Market Watch Q1
How’s the Market Looking in Q1 of 2022
Market Momentum Shifting
After hitting a high of 129,188 sales in the year-ending of June 2021, sales have reached a total of 118, 563 during the latest 12-month period continuing a lower trend in number of sales. Across all house types, supply remained low at under one month.
Detached inventory was the highest at 0.9 months, following are condo apartments at 0.7 months and Finally it’s semis/rows/towns at 0.6 months. According to the graph above you can clearly see the decrease in number of sales during the February periods year over year.
The number of sales is usually an indicator for demand, the thought is usually if there are less sales there are less people interested in buying properties at this time. However, a decease in sales can also be due to an increase in price resulting in people being unable to buy properties. Another reason could be due to little supply available thus resulting in a lower sales number. There can be multiple reasons for the numbers to decrease so keep that in mind as you continue to read ahead.
Despite Improvement in supply, Prices continue to Soar this Quarter
Despite slower sales, low supply continued to put upward pressure on detached prices in February that grew 31% year over year.
The strongest monthly gain in prices was for condo apartments, however yearly it’s still trailing behind the other housing types at 25%.
Huge Sales Growth in price ranges of $2m+ Detached homes and $900-900k Condos
Change in Detached sales
Annual sales growth continued to be led by the high-end market for detached homes with sales up 85 % for $2 million plus homes.
In Contrast, sales were down 85% annually for the low end of the market represented by detached sales under $900k
Simply put this graph is telling us within different price ranges, which ranges has had an increase in sales growth and which ones had a decrease change. As in within the ranges shown, which ones had more or less sales and by what percentage.
Condo apartments have had the sharpest decline in sales for those within the range of under $500k, it fell by 87% year over year.
The strongest gains in sales were for units in the $700-799k and $900-999k ranges at 157% and 161%, respectively.
What is a Supply Indicator?
New Listings has a stronger increase than normally for it being this time of year by 77% month over month. This is still considered a seller’s market despite the increase on new listings.
Monthly increase in active listings was still not enough to keep inventory levels from rising meaningfully as supply remained below one month (0.8) for the fifth consecutive month.
The market has eased somewhat during March, likely due to a combination of more supply. High prices, and the psychological impacts. The psychological impacts include the first interest rate increase by the Bank of Canada since 2018 and heightened uncertainty stemming from the Russian invasion of Ukraine.
What’s a Price Indicator?
Being that there has been intense competition for home, the average selling price has risen 28% year over year. February had a record high of $1.33m overall. The average selling price in February rose by $290k compare to a year ago. Compared to 2 year ago, prior to COVID-19, prices have increased 47% (+$425k).
Predictions
It is expected that the Bank of Canada will remain focused on fighting off inflation which faces continued upward pressure due to ongoing supply chain issues, soaring gas prices, and an economy operating with little spare capacity.
The resulting rise in mortgage rates is expected to lead to more moderate levels of housing demand. Although sales are likely to remain supported by a large number of buyers still waiting on the sidelines and record numbers of new immigrants.
The impact on demand is likely to fully materialize only after a number of interest rates increases. The market should rotate from expensive detached properties to condo apartments. Condos, and rentals stand to benefit from the sharp erosion in affordability caused by the substantial level of price growth for low-rise housing over the past 2 years.
The market is still showing a strong upward price momentum, next quarter’s data will most likely show some level of calm starting to set in.