How’s the Market?
Average Sale price spikes, but fundamentals hint at Seasonal Slowdown
Somewhat inexplicably, we saw an ENORMOUS bump in the average sale price of Residential property in the city of Woodstock, Ontario in November 2017, but a drop in both sales activity and new active listings maintain the status quo in terms of Supply and Demand.
The Seller’s market is showing some serious resiliency. After last month showed a declining average sale price for the first time in years, we are right back to full on favourable conditions for Sellers once again. Inventory dropped month over month from 112 homes for sale at end of October, down to only 89 homes actively for sale in Woodstock at the end of November.
During that time period, the market reported a somewhat disappointing 53 homes sold, which was down 24% from November 2016, and down slightly from Octobers sales numbers.
But the average sale price bumped back up to an astounding $365,990 in November 2017!
This takes us to the metric of supply and demand, known as Absorption Rate. Absorption rate blends supply and demand into an easily understandable single metric. Essentially, Absorption Rate is the story of “How much supply exists, relative to the current demand?” and it is expressed as a number. This number is the “number of months of inventory” currently on the market.
Simply put, if the Absorption Rate were “2”, that would mean that at current demand, all homes for sale would be sold in two months (assuming no new listings come on the market during that time).
It is said that an absorption rate of between 5 and 6 months of inventory is a “balanced market,” and of course as the rate decreases, prices go up as demand outstrips supply. As absorption rate INCREASES, prices drop, as buyers have more options, and therefore have enhanced bargaining position to negotiate better deals in the marketplace.
Check out this chart, which I update every month. It measures supply relative to demand.
Lower Line = Sellers Market / Prices increasing.
Blue Line = Absorption Rate in 2017.
Yellow Line = 2016 (property values increased by 13.5-16%).
As you can see, we have been enduring a period of extremely low supply relative to demand. Also, you can see that August 2017 was statistically the best month to be a buyer since February of 2016, and now that metric has decreased once again, and seems to be holding steady. With days on market at 37 days on average, the atmosphere around buying a home is once again somewhat difficult and competitive. It remains normal in the market for Buyers to be able to include conditions in their offers to their benefit (for example, inspection, and even in some cases more protracted conditions, like condition of sale of their homes), but if the low inventory continues and demand begins to tick back up, we will see a return to the frenzied bidding that dominated much of the first half of the year.
November was more or less consistent with October, in terms of absorption rate, with just a slight dip to 1.68 months of inventory available. That means, even with the decrease in demand, we still run out of houses to sell in just under two months, if nothing else gets listed for sale!
Winter is coming…
Normally by the middle of December, we start to see some winter weather in the area, and along with that, a chill takes over the marketplace. It is difficult to determine what may happen this year, as there are some external factors that may cause a longer deep freeze into the first quarter of next year, namely enormous changes to the mortgage laws in Canada. Heading into these changes, the Woodstock market has shown remarkable resiliency, with a tendency towards favourable conditions for sellers.
With the relationship between demand and supply staying more or less consistent, it is somewhat surprising that the average sale price for a Residential property in Woodstock rebounded incredibly to $365,990 in November of 2017, which represents an increase of 21% over last month, and an Annual JUMP in average sale price of 25.6%. These numbers are extraordinary!
Why such a huge jump?? One good reason for the spike in average prices in this month is that we had only 5 houses that sold for UNDER $200,000, and we had 11 homes sell for OVER $500,000. Because our sample size is somewhat small in Woodstock, Averages can vary quite tremendously from month to month, but we don’t very often see a swing this large.
So, is this a good time to be a buyer?
Well, the fundamentals indicate that this is a sellers market. However, the market has been showing some signs of stabilizing over the past six months. Sometimes, what happens in these stabilizing markets, after periods of intense price appreciation, is that sellers refuse to believe their homes are not worth what they might have been worth 6-7 months ago (when things were ridiculously hot), and set asking prices that are out of touch with a slightly slower market.
If you can find a listing that has been on the market for a while, there’s a good chance that it is overpriced, and the sellers may be open to negotiating better terms, in order to get a deal in place before Christmas. Have your agent search for homes based on their number of days on the market, or be on the lookout for new listings that appear to be overpriced. These are where you’ll find the deals in today’s marketplace.
I often say this, but if I were a buyer looking to time the market, I would keep an eye on the GTA. When the GTA market begins to show signs of heating back up again, you can be assured that the pressure on prices in Woodstock will follow in lockstep, trailing by 30-60 days. This is already beginning to happen again