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2019: The Year in Review
Posted January 30th, 2020 under market updates.
There is no rhyme or reason to the way the market behaved in 2019. Many were expecting prices to level off, but what happened was nothing of the sort. Here are some facts which would have impacted the market.
New listings dropped in 2019, for the second year in a row. Starting from a high of 18,731 in 2017, listings dropped steeply to 14,807 in 2018, and then a little more to 14,187 in 2019.
Meanwhile, sales went up from 7,725 in 2018 to 8,920 in 2019. With sales going up and listings down, the sales-to- listings ratio stayed over 60% through the summer of 2019 and reached a high of 136% in December. (A ratio above 100% means homes are being sold faster than they are coming on the market, reducing the inventory of listings.) This tops the 124.5% ratio we experienced in 2016.
In addition to the shortage of listings, interest rates did not rise (despite predictions they would).
The combination of all of these factors, plus a considerable number of “flips”, are the likely causes of the steep price increases we experienced.
I remain steadfast that flips once again played a significant role in pushing prices upward, although slightly less than previous years. In 2018, almost 7% of all sales were flips, with an average price difference of $131,800 between buying and selling. Last year, 8% of sales were flips, with an average price difference of $123,200.
Remember that much of the price difference is due to the costs of buying and selling, and due to mortgage, insurance and utility costs while the flip is being renovated. All of this is lost value that the buyer is paying for, inflating the price compared to the value received.
A final factor was bidding wars. Although bidding wars were not as fierce as some past years, the overall number of bidding wars increased.
In 2018, the number of sales with a higher price than the asking price was about 11% of homes. In 2019, this rose to 18%. This is a significant increase, but nothing as drastic as 2016, when the ratio was almost 50%.
Homes selling for more than 105% of asking price (a more intense bidding war) were 3% of sales in 2018, and rose to 5.4% in 2019. And those selling for more than 110% of the asking price (the fiercest bidding wars) were 1% of sales in 2018, but rose to 1.5% in 2019. Preemptive offers made before the set time for offer presentation (“bully offers”) are very likely to have contributed.
CMHC and CREA are now calling 2019 a year of recovery from the slowdown of 2018. For 2020, they have predicted that sales will increase by about 8% and prices by about 6%. Let's see if they're right.
Want to know more about current market trends? Just ask me, I'll be happy to help.