2018 Year In Review: Local Real Estate Market Observations

Happy holiday season, Gang! Can you believe Santa is coming to town in less than 2 weeks? With the end of 2018 on the horizon, we wanted to take the opportunity to review some of the things we learned this year about our local (Windsor-Essex) real estate market. Here are some items of note that stood out to us.

Listings Are Still Down.

Per WECAR (Windsor-Essex County Association of Realtors), through the first 11 months of the year, listings were down from 2017 by 6% year to date. Everyone thought inventory was super low last year and that was one of the main reasons for the bidding wars.  Well, inventory got even lower this year. The supply and demand balance has stayed with the sellers this year.

Average Sale Price Is Up, Again.

Also through those same 11 months of the year as per WECAR, the average sale price rose 14% versus 2017. I don’t think this strayed much from our forecast. Having listings down again, upward pressure was put on sale prices. This is a healthy stat that should put us up with some of the best performing markets in Canada.

Unit Sales Are Down Quite A Bit

In that same timespan, unit sales were down 11% versus 2017. This isn't a good stat for realtors! Listings being down explains part of it but clearly there is less turnover. A partial explanation could be that sellers have increased their pricing expectations and these over-priced listings are sitting on the market and not resulting in transactions.

Total Volume of Sales Were Up Modestly

Sales volume rose 2% versus 2017 through the first 11 months of 2018 per WECAR. This stat is pretty easy to figure out when you combine sales prices being up 14%, combined with unit sales being down 11%. What also affects this stat is the fact that more and more of the sales seem to be in higher priced categories bringing up the averages.

Increased Interest Rates Haven’t Affected the Market—Yet

With the Bank of Canada's increased interest rates three times this year, higher interest rates are making things less affordable in housing. This hasn’t translated into much decreased demand yet, but should interest rates go up a few more times in 2019, this could start to drive some people out of market.

Investor Demand Has Plateaued

The fever pitch of real estate investment demand seems to have levelled off. We had some listings this year that surprised us a little on the market reaction. The cap rate demanded by sellers and what buyers will accept seem to be at a standstill in 2018. Perhaps cap rates will increase a little next year and part of that may be due to the increasing interest rates mentioned above.

There Is A Serious Housing Shortage in the Rental Market

The vacancy rate in 2017 was down to 2.3% locally. The 2018 report still hasn’t been released but is looking like it will be less than 2%. We believe this stat is somewhat inflated; if you look around for vacancies for any decent buildings, they are essentially 0% with waiting lists. There are also long waiting lists for socially assisted housing. Combining this low rental supply with the booming housing market that is driving more people into the rental market and the situation is really dire for tenants. Something needs to be done about this at the governmental level as it seems to be getting more tight every year and market based solutions don’t look to be feasible.

Those are some of our 2018 real estate market observations. What are yours?  

2017 Real Estate Year in Review – Dissecting the Stats

Well, we are now fully into mid January and 2018 is in full swing.  Hopefully those of you that made new year’s resolutions have stuck to them so far ☺.  If one of your resolutions was to stay informed on the Windsor-Essex real estate market, then you have come to the right place!  Today, we are going to be reviewing the 2017 Windsor-Essex County Association of Realtors statistics.

Listings Year Over Year Fell 2%

Listings were slightly down from 2016, and many people already thought 2016 was a year of low inventory.  In 2017, we burned through even more inventory and there are less properties for buyers to go around as we start 2018.  One might’ve assumed the hot market would entice more people to list their properties but the stats don’t tell that story.

Units Sold Rose 2% Year Over Year

The total number of property transactions increased by 2% over a great 2016 year!  It's not a huge increase, but combining that with a decline in listings and inventory being eaten up, a 2% increase in units sales isn't enough to explain all the craziness of the 2017 market. That leads us to our next stat...

Average Sale Price Increased 17% Year Over Year

The average sale price in the area increased from from $225,906 to $264,750 during that period.  A banner year on a percentage basis and one of the best our local market has even seen.  Strong activity across the board and a healthy sellers market.  But when comparing the price increase to the listing and unit sales activity (with modest moves), the number seems a little out of whack.  Why is that?  To try to figure it out we’ll dive into the December monthly statistics.

In December 2017,  16.83% of sales were of Properties that Sold for $420,000+

When the board breaks down sales by price range, they have increments of $40,000-$60,000.  Starting at $0-$60,000, $60,000-$99,999, etc, up to $420,000+ as the highest range, the highest range had the second highest sales activity next to only $140,000-$179,999 (17.16%).  Basically, we’ve been selling way more high priced properties!  I think a lot of this can be contributed to the booming year in new construction and for detached homes, with $420,000+ at the low end of that price range.  The next point will help us further illustrate and hopefully drive the message home.

In December 2017, Average sale price increased 36% Year Over Year!

