May 17th 2022
We talked last month about the fact that the market was changing. There were fewer buyers actively looking. Multiple offers were down. In some cases where sellers were delaying presentation for a few days in hopes of generating a ‘bidding war’, where once they might see 12-15 competing offers, now there might be 2 or 3 and in some cases none at all. Well, that trend is continuing through April and into May. If we look at the unit sales reported throughout Niagara, we see there were 758 sales in April. That is down 133 units or 14.93% from March. But what is more significant perhaps is that it is also down 375 units or 33.10% from April 2021. There are simply fewer buyers active in the marketplace.
*Sales data provided by the Niagara Association of Realtors and the Hamilton-Burlington Realtors Association as submitted through Brokerage Members inputted MLS sales.
It’s not so much that the market is running out of steam as it is that the speculators, and in some cases renovators, are getting a little gun shy. You see, when the market is registering 30-35% year-over-year price gains, speculators are lining up to get in. But when the dramatic rise in price seems to be tapering off, they are quick to put the brakes on. And when that segment of the marketplace makes up some 20%-25% of the activity, their departure is significant.
What is surprising however is what is happening to prices. One would expect, with fewer buyers, and bidding wars being much on the decline that prices would be hugely impacted. And it feels that way. In the marketplace, we are seeing a lot of situations where the seller anticipated $100,000 or $200,000 above the list price and just didn’t get it. Agents will sometimes say “they would have gotten $100,000 more a couple of months ago”. And yet, remarkably that is not what the stats are showing.
The average price across the Niagara Region came in at $844,887 in April. That’s down $9,874 or 1.16% from March. Insignificant. And when you factor in the substantial gains we saw come in in January, the April figure still maintains a $92,666 increase or 12.32% over year-end 2021, and a $145,514 increase or 20.81% over April 2021.
The thing with averages however is that it tracks buying habits, not value changes. By that I mean if any given month more upper price homes were sold than the previous month, the average sale price would go up, but that wouldn’t necessarily mean property prices were going up. It would just mean that more homes in the upper price range were being sold. In order to combat any misunderstanding that would cause, Boards have begun to track and report the Home Price Index (HPI) instead of all sales. What they do is follow one segment of the Marketplace. 3 BR brick bungalows between 50 and 100 years old, with attached garages and full basements. Comparing apples to apples. That’s not what I track and report only because with averages I can go back years and see trends. HPI is relatively new. But I thought it would be interesting to see what HPI prices were doing.
HPI Benchmark Price for April 2022 came in at $814,600 compared to $825,300 in March. That’s a drop of $10,700 or 1.30%. Virtually the same as we saw with the overall averages.
Now what I do notice with the average price trends across the region and you can see from our first chart is that while prices spiked significantly in January 2022, and to a lesser extent in February, they have been creeping down each month since. Not a huge decline, but we are back to where we were at the end of January. And with interest rates moving steadily upward, along with the government doing what they can to hamper the market, I expect the trend will continue. The will is there. People want to buy real estate. And for the move-up or lifestyle change buyer, they will find a way. In fact, with fewer buyers in the marketplace in many ways, it’s easier for these buyers to maneuver the marketplace. But with government intervention, it’s going to get harder for first-time buyers and less appealing for speculators to buy property in the days ahead.