
List price: $4,250,000
Days on market: 48
Size: 4 bedrooms, 4 bathrooms, 5,000-plus square feet
Listing agent: James Smith, Sales Representative, Sutton Group – Select Realty

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Disclaimer: London Inc. does not guarantee the accuracy of the statistical data on this page. The data does not represent the listings of any one agent or agency but represents the activity of the real estate community in the area. Any real estate agent’s ad appearing is separate from the statistical data provided, which is in no way a part of their advertisement.