Homebuyers, sellers 'waiting and watching' for market to steady

The Ottawa Real Estate Board (OREB) says a combination of ongoing economic turmoil and seasonal market trends are keeping many buyers and sellers on the sidelines, resulting in "expectedly low" residential property sales last month.

OREB members sold 846 residential properties in November through the board's Multiple Listing Service (MLS) system, compared with 1,456 in November 2021, a drop of about 42 per cent. Last month's condo sales were particularly weak, down about 50 per cent from the previous November.

The five-year average for total unit sales in November is 1,270, according to OREB.

"November's sales were expectedly low given the typical slowdown this time of year but they also reflect today's economic conditions," said OREB president Penny Torontow in a news release.

"This is not isolated to our local market. Globally, we're still adjusting to the post-pandemic world and that affects demand, pricing, interest rates, cost of living, supply chain disruptions and more. As a result, those who can, are waiting and watching."

Concern for 1st-time buyers

Average sale prices also declined last month compared to November 2021, with condo prices dropping four per cent to $415,533, and the average price of a single-family home dropping five per cent to $680,031.

Figuring in year-to-date averages, however, prices across both classes have risen eight per cent in 2022, to $454,436 for condos and $774,422 for homes.

"What's concerning about the current market is the impact on first-time homebuyers," Torontow said. "The marked decrease in condo sales, for example, signals that even entry-level properties are being affected. Fluctuating markets, paired with the stress test, are keeping first-time buyers on the sidelines in a tight rental market."

Local rental rates listed on MLS have jumped 27 per cent this year over last, according to OREB.

Ben Rabidoux, founder of market research firm North Cove Advisors, points out that "exceptionally high levels of sales" in 2021 can skew year-to-year comparisons.

"It can make the annual change look maybe a little more dramatic. That said, we are looking at the lowest level of sales since the financial crisis, and it's a pretty pronounced slowdown," he said.

Sellers holding off, too

The downturn was predictable, Rabidoux said, blaming it on rising interest rates, deteriorating affordability and a general lack of confidence in the current market.

"The one thing that I would note that's really interesting — probably even more interesting for me than the low level of sales — is the incredibly low level of new listings coming to market, and we're seeing that in metros really across the country."

In Ottawa, this November's new listings (1,598) were actually up 12 per cent compared to last November (1,429), but down 22 per cent from the previous month (2,046). The five-year average for new listings in November is 1,398.

Ignoring that local anomaly, Rabidoux said the general trend appears to indicate prospective sellers who would have jumped in with both feet are holding off, hoping the market will rebound as quickly as it did after recent six-month downturns.

"There are people who want to sell, who in some cases might soon be forced to sell, but are holding off in the anticipation that the spring will bring a much stronger market."

Looking to spring

Rabidoux believes there will be a "significant supply response" in early 2023, and that could open the floodgates.

"There's very much this tug-of-war right now between buyers and sellers, with neither wanting to blink, and I get the sense that come spring, there will be a lot more motivation on the part of sellers who might have to sell."

With further clarity around lending rates and how high they'll peak, buyers could also become more motivated to enter the market, Rabidoux said.

"There are definitely some buyers who are sitting on the sidelines, too," he said. But Rabidoux cautions against delaying too long.

"My view actually is that home sales have probably bottomed, and aren't really going to go a lot lower from here. They almost can't. You really can't sustain sales this weak for any length of time."

It all adds up to a resale market that's "slightly tipping toward the buyers," according to Torontow.

"Prices are adjusting but real estate is a long-term investment. It's the same reason I tell buyers to marry the house and date the rate."