Take into consideration the date is January 31st, 2022.
Everyone likes to discuss Real Estate. You can cozy that topic right up there with weather and politics. You can predict that a major part of being a Realtor, even when not selling property, is simply talking about it… to practically anyone.
The first question on most everyone’s mind is, quite simply, is “what the hell is going on with the market & why is it so costly so quickly?”. While the answer is going to continue to evolve (hence Volume 1), I am going to give some insight to the market right now and why it is acting the way it is. Perhaps a little hope as well.
Supply & Demand
One of the most basic features of economics is the most accurate reason we are in the situation we find ourselves. We have an issue with housing – both affordable in style and quantity. This month the CREA (Canadian Real Estate Association) released an article (found here) outlining data from the country consisting of a breakdown of December 2021 – and some key points are:
- 1.6 Months of inventory – a “Goldilocks” zone would be 5’ish months of inventory.
- National HPI (Home Price Index) up +26.6% in December 2021, a record increase.
- Annually – Home sold 2021 vs 2020 – up +20.7%
- Annually – Home sale price 2021 vs 2020 – up +21.1%
The question is not whether demand can keep up this pace. The demand is definitely there. The question is whether we’re going to run out of homes for people buy. There were actually fewer homes listed for sale on Canadian MLS® Systems on New Year’s Day 2022 than at any other time in the database’s history going back to the 1980s.S. Cathcart – Dir. and Sr. Economist, Housing Data and Market Analysis CREA Jan 27/2022 “New Year, Same Housing Story”
Now let’s apply that to what we are seeing in Windsor-Essex. Our inventory, while I do not have the latest January data (will come soon), from what I have seen we follow the trend of “insufficient” in Supply – making the Sellers market we have. That is reflected in the quantity of offers on houses in the price range for first-time buyers. The more competition in demand, the more difficult it is to get the home. This is the main cause of frustrations, but it does not apply to all homes. Interestingly, the quantity of competition decreases as the list price of the home increases.
Let’s look at it in a round number of “100 buyers in the market”. While this is anecdotal and just for reference, consider 70 of those 100 to be looking in the same price range (just for a placeholder, we will use $350k-$550k). Again, that is not based on confirmed data, but does account for the price band bottleneck we see, and is one of the reasons you see a considerable amount of offers on desirable “first-time home” priced properties. Keep that in mind if you are researching homes. For the buyers reading this, the best advice I can offer is – keep going. If you are a first-time buyer, the process is likely going to be frustrating, but a good Realtor will help you through it.
Competition and Inflation
As touched on in the last paragraph, this demand portion is increasing and is not likely to slow down. With record international immigration and the middle-age of our demographics – over 4,000,000 Ontarians are between 25-44, the most of any band of age (reference here) – this trend is going to continue.
This again affects the range of first-time buyers and will likely continue to do so. I cannot see into the future; had I have been able to I would have bet $100 that Stafford would be in a Super Bowl in 2022.
Some Blame the Boomers – I Do Not
A recent National Post article made the headline: How Baby Boomers are Breaking Canada’s Real Estate Market; and followed it with an article with the journalists concluding the housing supply crisis is due to an emerging trend of the Boomer generation not wanting to leave their homes for retirement homes. It goes to state some points about how the “real-estate wealthy Boomers are to blame for yet again disrupting markets”, while citing industry documents.
I recommend reading the article (cited above), so you can make your opinion. However, since you are here I’ll give you mine as well. Stop blaming boomers for everything. Boomers do not want to downsize for retirement homes? Likely, that is because they saw during this pandemic how poorly they are run, as was noted in the article. Can you really blame them? Also, it is their home and they can do what they like with it. Do we really want to blame people for planning their retirement properly? We praise people who invest their hard-earned money and become upset when they would like to live life on their own terms.
If supply is the concern of the article, then we need to address it as a whole – and that is exactly what the OREA is trying to do.
More Homes, More Choice Act
If this is your first-time hearing of this provincial legislation, you are not the only one. You will likely hear more about it this year in particular, as it’s a hot ticket in discussion for politicians wanting to be Premier of Ontario. Perhaps some good news is on the way.
As we know, and cannot be said enough, we are in the middle of a ‘historic housing and affordability crisis in Ontario’. Not my words, but those of the OREA (Ontario Real Estate Association) President David Oikle. This comes from an excerpt of a January 19th press release from the OREA regarding this issue – found here.
“The More Homes, More Choice Act got us on the right path but more work needs to be done. The Housing Summit was a good idea to ensure municipalities are not only given the tools to increase supply and choice, but also held accountable to use those tools. The future of the Canadian dream of home ownership in our Province depends on it.”D. Oikle – OREA President on the More Homes, More Choice Act. Jan 19, 2022
We do need to find balance in this Sellers market here in Windsor-Essex, and I would like to go on the record to say the one of the worst feelings in my job is letting a client know their offer was not accepted. I know how much this home means to you. I will work hard to get you as much as I can, so the best feeling can be felt by all – getting an offer accepted