Are We Suffering From Housing Hysteria?

   Real estate has always been one of the more popular topics at social gatherings and with current market conditions being what they are, housing sales and prices have become a daily aspect of both social and media agendas alike.

  As a full time real estate practitioner for the past 16 years, I have been trying to come up with one word that best describes what we are seeing in the local housing market and in many major centres across Canada.  That word is "hysteria."  When referred to as a noun, Dictionary.com describes hysteria as: an uncontrollable outburst of emotion or fear, often characterized by irrationality, laughter and weeping.

  So let's break this definition down in the context of current real estate market to see if there is some correlation.

  In recent years, many of the major manufacturers that once operated here and offered the higher paying jobs have left.  Subsequently the real estate market across southern Georgian Bay has become very much driven in large part by those looking to buy a property for recreational and or retirement purposes.  In other words its a discretionary purchase, one in which buyers are under no duress to buy and as such they take their time and rarely get into bidding wars.  All that has now changed.  

  In 2016 MLS® sales across southern Georgian Bay were up 15% in terms of units sold and for the first time ever, sales via the MLS® system of the Southern Georgian Bay Association of REALTORS® broke the $1 billion barrier.  Year-to-date 2017 sales to the end of February are equal to last year so we appear to be on the same pace.  At the same time listings are down 22% so when properties hit the market, multiple offers with properties selling over list price is becoming more and more the norm.  A Collingwood home listed at $399,900 recently received over a dozen offers and sold for $517,500, 29% over the asking price.  This is a clear example that Buyers are faced with an "uncontrollable outburst of emotion" with a fear they may lose out when faced with multiple offers combined with the added fear that prices may go even higher if they don't buy now!  

  Sellers and would-be Sellers endure the same emotions.  While they experience positive emotion with respect as to what they might get for their property in this overheated market, they have a fear of selling and not being able to find something else.  They may also have a fear they are selling too soon if prices continue to rise or conversely they may fear that current market conditions might not last and rightly so, meaning the longer they wait to sell, the less they might eventually get. It's a difficult call and if anyone really knew they'd be rich 

  As a Market Value Appraiser, I find the sale of a house in Collingwood for $117,600 or 29% over the $399,900 asking price to be pretty irrational.  As per the definition of hysteria above, the Sellers are no doubt engaged in laughter while the many Buyers that were on the losing end of the multiple offer frenzy over this property are weeping, then again maybe not.  A few years from now the Buyer of this house may be weeping as well if we have a significant market correction and they find they grossly overpaid.

  The point of all is nobody knows for sure.  Currently there is a surge in the demand for homes especially in places like Toronto which is the predominant feeder market for us.  As long as Sellers can liquidate their Toronto real estate for the prices currently attainable there, these cash rich Buyers in our market can well afford to overpay here.

 An article in the Globe and Mail sums up much of what is happening.  Typically the average house price is about three times median family incomes.  In Toronto prices have spiked to eight times family income which is okay in times of low interest rates but many of us remember what happened the last time mortgage rates jumped?

  So what's the best advice?  First, no one knows how long the current run up in real estate values is going to last.  For years we have heard the many prognostications that the real estate "bubble" is going to burst.  At the end of the day buying and selling real estate is nothing more than a business transaction and it's the role of those of us in the business to treat it that way.  Yes it may be your beloved home or your cherished weekend retreat but with conditions such as we are experiencing, hysteria can set in producing some costly mistakes.

  Rudyard Kipling said something to the effect, "if you can keep your head when all about you are losing theirs..... If you are currently looking to buy or sell your real estate, now would be a very good time to heed this advice.

  As always I welcome you comments and questions.  Please feel free to Contact Me without obligation to discuss your real estate needs and or goals.

  

Lack of Inventory Threatens to Slow Area Real Estate Sales

About eighteen months ago I made the prediction that the only apparent threat to slow down sales in the local real estate market was inventory and that day now appears to be approaching.

Unit MLS® sales across southern Georgian Bay in February were down 4% with 174 properties sold versus 181 in February of last year.  MLS® dollar sales for the month posted an 11% gain as we continue to see robust sales activity in the upper price ranges.  Sales over $500,000 totalled 76 properties compared to 46 last year and that is what is really driving the stronger sales dollar volume.  MLS® dollar sales in February were $75.3 million compared to $67.7 million last year.  The trend of declining new MLS® listings continued in February as MLS® listings for the month were down 12% with 240 properties coming to market compared to 274 in February of last year.


  Year-to-date MLS® unit sales as reported by the Southern Georgian Bay Association of REALTORS  (SGBAR) to the end of February totals  285 properties, 1 less than during the same time last year.  MLS® dollar volume of $129.6 million is an increase of 23% over the $105.4 million in sales in February 2016.  This trend can not continue without a boost in available inventory for sale.  Year-to-date, new MLS® listings are down 22% from one year ago.  Through the end of February there have been 408 new listings come to market compared to 522 in the first two months of 2016.   The lack of MLS® listed properties compared to demand has created a seller's market unlike we have ever seen with multiple offers and properties selling above list now becoming quite commonplace.  A single family home in Collingwood priced at $399,900 drew approximately 14 offers and sold in 6 days for $517,500 or 29% over the asking price.

