To no one’s surprise, real estate activity dropped significantly in April as the world grappled with COVID-19. While real estate and many related services were deemed “essential” in Ontario, only those with significant need to buy or sell were in the market in April. Here are some highlights from recently released statistics:
April sales plunge 55%
While March sales had been strong, with skyrocketing prices in our inventory challenged sellers’ market, there were already indications that April would be a whole new ball game. Showing Time® which is a 3rd party software and services organization that our Board uses to schedule and manage property showings, reported an 81.1% drop in showing activity across Ontario between March 12th and March 30th. Not surprisingly, this drop-off in showing activity was followed by unit sales in April which plunged 56% for residential properties and 51% for condos.
Average selling prices rise 6%+
The average residential selling price during April was up 6.8% to $521,694 and the average condo sold for $321,813. (up 6.3%) If this seems to be a bit of a surprise, given the relative lack of overall sales, it can probably be explained by the level and prices of available supply.
New listings and total inventory still very low:
New listings also showed a dramatic decrease during April of 57.3% mirroring the lack of sales. This can perhaps be considered a bit of a silver lining, as it keeps the diminished demand in some balance with supply. One key statistic industry watchers consider is the sales to new listing ratio. In April, this ratio was still a healthy 76% which normally would be indicative of a sellers’ market. So there are still a lot of serious buyers relative to the number of listings available. Month end listing inventory is 48% lower than a year ago.
Most military moves on hold:
An important activity in our spring market is the onset of military and other Federal government moves, corresponding with the new government fiscal year in April. Only the most mission critical of these moves are happening and most have been delayed. Though our Board is not able to keep stats on this portion of our market, from our analysis of April sales, it would appear that as much as 20% of our sales shortfall could be attributed to stalled government moves. These may occur later or throughout the year but it will also have a negative effect on both May and June sales, as this is when most of these purchases and sales for those posted to or from Ottawa occur.
How will the rest of the spring play out?
May is typically the # 1 sales month and June is typically #2. (April is 3rd) Assuming a continuation of existing conditions, it is hard to see May sales surpass those recorded in March this year.
Will prices be dropping?
A lot of buyers may be thinking that prices are bound to drop and while they are certainly likely to plateau somewhat, history shows that there is little chance of a significant drop in overall average price levels. In the history of the Ottawa Real Estate Board, average selling prices over the course of a full year have only decreased 4 times (1961, 1962, 1995,1996) and the largest of those annual decreases was in 1961 at the height of the Cuban Missile Crisis.
What is generally more likely to happen if the economic fallout from C-19 is extended, is that real estate just totally stagnates and few choose to either buy or sell. This was the situation in the 1990’s which resulted in years of moribund sales activity, prices that weren’t advancing and a huge decline in the number of real estate agents. Ottawa started the 1990’s with somewhere around 2,800 Board members and that number was down to 1,300 by the middle of the decade. It actually took until 2009 before the Board reached that 2,800 membership number again.
The average selling price during the whole decade of the 1990’s only increased by a total of 8.9% over the decade or less than 1% per year.
It is true that prices tend to follow sales and inventory level trends and with sales and new listings falling in tandem, thus far there is price support, though sellers should not be overly aggressive with their price expectations. Surprisingly, we are still seeing a fair number of multiple offer situations but far, far fewer than was the case prior to mid-March.
Buying and selling in the same market:
The good news-bad news about the market “pivot” (as the Board calls it) is that those who choose to both buy and sell right now, are doing so under the same market conditions.
Most builders are still actively completing homes that are under construction, though there are many delays in possession dates. Builders have closed their sales centres and model homes but like Realtors are going to considerable lengths to accommodate buyers and sustain business by whatever means they can and we continue to see new lot releases and promotions. No statistics available to gauge builder sales results but it would make sense that is somewhat similar to the resale market.
Gord McCormick, Broker of Record
Dawn Davey, Broker
Oasis Realty Brokerage