Hello again everybody! I hope everyone had a great Christmas, and that 2023 will be good to you! With 2022 now in the books, I delved deep into the market stats from the last year in order to make some predictions which I will be publishing on Wednesday.
But before we can look forward, we of course need to understand what happened… Last year started off looking great! Prices were continuing to climb, and the market wasn’t yet showing signs of slowing, at least to the untrained eye… As a reminder, I only look at the statistics of the City of Greater Sudbury, and not the Sudbury Real Estate Board’s territory as a whole, which includes Espanola/Manitoulin, east and west on Highway 17, and south on Highway 69 until we meet the jurisdictions of the RE boards of our neighbouring cities.
The truth of the matter was the signs were there for a market correction. I had been saying around the office that I felt 2023 was going to see a small shift in the market, similar to the one we saw in 2013. I had predicted we could see that shift as early as Q1, but that by Q3 we would be well on our way. I had said to colleagues that I felt we would see the beginnings of it in Q1 or Q2, but that we would go through another spring market before the full effect would be known. The uptick in activity typically experienced during the spring market would mute the effects somewhat…
At that time, 2 colleagues in my office (Broker of Record & another veteran agent) wholeheartedly disagreed, and thought I was crazy to think that, and a little too pessimistic about the market… Well, it turns out that I actually wasn’t pessimistic enough!
With the benefit of hindsight, we can see that the peak of the market actually happened right at the beginning of Q1. Some may disagree, as average price on a monthly basis stayed relatively high through Q1 & Q2, but price is what we call a lagging indicator of market conditions. What that means, is it can take several months for market conditions to sort themselves out, and for behaviours to shift enough to have an affect on prices.
In order to appreciate what was happening, we simply have to look at 2 metrics/stats in particular. The first is the increase in Active Listings, meaning the listings that have not sold and are carried over from one month to the other. We saw this number hit a low of 73 in December of 2021, and steadily grow by a factor of 3 by the time we made it to June! That is a pace of roughly double what we had seen in 2021.
The second metric/stat would be the differential between how many New Listings hit the market, and the Number of Sales in a given month. Where we spent a good part of 2021 with sales numbers exceeding the number of new listings, 2022 saw that number steadily climb through the first 2 quarters, reaching a peak of 125 more new listings than we saw sales in June.
Now, I am sure you are all tired of hearing me say it, but the single biggest influence to price in the real estate market is supply and demand. As inflation got out of control, and interest rates began to rise, demand started to wane. And if supply is climbing, while demand is dropping, the effect on prices is going to be a downward trend.
After finishing 2021 strong, with an average price for a home sold toward the end of 2021 in and around the mid-to-high 400s, we started off 2022 with average prices right at the 500k mark through the first 2 quarters of the year. But remember, price is a lagging indicator… Come Q3, we saw average price drop below 450k, and save for a slight uptick in September, average price never exceeded 450k in any month…
Although the average price of a home sold in Greater Sudbury during 2022 was $473,874, we finished the year with the price of the average home being closer to 430k. While that is an increase from the average price of 2021, simple arithmetic tells us that is a 15% drop in average price from the peak.
Now that we know what happened, and why… What does that mean moving forward?
Stay tuned for my next blog post on Wednesday where I will have my predictions for 2023!
Happy New Year!