As stated in my previous blog post titled “The Bloom Is Off The Real Estate Rose,” MLS® sales activity in the southern Georgina Bay region and in other markets across Canada has dramatically changed. The days of robust sales with multiple offers and properties selling for well above their asking prices are over. Many of us in the real estate professional as well as knowledgeable consumers knew that sooner or later, the real estate market would shift from being strictly a Seller’s market to one reflecting a more balanced level of sales wherein Sellers and Buyers were equals rather than adversaries.
After a strong start to 2022 with MLS® dollar sales in January and February up 37% and 8% respectively, sales in March dropped 22% from March 2021. Decrease sales has continued in each month with sales in April down 20% while May through August sales have been 37% to 49% below the same months last year. There would appear to be no end in sight in the foreseeable future and personally I believe this trend will continue into 2023. Note: In terms of these statistics, I am referencing real estate sales in the six municipalities that make up the southern Georgian Bay region specifically the Municipality of Meaford, Blue Mountains, Grey Highlands, Collingwood, Clearview Township and Wasaga Beach.
The chart below reflects the percentage change in MLS® sales for the above referenced areas January through to the end of August. There is no denying that the change in the level of MLS® sales activity hasn’t been both dramatic and fast. The computer generated “trendline’ shown in red indicates this downward trend in sales we are experiencing.
Monthly MLS® Sales Volume % Changes in Dollars Sold
Since entering the real estate profession over 20 years ago I have always paid close attention to the data that can be extracted from the MLS® System. See the Complimentary Market Reports page of my website for the reports I prepare monthly in addition to the quarterly reports I do on the condominium and luxury home segments of the market.
While MLS® sales dollar volume and unit sales are important pieces of data to analyze and share with consumers, they are not the only statistics that we as real estate professionals need to be aware of and share with our valued clients in order to help them make informed decisions whether they are selling, buying or both. The number of properties listed for sale on the MLS® System, days-on-market, median sale prices, list-to-sale price ratios which is the percentage that properties are selling for relative to their listing/asking prices and other statistics are all important numbers to be aware of.
On a monthly basis, media outlets on television, radio, online and in print focus heavily on the “average price” for residential homes in their particular coverage area. As a full time REALTOR® along with my Market Value Appraiser – Residential designation (MVA), I learned a long time ago that average prices are somewhat meaningless as they can fluctuate significantly month-to-month based on the sheer mix of housing sales.
Example: If home sales in a given market see a jump in sales in a given month, quarter and annually that are priced over $1 million in a market where homes are typically $500,000 to $600,000, the “average price” can increase upwards dramatically. Conversely, if for some reason there is a sudden increase in home sales at the lower price level of a given market, the “average price” may be negatively affected with a decrease in value which may not accurately portray an entire area or subdivision. Due to these rapid fluctuations, even the Canadian Real Estate Associations who is the owner of the MLS® System is now focusing on “median” versus “average” sale prices as well as on the MLS® Home Price Index (HPI) which is the most advanced and accurate tool to gauge home price levels and trends.
Median sale prices provide a much more accurate picture of the market and where prices are going. While median prices can fluctuate, they do not swing wildly up and down as average prices do. This is of even greater importance in today’s real estate market which is clearly in a state of rapid change. Below is a chart that I prepared comparing residential “median” sale prices in the six municipalities I have mentioned above for 2021 versus 2022 through to the end of August.
The purple “trendline” for 2021 shows that MLS® sale prices for residential homes trended upwards last year whereas for the first 8 months of 2022, the red trendline shows that MLS® median sale prices for homes are for the most part trending downwards and that trend started back in March.
MLS® Median Residential Sale Prices 2021 vs 2022
Another key factor I look at monthly is the “List-to-Sale Price” ratio which is a percentage measurement as to what a property sells for versus its listed or asking price. Traditionally, an overall MLS® sale price ratio in the 95% to 97% range of the asking price(s) was quite common once total sales for the year were were lumped together. Yes some properties may have sold for 99% of their asking price but others may have sold for well below 90% of their MLS® listed or asking price. Combining all sales together typically yielded an overall annual ratio of 95% to 97% for the year entire.
The past two to three years were anything but normal years. First, with strong demand and a low level of homes listed for sale on the MLS® System, the market saw an abundance of multiple offers, offers with no conditions for home inspections, financing or the sale of the Buyer’s current home. It was clearly the highest price wins scenario ie: who is willing to cough up the most money over the Seller’s asking price. That factor alone drove the monthly “Listing-to-Sale Price” ratio for home sales to new levels unlike anything that we had seen in years.
The chart below shows the monthly MLS® residential List-to-Sale Price ratios for 2021 and for the first 8 months of 2022. in 2021 the List-to-Sale Price ratio peaked in April at 103% after which it fluctuated for the balance of the year. For the overall year, the purple “trendline” reflected a decreasing ratio. As 2021 progressed, Buyers were becoming weary of multiple offers and the resulting price wars. Some choose to pause and wait things out, others continued to buy but as the level of competition started to decline, so did the List-to-Sale Price ratio for homes sold. The red trendline clearly reflects a relatively steep decline in the residential List-to-Sale Price ratio for the first 8 months of 2022.
MLS® Residential List-to-Sale Price Ratios 20221 versus 2022
With the arrival of 2022 came a further reduction in both MLS® sales including multiple off “bidding war” activity. As mentioned above, after a brief increase in MLS® sales through January and February, sales activity in 2022 dropped in March and this has continued right through to the end of August. It therefore came as no surprise that the MLS® List-to-Sale Price ratio would decrease in conjunction with reduced sales and less competition amongst Buyers therefore fewer multiple offers coming forth.
Another factor that has caused the List-to-Sale Price ratio to decrease in 2022 is Seller price reductions. With fewer offers and a significant reduction in both the number of multiple offers and overall Buyer interest stemming from increased lending rates etc., Sellers that are truly committed to selling, must come to the realization that we are no longer riding the crest of a wave in a Seller’s market. In order to sell a home or any other property, the listing price must be realistic to both the Buyer(s) as well as the banks if lending is involved.
The days of Buyer’s being willing and able to over-pay are gone. This coupled with higher mortgage rates and lenders looking for assurances that what a Buyer(s) is willing to pay is consistent with a property’s true value have all contributed to creating the downward trends we are seeing not only on MLS® residential median sale prices as well as on the List-to-Sale Price ration but on listing/asking prices as well.
After a virtual absence of price reductions in our local MLS® System, over the past two plus years, they are once again commonplace. In the past 7 days, they have been 74 Seller price reductions in the six above mentioned municipalities. These reductions range from a low of $4,100 to $300,000. More on this in my next post.
Regardless of the information contained herein, we still have a strong albeit a changed market. Inventory of homes listed for sale on our MLS® System remains relatively low and for those seriously considering selling now is a good time. Realistically priced, your home, condo or other property will sell. Based on my knowledge and expertise as a Market Value Appraiser I can say with a high degree of assurance you may well get today the highest return on your investment ever. Conversely if you are a gambler and are willing to roll the dice and wait, there is a 50/50 chance your sale price in a few months or more will be less than it could perhaps be today. That’s just the market we are in here both locally and across Canada as well.
Whether it’s your desire to sell, buy or you just want more information to help you make the right decisions about your real estate needs and or objectives, feel free to Contact Me for a no obligation consultation. As always my only goal is to help you make informed decisions. “Everyone deserves an exceptional life!”