Feeling confused? Scratching your head about the market? You’re not alone.
This is a strange time in the real estate market here in the Collingwood – Blue Mountain area. Not a day goes by that I don’t hear another REALTOR® say things like, “I don’t know what to make of this market” or, I’m shocked that property hasn’t sold” or, “I’m stunned it sold for THAT much.” One day we are dealing with multiple and bully offers on a property and the next we are holding a seller’s hand who is concerned they are not getting showings on their home. So, what is going on and why?
I decided to dig a little deeper to try to figure it out. First, let’s look how things have changed from this time a year ago.
2017: Remember, the spring of 2017 was a frenzied market the likes of which we had not seen in almost 30 years. 70% of properties that sold in our area were on the market for less than 30 days and in some months, the sales-to-listing ratio (the percentage of properties sold versus listed) was nearly 100%. There was a huge imbalance of supply and demand.
Fast forward to this year. Year-to-date in 2018, only 57% of properties that sold went in the first 30 days. I can’t believe I’m saying “only 57%” because that is still a very strong market. The sale-to-list ratio is down to 97.91% (from 99.3% in May 2017) but that’s still darn good. Today, 20% of properties sold are on the market for 31-60 days instead of the 12% last year. On average, properties were on the market last spring for 40 days and now it is 46 days.
The number of residential sales in our area of the Southern Georgian Bay region is down 27% from last year but both the average and median sale prices are up marginally to $477,622 and $415,000. The number of new and active listing is WAY up from a year ago however still well below the levels we saw prior to 2016.
So the high-level conclusion I would draw from the above is that the market has steadied itself to some degree and that is likely due to the increase in the supply of available properties for sale. The urgency is gone from the market as we begin the return to more balanced market conditions.
There is something else though that needs a deeper dig. There are some unusual anomalies in the market. Here are some examples:
- In the newer middle-class subdivisions such as Georgian Meadows, Creekside or Mountaincroft, there was nothing for sale a year ago. If a listing came up, there were multiple offers within days and they almost always sold well above the asking price; most of which ran $600,000 to $750,000. Fast forward to this year and there are dozens of homes for sale in these areas with few offers on them. Asking prices have come down with many now in the $500’s.
- Every day, we get a report on our MLS® system that shows the number of active listings, sales, etc. It also shows the number that are “back on the market.” These are properties that sold conditionally and then the buyers backed out. In speaking with agents, the vast majority of these are backing out because their financing was not approved. More on that in a moment.
- Houses with apartments in them or condos where short-term rentals are permitted are selling in many cases, over their asking prices.
- Houses in the downtown core of Collingwood are getting record-setting prices and fast sales.
- Properties in the lower price range of the market, under $450,000, are still often getting multiple offers.
- Condos, especially those with garages and, those in premiere developments like Lighthouse Point, are selling fast and for over-asking or at least for top dollar.
- Chalets in prime areas are getting multiple offers and selling over asking if they have water access.
The conclusions we can draw from this is that the market has been affected by the new mortgage stress test rules. The national media and banks downplay the importance of this but I really believe it’s been a significant driver. The properties selling briskly in our market are in lower price ranges or, they are ones that may sell to people not affected by mortgage rules. Middle-class family homes have seen the most impact from market changes and it’s not a surprise.
Impact of The New Mortgage Rules
If we take the example of a couple earning a gross income of $120,000 a year with no debt and an available down payment of $50,000, last fall they could have qualified for a mortgage that would allow them to buy a home valued at about $670,000. Under the new mortgage stress test rules, that same couple will today only qualify to purchase a home valued at $518,000. Purchasing power has dropped generally by about 20% or so and this, in my opinion, is the key factor affecting the market. It impacts investors, first-time and middle range buyers in a significant way.
The dream of homeownership is very much alive and the demand for homes in our region remains strong. Who wouldn’t want to live here? The market is healthy but it is changing. Sellers need to be competitive in pricing and, homes need to be the “best in class” as they now have competition from other sellers. Middle-class homes and older chalets may continue to be stressed as the market corrects itself and a new normal settles in.
Market statistics derived from the Southern Georgian Bay Association of REALTORS® MLS®