After more than two years of robust sales with surging home prices unlike most of us have ever seen, it is amazing how quickly change can happen. The real estate market has clearly changed direction and while opinions vary and the compass has yet to settle on what direction we are headed, it’s clearly no longer a Seller’s market.
Following back-to-back months (March and April) when MLS® dollar sales were down 22% and 19% with unit sales in each month down in excess of 34% from the same time last year, sales in May are following the same trend. While there are still five days left in the month, MLS® residential sales as of this post are down 49% from May of 2021. That is a huge drop in sales at a time when the spring real estate market is typically running full tilt prior to the summer vacation period.
For the properties that have sold on our MLS® System this month, the median days-on-market, the time it takes to sell a home is 11 compared to 9 days in May of last year. When driving around the area, one can’t help but notice that For Sale signs are up for longer periods before a SOLD sticker appears. This is certainly evident in my travels and I suspect your particular neighbourhood may reflect the same.
The MLS® residential list-to-sale price ratio thus far in May is 99.9% whereas in May of 2021 it was 101.6% as many homes were selling for over the asking or list prices. This ratio applies to sales in the six local municipalities which are the Blue Mountains, Clearview, Collingwood, Grey Highlands, Municipality of Meaford and Wasaga Beach. Over the past two years or more, “price reductions” were virtually non-existent this is no longer the case. As of this post there have been 39 residential price reductions in the past 7 days alone on the local MLS® system. The dollar value of these reductions range from $10,000 to $1 million. Of these 39 price reductions, 25 or 64% were for reductions of $50,000 and higher with the reductions representing anywhere from a 2% to a 35% discount off these property’s former list prices. I fully expect the bright orange “New Price” or “Price Reduced” stickers will be starting to make an appearance on For Sale signs provided the time it takes to sell continues to increase.
None of the information I am sharing here should come as a surprise nor should it be construed a “negative” news. Over the past two years or more we have seen a level of housing sales and price appreciation unlike anything that most of us have ever witnessed in our lifetimes. Many including myself knew that the robust if not turbulent real estate market we have experienced was both unsustainable and in all honesty unhealthy for both Sellers and Buyers alike.
We are clearly headed in a different direction and once the market results for the full month of May are known I am sure they will confirm what we already know. How long the downturn in the market lasts is anybody’s guess. While I am not into gambling nor am I an economist, I am willing to bet that what we are seeing is not a blip in sales and pricing that is going to go away in the next two or three months. Believing this to be the case may be like Donald Trump saying that COVID 19 will disappear like magic in a month or two and we all know how that went.
There are two many factors working against a quick turnaround where we will bounce back to surging sales, multiple offers and properties selling for $50,000, $100,000, $300,000 or more over asking. Interest rates are on the rise and inflation is running at a 30+ year high. Numerous media outlets report that some home Buyers who got caught up in the heated market paying well over the asking price are feeling Buyer’s remorse. Some have closing dates that are quickly approaching and with the market softening and mortgage rates rising they are no doubt feeling they paid too much and have perhaps taken on more debt than they should. The possibility of a recession is still lingering and the global economy has yet to fully recover from the pandemic.
Perhaps the most significant factor that we can’t ignore is the matter of price. In my lifetime I have bought and sold eight houses including one in the U.S. and I have been a licensed real estate Broker for over 20 years. Never have I witnessed a real market where so many Buyers bought homes and paid such large amounts of money above the property’s listed sale price. One of my neighbours recently sold their home for $450,000 (30%) over their $1.5 million asking price. In short there are a number of factors here that would suggest the real estate market is not going to bounce back in July, August or early in the fall. Only time will tell if my prediction is right but it’s based more on fact not a gut feeling.
In my next post I will speak to what I feel we as REALTORS® can and need to do to mitigate any damage and best assist consumers in fulling their real estate needs and objectives. Stay tuned or Contact Me if you have any questions about your specific needs or circumstances.