Hey everybody! With 2022 in the books, we took some time to review last year, and how we fared in the Greater Sudbury Real Estate Market. If you haven’t read that blog post, I recommend giving a quick read!
Looking ahead to 2023, it’s time for me to make some predictions! Now, nobody has a crystal ball, and me least of all… What I am relying on here is my decade-plus of working in the Sudbury Real Estate Market, and my analysis of the market statistics of the recent past, to make educated guesses of what I think the future will hold! Some of these are fairly obvious, while other may be a little bolder!
As I want to get into enough detail with each of them, I have decided to break it down into a 4 part series. This will allow me to go into detail with my reasoning behind each prediction, and engage in discussion about them.
Only time will tell if I am right on any of them!
Well I hate to be the bearer of bad news, and this is only bad news depending which side of the transaction you are on, but… The worst is in fact behind us! We have seen the bulk of the drop in prices that we are going to see. Prices receded 15% from the peak in Q2 of 2022, from a high of around 500k, to about 430k to finish the year in Q4.
In 2023, we will continue to see downwards forces on prices, but only slightly. Interest rates have more or less peaked. We may see another small increase in the overnight rate this year, before seeing rates ease as we end the year. Overall, the change in rates is going to be negligible, and at best I think we will see the overnight rate 0.5% lower than where they were at the end of 2022.
Although we will see some months below 400k average price, I fell we will see some above that as well. At the end of the year, I feel like this will work out in the wash, and we will see an average price very close to $400,000, either just below or just above. Pressed for a number, I am going to guess $396,500. That would represent a further drop of a little less than 10%. And this could be bad news for both sides, as sellers will have to endure a further drop in the values of their homes, while buyers will see that the market is in fact not crashing as they hoped it would.
This news may be particularly unwelcome to many first-time home buyers out there, many of whom were priced out of the market due to the unprecedented increase in property values through the pandemic. I know many are holding out hope for prices to drop to levels where the affordability of a home returns to them. Many are hoping of a “crash”, and thinking prices will drop another 100k. I simply don’t see this being the case, nor do I know of anybody in the industry that feels this will be the case.
However, after reviewing the data, and discussing with some colleagues, it is my belief that will will see most of the gains of the last half of 2021 and first half of 2022 continue to evaporate, leaving us roughly with number in line with the average of Q1 and Q2 of 2021. The average price of a home sold in 2021 was $403,597, and I think we will end just below that number.
All that being said, after a discussion with my Broker of Record, I am gong to begin paying more close attention to the Median Price, as this differs significantly from Average Price. Average Price includes all homes sold, no exceptions. Median Price excludes some “Outlier” properties which can skew the data a bit.
Outlier properties are properties that are so far outside the norm, they sell for significantly less or significantly more that other properties on the market. What we mean by this, is maybe you have an absolute tear down of a property that sells for under 150k, when typical homes in the area sell for above 350k. On the other side, we are talking about luxury waterfront properties. In December for example, we had a single sale of $1.6 million. If we looked at the average sale price for the week, and excluded that 1 sale, it was enough to affect average price by 100k that week.
By doing this, I believe it will be able to give us all a better picture of what price a typical home is selling for by giving more weight to “typical homes” and excluding certain luxury and waterfront properties that are so far removed from the definition of a typical home that they really don’t have any bearing on the overall health of the real estate market. This whole topic will be covered in a future blog post, and I will let you be the judge of my reasoning here.