May 11, 2022
A couple of months back I went on a tirade about CMHC and how they predicted a market correction of almost 50% in 2021. Well, they retracted that prediction, and have since revised their forecast, stating that housing sales and prices are more likely to increase in 2021 than decline. Soon after the depths of the shut down in May of 2020, CMHC came out with a very bleak unit sales and home value outlook, with good reason. But why did they stick with this for so long? The market was clearly changing direction a month later, with the summer and fall breaking sales records.
It seems we always pick on CMHC and how their predictions are more of a weather balloon than a bellwether. It’s like their job is to temper the market, not predict it. But they were not alone in their pessimistic approach to the real estate market. CIBC forecasted a 5 to 10% decrease in home prices; RBC proclaimed a 7% decline and BMO 5%.
But who foresaw the tidal wave of multiple offers and price gains that would define Q1 of 2021? No one really, however all the indicators were there: a very robust November and December of 2020, which had to spill over into 2021. End of year inventories were at an all-time low; appointments were setting records every week; the sales-to-new listings ratio were in uncharted territory. CREA recently highlighted the national sales-to-new listings ratios, with January at 91.2%, and February at 84% - the second-highest on record. (The previous record of 81.5% was set in 2002). Furthermore, CREA predicted the long-term average for the national sales-to-listing ratio to be at 54.4%.
All of us have access to this number in real time. In Hamilton-Burlington/Niagara, January was 84%/76%; February was 79%/81%; March is 69%/64%. This is good news for buyers and a more incremental gain for sellers as we see “a rebound in supply outpacing the gain in sales,” according to CMHC.
The other big trend which no one predicted was how the upper end would move at warp speed. The pandemic has created growth in personal savings, with people not eating out or travelling. For Canada’s wealthy, this means they are bored, and in order to curb that boredom they go shopping. What other better way to deploy your savings and change your life than by purchasing a luxury home? Back in December of 2020 when you examined residential properties over 2 million in Hamilton-Burlington, 85% of the new listings were absorbed. $2,000,000 plus properties on RAHB and NAR in 2021 have also seen strong activity with January’s sales-to-new listings ratio was 55% and 30%; in February it was 59% and 64%; in March it was 47% and 14%.
The so called ‘Mansion Market’ also experienced a rarity in 2020. After being listed on and off the market since 2016, 1150 Lakeshore Road East, Oakville finally sold. Chester Hall, as it is known, is a 10 acre lakeshore estate, approximately 29,000 square feet of pure old-world luxury. It was listed on the MLS® for $59 million in 2018, and $49 million back in the summer of 2020, showing a cumulative 725 days on market. Some of you may be wondering what the municipal taxes are...$22k/month or a whopping $260,000.00 a year. Well, I have good news and bad news. This property finally sold in October 2020 for less than its assessed value, (that’s a first), at a cool $30 million!!! The catch...it sold PRIVATELY! There must be a great story there for sure!
That real estate story may not have ended well for the seller, or the listing agent, (who has a Hamilton connection). But our company has proven to be the leader in $2,000,000 plus sales in the first 2 months of 2021 as the chart below illustrates.
What do all these numbers all mean? A few weeks ago there was an interesting, but sad statistic that came out, indicating there were as many properties available for sale as there were REALTORS® in the United States. According to my research, in Canada we had 1.5 properties for sale for every REALTOR® in Canada. Furthermore, CREA just predicted a 27% increase in unit sales in Canada for 2021, with a decrease in unit sales year-over-year of 12.6% in 2022.
However, lets put this in perspective. 2020 saw 551,262 properties changing hands in Canada. 2021 is projected to see 702,000 sales, and 2022 is expected to result in 614,000 unit sales. All in all, the future looks bright for our industry. But remember, do not rest on your laurels. Consumers are still looking for great advice, and its uwp to you as a professional to keep in touch with every statistical asset you have at your disposal.