In Part 1 of this blog I recapped the robust real estate market that many parts of Canada experienced in 2020 and 2021 including the Southern Georgian Bay region only to see a significant shift in MLS® sales commencing early in 2022 which carried over into 2023.
The big question now that many are asking is, what will 2024 bring? Inflation is still very much with us as are higher mortgage rates. Those two factors alone would suggest that until inflation is wrestled to the ground and we see a reduction in mortgage lending rates, the weaker demand/sales we have been experiencing in real estate activity over the past 12 to 18 months is not likely to significantly change in the near future. My opinion is based on a thorough review of data I pull from our MLS® System as well as other information which I will cover herein.
There are also two other issues to consider that will impact sales in the coming months, the first is the level of inventory that is currently listed for sale on the MLS® System. While some markets across Canada may still have a shortage of homes listed for sale relative to demand, that is not the case here in the Southern Georgian Bay region. Back in 2021 and 2022, properties listed for sale on the local MLS® System like mortgage rates, were at record low levels. Through 2023 and currently in 2024 the number of active MLS® listings has risen steadily. See chart below.
Number of Active MLS® Listings as of January 2020 to January 2024
NOTE: These results are based on total MLS® sales for residential, commercial properties & vacant land in Clearview, Collingwood, Grey Highlands, Municipality of Meaford, the Blue Mountains & Wasaga Beach.
With both Buyer demand as well as their buying power elevated the latter thanks to low mortgage rates, supply in 2021 and for much of 2022 did not meet demand. This triggered multiple offers, robust sales and record high prices. The chart below reflects the MLS® “median” residential sale price our area saw from 2019 to 2023.
MLS® Median Residential Sale Prices 2019 to 2023
The second factor and perhaps the most significant affecting the current market is the increase in mortgage rates. MLS® dollar volume throughout the area in December alone was down 42% from the prior year. For the full year, MLS® sales in 2023 were down 16% from 2022 in terms of dollars sold while unit sales were down by 6%. As of this post, MLS® sales in January are running 39% below January 2023 in terms of dollar volume while the number of properties sold are down 29% from this time last year. The chart below shows the number of properties sold in the MLS® System in the month of January from 2020 to 2024 as of this post.
Total MLS® Sales January 2020 to January 2024
As mentioned in Part 1 of this blog post and as reflected in the chart above, “lack of inventory” alone can no longer be blamed for the decline of sales. Higher mortgage rates, today at close to 7% compared to a couple of years ago are clearly having an impact on Buyer’s willingness and or their ability to purchase a home. A much needed reduction in both interest rates and home pricing has caused some Buyers to step back hoping that both will come down before they step back into the market.
Seldom in the media do we hear any mention of Canadian consumer’s mortgage debt. Based on a recent report by Canada Mortgage and Housing (CMHC), residential mortgage debit in Canada as of January 2023 stood at $2.08 trillion Canadian, an increase of 6% from the prior year. As I pointed out in Part 1 of this blog mortgage debit does not include credit cards, lines of credit or car payments etc. By comparison, the value of Canada’s entire economy is estimated at around $2.1 trillion in U.S. dollars. As stated by CMHC, “With record levels of mortgage debt and the higher cost of living, questions are arising around the ability of Canadian households to make their monthly debt payments.” This in itself may perhaps play a key role in the how well our real estate market performs in 2024 and when we might expect to see sales activity increase.
In my next post I will cover what the major banks are saying about the real estate landscape moving forward. Many of the bank’s clients are facing mortgage renewals in the months ahead. For many consumers, these renewals will be at significantly higher rates especially for those home owners that bought a property 2 or 3 years ago with a 3 or 5 year term mortgage, when rates were at record lows. Undoubtedly some Buyers got swept up in the euphoria of the real estate market that appeared no sign of slowing. Determined to purchase a home and with the fear that prices would only go higher, many got swept up in multiple offers and may have overpaid.
In the meantime please feel free to Contact Me if you have any questions or would like a no obligation consultation pertaining to your real estate selling or buying needs or objectives.