The real estate market really has been one intense roller coaster ride these last few years! I have spent a good part of the last week analyzing the historical data, and trying to extrapolate what is going to happen moving forward…


David from our office made a comment the other day that “we’re inside a tornado, and it’s almost impossible to see what’s happening on the outside!”. He’s not entirely wrong, and this is surely how it must feel for the layman… Even for those of us in the industry, it can be difficult at times to predict what is going to happen. Real Estate is often a business of hindsight…


All that being said, in order to understand where we are going, it’s important to look at how we got here. Many people, both within the industry and outside of it, have cited many reason as to why the market is where it’s at and why we got here. The truth is actually much simpler than anybody thought…


The answer is as simple as this - Supply vs Demand. It really is not more complicated than that! Like any other commodity, housing prices are driven by supply and demand, and more specifically what people are willing to pay for a home in a market with limited supply.


Over the last 10 years, we have seen inventory levels, meaning the active listings that carry over month to month on the MLS system, trend downward. You’ll notice on the graphic below that active inventory (blue line) steadily trend downwards over several years. Meanwhile, the number of new listings coming to market (green line), as well as the number of sales (grey line) has been fairly steady, with a slight upward trend. 



The inventory levels peaked around 2015/2016, seeing spring market levels around 1000/1100 active listing on the SREB MLS, and then declining from there. Between 2016 and through 2019, we saw inventory levels drop by about half, to spring market levels in the high 500s/low 600s.


And then the pandemic hit… This saw inventory levels drop by half again, except instead of taking 3 years as we had previously seen, this happened almost overnight. In 12 short months, we saw inventory levels drop to below 200 active listings by the time December 2020 rolled around.


If we zoom in on the specific time period immediately preceding the pandemic until now, you will see just how dramatic that decrease in inventory was once the pandemic hit. Whatever the reasons, we saw inventory hit historic lows! Most interesting, was that inventory levels for the first time in history dropped below the level of number of new listings and number of sales. This happened in January of 2021, where the number of new listings hitting the market was the same as active listings carried over. See how that blue line drops below the green and gray ones starting in January 2021. Meanwhile, the number of sales was more or less keeping pace with the new listings, meaning that for every listing that came to market it was offset by the sale of another, further adding to the downward trend of inventory. 



Now, demand did increase slightly, largely driven by the lowest interest rates I have seen, but that increase wasn’t nearly as dramatic as the drop in inventory which saw a 80% drop in just 5 short years. That’s roughly 800 listings that were once on the market and no longer were! Incidentally, starting in January 2021, we saw the greatest increase in average price in the history of the Sudbury Real Estate market. The catalyst this this was the crossing of those lines.


As Realtors, we saw this coming. We knew that prices in Sudbury were due to increase, as we lagged far behind other similar sized cities throughout Canada for property values. I think we would all agree that none of us saw this happening as quickly and dramatically as it did, but the fact of the matter is that it did, and when you review the data it’s not hard to see why!


Less houses for sale, plus more buyers leads to increased demand, which leads to higher prices - plain and simple. But when the availability of product drops below the level of demand, then a feeding frenzy takes places, and things accelerate!


Like any other market, things don’t stay white hot for too long, and things eventually cool. The market, as I’m sure any of you has felt, has lost some steam as of late. It’s still a hot market, but with more listings coming to market, and less sales by comparison, inventory levels have started to climb once again. New listings have continued to outpaces sales since early 2022, which has seen inventory levels increase from a low of 98 listings at the end of January 2022 to 215 listings at the end of May 2022.


And that is how we ended up where we are today, as we wrap up Q2 2022. Now that you’ve got an understanding of how we got here, you’re ready to see where I think we are going! So, be sure to check out my next post where I discuss my predictions for Q3!


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