Wow, now that is pretty amazing.  Prices in those 30 days went from an average of $220,053 in 2016, all the way to $300,314 in 2017.  The first time we ever remember seeing an average price with a 3 handle!  Not that long ago our average prices still had a 1 handle!  In this 30 day period the main contributor to the huge spike in average prices was the healthy activity in the higher priced properties.

There is our brief but hopefully helpful review of the 2017 market statistics.  If there are any topics you’d like to read about in 2018, drop us a line and we’d be happy to try and incorporate it into a future post.  Happy new year everyone!

2017 Real Estate Trends: Bidding Wars

As spring quickly approaches, the typical peak period housing market activity is almost here.  Only this year it seems to have come early.  The statistics for the first few months of 2017 have been off the charts.  Bidding wars are everywhere and people are asking when will it calm down.  Well today we are going to talk about some of the factors driving these bidding wars and buoyant market activity.

Low Levels of Inventory

It seems month after month the same story emerges.  Sales are up 10%+ and listings are flat to down on a monthly year over year basis.  As this trend continues, each month the increasing sales are eating up more and more inventory and driving down inventory.  We are now at the point where we have very low inventory… not enough houses to go around to meet demand.

Continued Low Interest Rates

Interest rates have been trending down for years and have pretty much held near record low levels for the past year to 18 months.  Today you would be looking at 5 year fixed rates in the 2.5% range and variable as low as 2%.  These low rates make it easier for the buying public to service more debt and afford to pay more for their homes.  This all leads to increased demand from buyers who are willing to pay more for what they want as it is still affordable to them on a monthly basis.

Immigration

The population is growing and a big part of that influx is coming from immigrants.  The type of immigrants coming to Canada these days have much deeper pockets than previous generations and hold widely held beliefs in the concept of home ownership and hard assets (such as real estate).  This is a large and growing segment of the market, and they also seem to be buying up lots of new construction.

Low Unemployment

Not that many years ago our region had among the highest unemployment rates in Canada.  We have rebounded from 10%+ to as low as 5.2% recently, which is below the Federal and Provincial average.  Manufacturing is booming again, the economy has become more diversified since the downturn, and now when we talk to business owners their biggest complaints are about difficulties in staffing.  What a turnaround it has been and these workers have steady paycheques allowing them to buy larger homes and more of them. Demand increased!

Those are some of the straightforward factors leading to the strength in our local real estate market recently.  Next week, we will continue on with some lesser known factors.  What has your experience been out there this year?

2016 Local Real Estate Stats Examined

Last week we made a few general observations about our local real estate market from 2016.  This week we are going to dive a little deeper and look into some relevant statistics.  Note: Some of these statistics are based on the first 11 months of the year, as we still have a couple weeks left in December.  Also, these stats refer to our home market of Windsor, Ontario.

Units Sold Increased 10% Year Over Year

The headline is pretty self explanatory.  The number of units (houses) sold are on pace to top last year by 10%.  This is generally positive as more transactions are taking place so the market is more active.  Obviously this is a great thing for sellers.

Listings Increased 2% Year Over Year

Again a pretty straightforward headline.  The number of houses listed for sale are on track to increase by 2% compared to last year.  All other things being equal, this is positive for buyers as there is more inventory for sale and negative for sellers as there is more competition when selling your home.  When comparing the increase in listings with the increase in sales, sales have increased significantly more than listings, so one should expect to see an increase in prices during this period.

Average Sales Price Increased 13% Year Over Year

Good news for sellers!  Average Prices increased from $200,823 to $226,193.  After seeing sales up 10% and listings up only 2%, there was not enough supply to meet demand and there was upward pressure on prices.  Some of this gain can also be attributed to a higher share of high priced homes being sold this year compared to last year.  Obviously this is not so good for first time home buyers, or people who have been renting for the last year as it will be more expensive for them to find a home.

Housing Starts Increased 30% Year Over Year

This is great news all around.  Sales of new construction houses have really boomed this year.  This is also great for the local economy as the builders hire skilled trades which boosts local employment, the city or town expands its tax base, and additional services must be added (retail) to service this additional density and demography.  Hopefully this continues.

The Rental Vacancy Rate Decreased from 3.9% to 2.9% Year Over Year

This is another overwhelmingly positive statistic.  On a percentage basis this means there are 25.6% less vacant apartments in the area.  This continues the improving trend from 2009 when vacancy rates were 12%+.  Vacancy rate declines are generally indicative of economic growth and population growth (both province migration ie Alberta to Ontario, and immigration).  With an improving economy, robust sales activity and a tight rental market, it is clear people are moving to the area.  The area now seems ripe for new construction of rental units.

So after reviewing the stats it's clear to see that 2016 was a pretty healthy year for the real estate market.  Those are our takeaways from the stats.  What are yours?

*Sources WECAR & CMHC