  To the end of February, single family home sales are down 10% with 168 homes sold in 2017 compared to 187 sales a year ago.  Collingwood is showing the largest year-over-year decrease in single family home sales.  A total of 23 homes have sold this year compared to 41 last year, a decline of 44%.  Wasaga Beach is seeing the same trend although not to the same extent as single family home sales are down just 12% for the first two months of this year.  Conversely, single family home sales in Grey Highlands are up 17% and Clearview is up 33% with 24 sales versus 18 last year.  MLS® single family home sales in Meaford have doubled year-to-date with 10 homes sold.  Sales activity for single family homes in the Blue Mountains on the other hand has remained very strong as year-to-date sales of 27 properties reflects a 35% increase over 2016.    

  MLS® condominium sales have remained consistent with last year, 63 units have sold in the first two months of 2017 compared to 62 last year.  Once again the lack on inventory is holding back sales in this segment of the market as well.  On the other hand, vacant land sales have taken a sharp turn for the better.  After a couple of weak years where residential lots were just languishing on the market, sales in 2017 of 43 properties is a 65% increase over 2016.  Almost 50% of the lots sold this year are in the Blue Mountains where there has been an abundance of lots available.  The absence of available housing to buy is no doubt forcing some to choose building their own home as a viable alternative.

  The remaining nine months of 2017 will no doubt prove to be interesting. Spring typically brings with it an upturn in MLS® listing activity and while this will no doubt come about over the next couple of months, I do not believe that we will the magnitude of listings needed to quench then insatiable thirst that appears to exist for southern Georgian Bay real estate.  I hope I am wrong.  The current market cannot sustain itself with the significant imbalance that now exists between demand and supply.  A day of reckoning will come, it always does and a soft landing is better than a crash.

 For a no obligation review of current market conditions as they relate to your home or area property please do not hesitate to Contact Me.

Southern Georgian Bay Condominium Sales Growth Outpacing Single Family Homes.

  As noted in a prior post, MLS® sales across Southern Georgian Bay in 2016 reached a new record for dollar volume with total MLS® sales exceeding $1 billion.  Condominium sales were an integral segment of this growth with condo sales for 2016 growing at a faster clip than the rate of increase for single family homes.

  Area MLS® condo sales for 2016 totalled 554 units an increase of almost 17% over 2015.  Single family home sales grew by less than half that rate with sales up 7% in 2016.  Collingwood represents the largest segment of the areas's condominium market.  MLS® condominium sales in Collingwood last year totalled 285 units or 51% of all the units sold.  These sales do not include the sales of new units in developments such as Wylde Cove which is virtually sold out.

  From my experience condominium sales are growing briskly for two reasons.  First they are a more affordable housing alternative than single family homes especially for first time buyers.  Let's take Collingwood as an example.  In 2016 there were 381 single family homes sold in Collingwood an increase of 6% over the number of homes sold in 2015. The average price of these homes was $440,200.  Meanwhile the average MLS® sale price of the 285 units sold in Collingwood last year was $288,600.  That is a difference of over $150,000 or 34% and would make a big impact on a buyer's ability to secure financing.

  The second reason is lifestyle. This area is attractive to both buyers looking at purchasing a property for recreational purposes as well as for retirement.  The condo lifestyle may not be for everyone but for those that are tired of cutting grass, shovelling snow and doing other home maintenance tasks, the condo lifestyle frees them of those responsibilities allowing them, to ski, golf, boat or to head south for the winter worry-free albeit at a price in the form of a monthly condo fee.

  As with our overall market there is a severe shortage of condominiums actively listed for sale.  As of the end of January, the MLS® system of the Southern Georgian Bay Association of REALTORS® (SGBAR) there were 79 listings, less than a sixty day supply based on prior year sales.  Many that have recently sold have done so with multiple offers rendering a final sale price well above asking.  Currently there are just 18 condominium units in Collingwood listed for sale on the local MLS® system which is less than a one month supply at the current rate of sales.  By comparison there are 53 active MLS® condo listings in the Blue Mountains a 3.5 month supply of which 41 units or 77% are in the Blue Mountain Village.

  Recently I help manage the sale of a small condo in Collingwood listed by a colleague.  It was a three bedroom one bath unit located in central Collingwood listed at $169,900.  There were a total of 17 offers which to my knowledge was the largest number of offers ever recorded for a listed property in our market.  The unit sold for $202,000 which was almost 19% over the asking price.

   As we approach spring we can anticipate seeing a ramp up in the number of active  condo listings on the MLS® system.  Many of these properties may be currently rented for the ski season or are being used by their owners.  I anticipate however that inventory will remain tight relative to demand which makes it an ideal time for sellers to dispose of a property they may no longer have a need for.

  If you have a condominium property that you may be considering selling or if you are a buyer actively looking for a condominium property in this area, please feel free to Contact Me for a no obligation confidential discussion about your particular real estate objectives.  Helping you to make an informed decision is something I am more than happy to assist you with.