Firstly, I am someone who is totally behind choices for consumers. I just want the public to understand some of the choices they have. We are hearing lots of ads on the radio about the company Unreserved. They want to disrupt the real estate industry. They have been in our market center for a little over a year.
This is the slogan from a recent ad from the company Unreserved “Here to empower buyers”
It is a good slogan but what about sellers? Unreserved clients are in fact the sellers of the transactions, not the buyers. How are they empowering their seller clients who are paying them by making the process less expensive for the empowered buyer? The transparent auction is much more advantageous for buyers. So much so that the government wants to ban blind bidding because they fear prices are getting too high as a result. They want to empower buyers by getting sellers less money? When you are selling your largest financial asset and have a lot of money at stake would you want to sell using a platform that is designed for buyers? Essentially to make sure buyers don’t overpay. I know I would not.
Don’t get me wrong. If I am a buyer I would much rather be in an auction and see the prices as they go. It is a more transparent process, no question. However, if I am a seller I am trying to maximize through the current blind bidding process. It is the best way to sell a house in a sellers market like the one we are currently experiencing. I am still having trouble seeing the value proposition this company is offering sellers. Just my opinion. I was just looking through one of their listings and they had a picture of the house with massive snowbanks in front of it. It is MAY! They are a very well-funded company so they are in no rush to be profitable but it will be interesting to see if they are able to take the market share they need to survive.
If I was a consumer looking to save money I would use a limited-service brokerage. At least it is regulated in the business. Auction companies are not.
Here are a few other things to consider with this process:
• If an auction goes badly, consumers have no one to complain to. There is no independent body to complain to and no penalties in the event a consumer feels they were treated unethically by an auction company. In my industry, we have a strict code of ethics with massive fines if they are not followed.
• There is also really no deal until an agreement is formalized after the auction. Not like a traditional bidding process with Realtors® where agreements are signed and submitted to the seller for them to select the best option. So when they sign it is a legal document.
• Owners of real estate auction companies are not vetted for past criminal or fraudulent activity, which matters if they are helping to manage someone’s life savings. In fact, this particular owner has had a conviction for fraud in past business dealings. As I mentioned choice is good. However, they should be playing by the same rules with the protection of the consumer at the forefront of the transaction.
Gordon Gecko would certainly have you believe that greed is good!
My philosophy is that you want to absolutely maximize as a seller and be a bit greedy but also diligent that you do not put yourself in a position where you will end up with less. It is a balancing act that I believe we at the Chris Scott Team seem to have mastered. I am confident we are putting our sellers in a position to maximize in this market. Footage of our clients leaving our office last week after a big offer during their presentation.
Seller Scenario: (disclaimer this is not a CST client)
This is a seller in Stittsville that came to market and got solid offers but did not get what they wanted. I think they are being a bit greedy here. Let’s look at the facts:
Let’s start with the upfront costs of a purchase before examining this scenario. When purchasing real estate an investor is typically putting up the down payment of 20%. The benefit is that when the market rises you as the seller get the return not on the down payment but on the entire appreciation of the asset. So let’s use this example for easy math. This is an actual home listed in March of this year:
This house was purchased for $800,000 a year ago. They just closed on it with the builder this year.
Down payment: $160,000 (estimate)
Listing price 2022- $999,000
Offer received and rejected: $1,200,000 (yes a 400k 12-month appreciation 33k/month was turned down)
It was slightly short of what they are looking for. They wanted 1.250M. They relisted a few weeks later at the same price and got the same result! This is not a client of ours but someone should be advising them that they have hit the jackpot and it is in their best interest to take this offer. At 1.2M the house was well above the comps.
To be clear the one year the return on their original $160,000 was well over 300%
I would be absolutely ecstatic! Right!
For them they are not getting the sale prices they expected. Now I am not against this strategy at all. I am seeing many sellers raising their prices after offer date to their desired price. But what is happening is now all those listings that did not sell are still on the market while new listings come to market this week. What will eventually happen as more comes to market. In the case I outline above I actually think they may end up with less than what they just got offered. Time will tell on that and I will happily update this blog with the results of that.
