Q3 Predictions - Where I Think We Are Heading 



If you’ve read my previous blog post, you now have an understanding, albeit a basic one, of what the landscape of the real estate market was coming into the pandemic, and how that catalytic event accelerated a trend that had been slowly evolving over the last decade. If you haven’t, I recommend taking a couple of minutes, and reading that blog post before continuing here!


Now, to recap, active inventory has been trending downwards heading into 2022, with a drop of approximately 80% in the 5 years preceding the pandemic. In Q1 & Q2, we saw new listings outpace number of sales, and by a wide enough margin that we have seen inventory levels climb steadily for the last six months, effectively doubling in that time.


This has put some pressure on those increasing prices, and cooled the market somewhat. Now, a cooling market does not mean the market is cool - just that it isn’t as hot as it was. We are still seeing premiums being paid by buyers on some properties, typically turn key homes that you just fall in love with minutes after walking through the door. Waterfront properties continue to be hot as well, as I witnessed myself in the last couple of weeks, with every waterfront property I showed having an abundance of business cards left behind by the other agents who had shown the property.


Although buyer’s attitudes are shifting in this transitional market, buyer’s are showing they are still willing to pay a premium $ for a premium product. Where we are seeing hesitancy is in those in between properties, i.e. properties that maybe need a little bit of work or updating. Buyers are noticing more inventory coming to and staying on market, and the fear of missing out on the next listing seems to be driving some of those buying decisions, in addition to that fear of the unknown as it relates to interest rates and price trends.


But what does this mean moving forward… Well, it’s prediction time!




1 - New Listings will total less than 400 in July & August



At time of writing, we are sitting at 386 new listings for June (with about 2 weeks to go in the month), and May numbers coming in at 345 new listings. These numbers are a tad higher than the last couple of years, but the numbers for March & April were a little lower. My thoughts are that some of the higher numbers can be explained by cancelled listings that were then relisted at a new price. It’s something we have been seeing on our hot sheets (what we call the daily activity bulletin showing new listings, sold, cancelled, etc…). There are also those trying to capitalize on the market before things slow down even more.


With this being the first summer since the beginning of the pandemic without any real restrictions in place, it’s my feeling that many people will be taking full advantage! Come July 1st, families will be taking trips, going camping, attending concerts and festivals, or whatever activities they have not been able to fully enjoy the last 2 summers. Talk to people in your circle, and you will find that many have plans that have been made for quite some time now. A quick check of hotel & car rental availability will show that getting a rental car, hotel room or AirBNB in July in all the major tourist markets is very difficult! I know this first hand, as I have tried to add plans to my summer, and have found it increasingly difficult to find suitable accommodations. Every campground that I have looked into is completely booked up as well.


New listings of homes over 500k have been more or less keeping up with new listings below that threshold. The ratio seems to be 3:2, with 3 homes being listed under 500k, to 2 over 500k. I see this changing, with listings over 500k dropping significantly, and that margin growing through the summer months.




2 - Number of Sales will be strong(er) as compared to New Listings



I am thinking the number of sales are going to drop, but that will have more to do with the drop in New Listings. The ratio between sales and new listings will however narrow, meaning the difference in the number of sales to new listings will be much smaller than we have seen through Q1 and Q2. This will result in a small dip in the active inventory we are carrying over, but nothing significant.


In early July and late August, we will see sales figures largely driven by properties in the lower price points, with the bulk of the sales in the higher price point occurring in late July and early August. If you have a home for sale through the summer months over 500k, be prepared for more days on market, and potentially offers a little lower than expected as demand will dip slightly as people enjoy their summer. If you’re a buyer in this price point, this could be an opportunity to negotiate a little on price for these homes.


For homes under 500k, or more in line with First-Time Home Buyer price points, I see demand continuing to be strong, as these buyers will be motivated to buy before the interest rate guarantee on their preapproval jumps. Inventory levels will drive a lot of this, but if my above prediction holds true, this space in the market may continue to be competitive throughout the summer as these buyers are motivated to make a purchase.




3 - Average Price $ will go Down compared to Q1 & Q2



We have already seen the price of certain types of homes, and certain neighbourhoods drop slightly. That being said, the average sale price of a home in Greater Sudbury has actually gone up in Q1 & Q2 as compared to 2021, from a low of 491k in January and a high of 505k in March. The rolling average so far for 2022 is pretty much right at the 500k mark. This is a marked increase from the numbers we saw in 2021, where we saw a monthly average peak in October at around 450k. The average price of a home sold in 2021 in Greater Sudbury was just a hair over 400k. All that being said, average price is a lagging indicator of market conditions, meaning it is one of the last statistics to be affected in a transitioning market.


In analyzing the sales data, it’s clear that there were many more homes over $1M sold so far in 2022 than we have seen historically, largely driven by the demand for waterfront homes. Turn-key homes, meaning homes that are updated and worry-free for a buyer for years to come, have continued to fare well, with buyers still willing to pay a premium in competition to secure their home. This has caused the average price to trend higher than it normally would.


As noted above, I see the numbers mostly affecting homes over 500k, and activity will largely be driven by homes in a little lower of a price point. For that reason, I see the average price of a home sold throughout the summer to be much closer to 450k than to 500k. And that’s where I am putting my prediction - I feel we will be within a reasonable margin of the 450k mark in July and August, and see a slight increase in average price in September.


I think we will finish the year with an average price significantly higher in 2022 than we saw in 2021, but I think that will largely be driven by a disparity we have seen recently in the number of homes sold over 500k vs those under 500k. Normally, we would see a much larger number of home in lower price points sell vs the higher, but as prices and values have increased, the new norm is that we will see the ratio of higher priced homes on the market narrow as compared to lower price points.


Caution - Don't read more into this! Average price on a month to month basis is not a good measure of overall market conditions. Prices fluctuate month to month in any given year, and are more reflective of demographics and buyer's personal habits and routines than they are of the state of the market. It's just too small of a data set to give you an accurate picture. Simply put, there are certain times of the year that certain people just aren't house shopping, in particular around peak holiday times.





Now, I may be completely wrong about all of this. Clearly, I don’t think I will be! As I have mentioned before, real estate is very much a game of hindsight, where we look back at the previous weeks and months and say “Yup, that’s what was happening”. But, with a little bit of market knowledge, and an understanding of the trends, it is possible to make some educated guesses that should hold up when all is said and done!


That’s all for now folks! Be sure to check back, where I will break down the numbers as they come in, and see if I was right! I will also start laying the ground work for my Q4 predictions, and how I see the numbers playing out for the balance of 2022!


If you have any questions, have a topic you'd like discussed in a future blog post, or need some help navigating this market, contact me to find out how we do real estate differently and I will be glad to offer any assistance I can!


Enjoy your summer!