March 2020 will be a month none of us will forget. The speed at which this virus has taken over has been astonishing. I was in the process of interviewing potential candidates to join our team early in the month. Two weeks later the majority of our clients put their real estate needs on hold. We have been working from home trying to homeschool our kids and keep some type of daily routine. It has been challenging to say the least!
The real estate market can almost be divided into the first two weeks of the month and the final two. Early in the month, the statistics reflected what was going to be another record-breaking month. The final two weeks cooled that and we barely ended up ahead of last year’s sales numbers. The full impact on sales will eventually be reflected in April’s numbers.
People that don’t have an urgent need to buy or sell are being asked to wait till this is all over. A few of our clients have bought a new home prior to COVID-19 and are in a position where they absolutely need to sell. Others sold their home just before this hit and need a place to live. This is the main reason why our industry was deemed an essential service.
Members of the Ottawa Real Estate Board sold 1,525 residential properties in March through the Board’s Multiple Listing Service® System, compared with 1,507 in March 2019, an increase of only 1.2 percent. March’s sales included 1,170 in the residential-property class, up 3.3 percent from a year ago, and 355 in the condominium-property category, a decrease of 5.1 percent from March 2019. The five-year average for March unit sales is 1,465.
“Our results show that the Ottawa real estate market seems to have withstood the pressure of a worldwide economic event in March, however in context with our market’s performance up to this point, we can see the underlying effect. Before the pandemic, monthly unit sales were increasing between 10-16% from 2019, while March’s sales were just on par with a year ago” The board President
The slowdown included a 75% drop in showing activity in the final week of March according to Showingtime software (this is the software we use to process showing). Of course, this is not surprising because everyone is being told to stay at home. Interestingly I have seen a surge in some of our online initiatives. Including our very popular 3D tours. Here is an example of one of our listings: https://chrisscott.ca/properties/active-listings/425-barrick-hill-road/ Some buyers remain active and I am hearing of some purchasing their homes virtually from tours like this.
“Once the Ontario State of Emergency began, our Members and Brokerages rightly began to make all adjustments necessary for the health and wellbeing of our clients and customers. We welcomed the government’s declaration of real estate as an essential service so that transactions in progress could be completed. However, it was not and is not business as usual for our Members. They are heeding government and public health authority warnings and advice and are being diligent in taking extra safety precautions. All this, while still doing their best to help their clients successfully conclude or close real estate transactions that were already in progress,” Board President Burgoyne acknowledges.
The lasting impacts of COVID-19 are yet to be seen. Ottawa is going to be in a better position than most markets to weather the coming economic downturn. Historically we were in the hottest seller’s market ever. This, of course, will change but I think because we were in such a strong market when the needle moves we will still have a fair and balanced market. We just won’t see some of the ridiculous prices and bidding wars that were prevalent early in 2020.
The market is B-A-N-A-N-A-S! Was trying to think of a more eloquent word but bananas seems to fit here. Here are three reasons why:
Prices in our residential-class properties are up 21%
Prices in condo class are also up 21%
Over 58% of homes are selling for above their asking price (feels like 100%)
It is a tough market right now for buyers. They (and their agents) have to go through the process usually a few times before they can secure their house. Sellers hold all the cards! However, many sellers are also buyers. This has added to the inventory issue. Many sellers do not want to sell until they buy. So round and round on the no inventory hamster wheel we go!
There are not enough new listings to satisfy the growing demand for Ottawa properties. Much of the demand is the entry-level $400,000- $550,000 market. About 40% of all sales are in this price range. I am seeing very competitive offer situations in that range. Many homeowners are listing very low and creating a frenzy on the offer date. This is partly to blame for the high over-asking sale prices. It is frustrating many buyers too. To have to keep going higher and higher to secure the deal is no fun!
Investors are quietly playing a role in the frenzy too. I am seeing lots of out of town buyers coming in and buying up properties. Again, mostly in the entry-level range. This week I have seen a bit more inventory coming to the market. I hope this is a trend that continues.
If you would like to see some sales in your neighbourhood, let us know and we can send you a report on your area. Every neighbourhood is very different.
We have talked quite a bit about inventory in the past few months or the lack thereof. Right now this is the Ottawa real estate market’s biggest challenge. There were only 1082 properties that came for sale in January 2020. That is about 50% less than the average. Then you look at the 780 sales in January 2020. This represents a very high absorption rate. This absorption is most prevalent in the $400,000 to $555,000 range, this represents over 40% of January 2020 transactions.
Buyers are getting increasingly frustrated. Some have put their searches on hold. I don’t recommend this. I do believe we will get more supply in the next year but I think price appreciation will continue. A balanced and fair market is still at a minimum a year or two down the road.
Ottawa’s market increases are still sustainable and reasonable when you consider our high average income. It is just a bit shocking to see how rapidly some of the price appreciation is happening in certain neighbourhoods. I think this appreciation is in some part due to the fact that Ottawa has been very much undervalued in years past. Not anymore! I think the new reality is here to stay for a while. Every neighbourhood and segment of the market is unique. If you want to know what is happening in your area please feel free to get in touch.
Another year is almost in the books! This one has flown by. This year has been the most active housing market I have experienced. The numbers bear that out. In November new listings were being absorbed by buyers at a record-setting pace. Here is what our board president had to say:
“Our inventory is not having a chance to build as it is being absorbed as quickly as it comes on the market. That’s why there are so many sales every month even though the supply stock is low,”
If we compare November of this year to last year, the price difference is almost shocking! See the statistics in the chart. We are up 16.9% on the freehold side and 9.8% on the condo side of things. At the start of next month, I will be providing a very detailed annual market report that breaks down all the numbers.
There is a slight cause for concern with the recent announcement that Canada lost over 71,000 jobs in the last month. This represents the largest drop in employment over a one month period since the financial crisis. Ottawa is always sheltered from this unless it hits the public service. Something to keep an eye on for sure.
If you want to know what’s happening in your neighbourhood, please feel free to reach out.
Every day I look through the hot sheet from the Ottawa Real Estate board. It is a list of all new properties to the market. One thing that almost every one of them has in common is that they were holding offers. This means the seller is waiting till a certain date and time to review offers. The idea is that they will have lots of showings between the list date and offer date. The hope, of course, being that the seller will have multiple offers to choose from. There are some buyers who do not want to wait until the offer date. That is where the term bully offer comes from.
The bully offer:
I prefer the term pre-emptive offer. Essentially the buyer makes an offer right away and before pre-determine offer presentation. The offer is usually at a premium price and often with no conditions. Example: House is listed for $400,000 and the buyer makes an offer for $450,000 on day 1. This would get the seller’s attention right?! The idea is to make the seller think twice about waiting until their pre-determined date.
A few other things to consider:
The Realtor is often in a tough position here as well. They have a form 244 signed with their clients explaining that there is no conveyance of offers until the specific date. If the Realtor then presents this offer it is in breach of the pre-signed paperwork. Further, other agents who showed the property or have scheduled showings on the property need to be kept in the loop on any change of directions. Our team has been on both ends of bully offers and there is a lot of things to navigate here for sure.