WHY ARE SELLERS WALKING AWAY FROM SOLID OFFERS:
Sellers are listing well below what they expect to get for their properties. In many cases, they are listed 100k-300k away from where they want to end up. When offer day rolls around they may only have offers that underwhelm their expectations. Keeping in mind that expectations right now are sky high!
These expectations are based on comparing their homes to others sold 6-8 weeks ago when there was absolutely no other inventory available on the market.
Things are getting interesting out there right now with so many variables at play. There has never been a more important time to have expert advice and interpretation of market trends.
Do you know one of the most common questions I’m getting right now about the real estate market is, are we at our peak? Or is the market starting to decline? It’s a tough question to answer because there are a lot of variables at play right now. We have interest rates rising by a half percentage point in the upcoming few weeks after a previous increase of a quarter of a percentage point just about a month ago. This is going to make the current prices in Ottawa that much higher for prospective homebuyers. This will certainly have an effect on what buyers are willing to pay for Ottawa real estate. My thinking is that house prices are going to stabilize. In fact, I believe that’s already happening. There are houses that sold in February of this year that would not warrant the same price in today’s market. The biggest reason being is that there are more houses for sale and buyers are spread out with more options available to them. My prediction is that you’re going to see continual stabilization of the market in the upcoming two months as more inventory comes to market I still think it’s going to be very much a sellers market but the days of 15 or 20 offers on almost every property I think are going to be behind us which is good for the overall health of our local real estate market.
We are up from the five-year average for total unit sales, which for March is 1,792. Prices are continuing to climb slightly, up 2-3% from February, sitting at $853,615 for a residential-class property, up 12.5% from last year, and $479,405 for a condominium-class property in March, up 10% from March 2021.
Overall, we are just slightly over (.6%) a half month’s supply of inventory, this is still considered a seller’s market. A balanced market requires at least four months of inventory.
Our team has strategies that can help both our buyers and our sellers in this type of market. Please reach out if you have any questions about the current market or anything else we can help with.
Things are picking up as we head into the Spring season. We have seen a 52% increase in transactions from January to February of 2022 via MLS. This is a strong indicator that the Spring market has sprung.
The number of new listings in February (1,762) offers some hope for prospective Buyers. At 4% higher than the five-year average and 12% higher than February 2021, it resulted in an almost 10% increase in residential-class property inventory compared to last year at this time.
There is hope that the trend of increased new listings will continue so that the housing stock can be replenished.
We are now sitting at less than a month’s worth of inventory, which is still looking like a seller’s market. This means buyers need to have all of their financing set up so that they can move quickly in this market.
Our team has strategies that can help both our buyers and our sellers in this type of market. Please reach out if you have any questions about the current market or anything else we can help with.
We recently took a listing in a building where 3 other identical units were up on the market at the same time. These units had all spent considerable time on the market. Of course, our sellers were concerned that they would be unable to sell.
Our sellers were open to staging the home and already owned some lovely décor and furniture items that we were able to add to, creating a magazine-worthy property. Having sellers trust in our process gave us a huge win. Our sellers and our team prepped the home including bringing in a couch to make it shine. This combined with our listing strategy made all the difference. Our listing was up for a matter of hours and sold after the first showing. It matters who you work with!!
We are starting this February in very much a similar way to the last 2 years. Housing inventory in Ottawa is scarce and sellers are cashing in on this once-in-a-lifetime market. This year feels different because we are already starting with high prices thanks to the last few years of double-digit increases in Ottawa home prices.
Buyers seem to be comfortable paying huge premiums to get in on the market and secure their house. This is leading to some pretty eye-popping sales in certain neighbourhoods. We have had first-time home buyers spending upwards of a million dollars on a purchase. It is actually a frustrating market for a Realtor because there is quite a bit of heartbreak! Sellers in many cases can’t put their house up for sale because they can’t secure another property. So we are in this cycle! I am hopeful that we can get to a place this year of a more balanced market. I had originally predicted that prices would rise less than 10% this year. Is it too early to have a mulligan on this?
One of the biggest changes in our market is the number of properties selling for over 1M. Do you remember when 1M was a big number?
