Vol. 5:1 2020 Real Estate Review
“Sales are likely to register a decline in the range of 19% to 29% from their pre-COVID level before beginning a slow, gradual recovery in 2021. Our forecasts indicate that sales are not likely to recover to pre-COVID-19 levels by the end of the forecast horizon.” - May 27, 2020, CMHC 2020 Housing Market Outlook, Special Edition
The CMHC's predictions turned out to be flamingly wrong. This statement, lifted from a report generated by the department that acts as Canada's national housing agency, is especially astonishing as it was published mere days before the month of June, which kicked off 7 consecutive months of record-breaking sales here in Winnipeg and surrounding area, a trend apparently reflected world-wide.
2020 started off in the usual way but by the end of March seemed to slow as the presence of the pandemic grew, prompting many (like the Canada Mortgage and Housing Corporation, for example :) to predict that it was a sign of things to come. Not so. That lull turned out to be momentary, a slight pause before charging full steam ahead.
A couple of days ago, WinnipegREALTORS® released their 2020 Year-End Stats Report for Winnipeg and surrounding regions, reporting an overall increase in sales of 17%, with 7 consecutive months of new highs and showing no signs of slowing down.
Not Your Typical December December 2020, the most recent of the 7 record-setting months, sales were up 44% over the same period last year and 41% over the 5-year average. The 90 sales of residential-attached homes (duplexes, side-by-sides and townhouses) was twice the total of last December’s sales, gobbling up 90% of existing inventory, while sales of residential detached homes ate up 66% of inventory and condo sales, bringing up the rear, 35%.
The Making of a Sellers Market Record sales on their own, though, are not responsible for the sellers market we have been experiencing over the past several months. There is a corresponding condition of relative scarcity on the listing side of things that has made its own significant contribution, and the combination of more buyers than usual with less properties than usual to choose from has created the perfect storm – sales demand at a record high with active listings going down 38% going into 2021. Indeed, this has been more or less the situation since early spring. The MLS area of Waverly West is a good example, with an overall drop in listings of 10% this year but a 32% increase in sales. Rising House Prices The fierce competition that has resulted has contributed to a considerable increase in sale prices, especially in residential market (as opposed to the condo market.) Overall, the average sale price of a residential-detached home is up 5% to $341,175, with the highest increases recorded in the southwest zone of the city – Waverly West, Lindenwoods, Whyte Ridge, Charleswood, Westwood - where an increase of 8% has led to an average sale price of $460,301.
I had one client with their hearts set on purchasing a Charleswood property that eventually found what they were looking for, but had to pay $20,000 more for the home than it had sold for just 6 months prior, in the so-called “before-times” of February.
Are Multiple Offers Limited to the South West?
No. Attractive, well-built, well-maintained homes everyehere in the city are attracting multiple buyers, and while it has not been uncommon for homes like these to sell for $20,000 - $30,000 over their list prices in years past, this is the first year I have seen sale prices of $60,000, $80,000 and even $100,000 over their list price.
Should aspiring buyers despair?
No. But it is especially important when buying in a market such as this that we double down on our scrutiny of not only the condition of a home, but also its potential for holding and/or increasing its value in the short and long term. And, if you can avoid shopping in the spring, when everybody gets the buying bug, do it.
Should homesellers rejoice?
It depends - a rising tide lifts all boats. If you are buying in the same market you have just sold in, you will experience the same challenges as the buyers who competed for your home and will likely need the boost to your equity you received as a result of multiple offers. Downsizing should be a little easier, though, and if you are selling a home to buy a condo, the potential to come out ahead is significant. (See my November 25th blog, Opportunity Knocking, for a more in-depth look at this particular scenario.)
A Final Few Stats of Interest Sales in rural municipalities are up 40%, with the Steinbach and Morden/Winkler areas being the most popular, sales of vacant land are up a whopping 72% and sales of resort properties up 24%.
A Few Final Words
It seems that the pandemic has increased our desire to create more space around ourselves, which makes sense. So how did the CMHC not see that coming? By focusing elsewhere. My sense, based on the language in their report, is that they were expecting that financial uncertainty created by the pandemic would slow buyers down. As far as I can tell, however- and I am speaking in the broadest of terms - the greatest financial uncertainty has been created in the sectors where wages are traditionally low and, no doubt at partially as a result, many of the workers have no immediate plans for home ownership – I'm thinking specifically of the retail, entertainment and service industries.
Anyone employed in the trades or doing knowledge-based work - where it's your mind but not necessarily your body that has to show up - may have experienced inconveniences such as having to work from home. Their finances, however, have remain largely unchanged - many on fact improved by the record-low interest rates - while their appetite for more space to call their own has grown considerably.
If you have any questions or comments as a result of this blog, please get in touch - I love to talk shop!