Sales in Ottawa over 1M
2020
2021
2022
We have had one of the hottest real estate markets in the world in the past few years right here in Ottawa. We are making up for years of undervalued real estate. Now we are heading to a place where the average house is going to be out of reach for our middle-class families, especially those who are not in the market already with a house.
I wanted to revisit this comparison that we did back in 2018. I thought it would be interesting for us to again compare prices in GTA vs Ottawa to see where we sit. Toronto has always been among the highest real estate prices in Canada and North America. Ottawa however is starting to close the gap. For this comparison, we wanted to find very comparable homes in each city. We dug a bit deeper and wanted to make a direct comparison with something in a similar suburban-style community in each city. The easiest way to accomplish this was to find something built by the same builder, in this case, Mattamy Homes.
I used the suburban communities of Pickering in the GTA and Stittsville in Ottawa.
VERDICT: There is still a price gap between these properties. My prediction last time we ran these comparisons was: “I really think that if a buyer in Toronto is willing to pay those prices right now it is only a matter of time before Ottawa gets to that level. I have said it for years and I believe now people are starting to realize that Ottawa is a very undervalued real estate market.” I have to say that I think I was fairly accurate on this assessment considering our market over the past few years. There is still a gap in prices between Ottawa and Toronto. In 2018 the divide was $374,000 more for a similar GTA property. In 2022, four years later, the divide has narrowed to $273,000. We will run this in another 4 years. My estimate is that Ottawa will be even closer to Toronto in price. Always fun to compare.
Do you ever feel like you are in the movie Groundhog Day? Well, I certainly do. We are starting the year with school online, COVID is still a part of everyday life, and for home buyers, very few homes to choose from. Prices are smashing price records and making economists and analysts look like they have no idea what they are doing. Is 2022 the year we get back to some normalcy? I don’t think anyone could have predicted that a global pandemic would send housing prices through the roof. The question now becomes well what’s next?
Average sales prices are for 2021 based on MLS sales.
Combined is for all property classes. Arrows are gains from 2020.
OTTAWA REAL ESTATE REPORT
FORECAST 2022
It has been hard to predict how the market would react to the pandemic, now, two years in, it is even more challenging to make any sense of it. I have read everything available including CMHC reports, Economist, and leading analysts’ predictions. This year I feel like everyone is being careful with their thoughts. Likely because no one really knows, impossible to predict the unpredictable. I refer to the economic principle of supply and demand. A trend over the pandemic is low inventory, hovering around, or just under one month’s supply, a true seller’s market. Currently, supply is very low, with just this one indicator it is difficult to see how prices will not go anywhere but up.
REAL ESTATE CHANGING
Our industry is constantly changing. There are many new players in the local market that offer a wide range of services to buyers and sellers. You can auction your home, sell it with a call centre in Toronto, use a local Realtor or put a for sale sign on the lawn yourself. There are 3500 agents in Ottawa to choose from. Having this many choices is overwhelming but also very good for the consumer. It forces everyone who wants to compete for your business to up their value proposition. Our team has completely revamped our services for 2022. We are always striving to bring the best value to our clients. We have a menu of services that will help us compete against any platforms. So if you are in the market this year to buy or sell, give us a call.
Based on OREB RES & CON MLS Sales | 2022 Prediction
KEY INDICATORS
Our Country’s Population Growth in 2021
G7 Population Growth 2021
Canada has had the highest population growth in the G7 and also the lowest per capita stock of housing. Quite simply we have a housing supply crisis. This is one of the many reasons why our market prices have escalated so quickly. We can look at all the new developments and cranes in and around our community but it is not enough to have an impact on price gains in 2022. Ottawa in particular has been a sought-after city for new immigration due to its high quality of living.
Historic Ottawa Freehold & Condo Inventory Since 2004
Inventory
As mentioned above. The very core of the price increases is the basic economic principle of supply and demand. In Ottawa we simply do not have enough housing for everyone right now. This is putting upward pressure on prices as buyers compete for what becomes available.
Historic Canadian Inflation Rates Since 1995
Canada’s Inflation Rate
Prices are rising rapidly everywhere. One interesting stat is that container ship costs have gone up 500% since 2019. Those costs get passed along to the consumer. Housing, cars, equipment, lumber, and especially food. COVID has brought about so many unique challenges that will have lasting impacts on our economy. One of them will be that the cost of goods and services will continue to rise. This will have an impact on what buyers will be able to afford.
Variations in Bank of Canada Interest Rates Since 2000
Bank of Canada Overnight Interest Rate
Right now interest rates are the big equalizer. The low rates are making the high prices relatively affordable. How long can these rates stay low? Central bankers are in a tough position. They could decide to act because prices are rising so fast and are not in sync with incomes. If the Bank of Canada should go this route they would also risk causing a housing market downturn. My prediction here is that rates will rise and help slow our market. This will happen in the late summer.
If you are curious about your home’s worth please fill in this form for a no-obligation market assessment.
Ottawa Real Estate Board Trend Analysis – Residential Property Class
WE GO ABOVE AND BEYOND FOR OUR CLIENTS
We are so pleased that we were able to host our Annual Santa Party this year. It was so great to be able to thank our clients by finally being able to hold an event again. We also continued a new annual tradition with our 2nd Annual Stittsville Food Bank Fundraiser, we partnered again with Maverick’s Donuts Stittsville who generously donated their holiday 6-pack donuts for us to sell in support of the food bank. The team matched each donation and raised $2,000 again this year! Our mission is to create a raving fan service experience for every client and bring value long after our clients have bought or sold real estate. If you have any real estate needs in 2022 give us a call.
If we compare this past November’s real estate market to November 2020, we again see that it is skewed as the Spring market was pushed into Fall in 2020 due to the pandemic lockdown. In comparison, November’s unit sales tracked 14% higher than 2019 (1,284), a more relevant base year. This is good to keep in mind when taking in the most recent market statistics.
1,459 residential properties were sold in November compared with 1,605 in November 2020, a decrease of 9%. November’s sales included 1,086 in the residential-property class, down 10% from a year ago, and 373 in the condominium-property category, a decrease of 7% from November 2020. The five-year average for total unit sales in November is 1,348.
Average sale prices for November are for a residential-class property $716,992, an increase of 19% from a year ago, and the average sale price for a condominium-class property was $432,099, an increase of 19% from 2020. With year-to-date average sale prices at $719,956 for residential and $420,762 for condominiums, these values represent a 24% and 16% increase over 2020, respectively.
Even though there were significant increases in average prices over November 2020, month-to-month price accelerations have tapered off slightly, with average prices for residential units on par with this past October’s and condo average prices increasing by 7%. For buyers, this is a much better situation than the monthly price escalations the first quarter of 2021 had shown us.
Ottawa is still sitting at one month’s supply for inventory, still signaling a seller’s market. Supply constraints will continue to affect prices until more inventory is made available.
As always if you have any questions or would like to know about any activity in your neighbourhood feel free to reach out.
We recently had the pleasure of working with some wonderful past clients on the sale of their beautiful townhome in Upper Hunt Club. In preparation for our appointment, we looked at all the most recent comparable sales. The house right beside was the closest comparable property. In fact, it was the exact same layout, size, bedrooms, bathrooms. It was virtually identical. Except the owners decided to sell with a limited-service brokerage and did not stage the house. The other home also had the advantage of selling in the hot summer months and is an end unit that buyers would pay a premium for.
These are the results:
Days on Market
Offers
Sold Price
CHRIS SCOTT TEAM
CHRIS SCOTT TEAM
CHRIS SCOTT TEAM
1
2
$639,000
COMPETITION
COMPETITION
COMPETITION
81
1
$587,000
Neighbours listing pictures (courtesy of MLS):
Our listing before our staging:
Our listing when we went to market:
Our clients received $52,000 more for their unit. It is stories like these we like to share because we think everyone brings a different skill set when selling ones home. Our real estate team believes in our value proposition as we get to see results like these on a daily basis in Ottawa.
Our Country’s Population Growth in 2021
Historic Ottawa Freehold & Condo Inventory Since 2004
Historic Canadian Inflation Rates Since 1995
Variations in Bank of Canada Interest Rates Since 2000
