The Ottawa Real Estate Board announced on Friday that resale home prices dropped by 2% in May compared to the prior month, which is yet another obvious indication that skyrocketing prices and interest rate rises are cooling a once-hot market.
The average residential-class property sold for roughly $802,000 last month, up 8% from a year ago but down more than $25,000 from April. The average condo sold for slightly under $473,000, an increase of 11% from the same month in 2021 but a $1,000 decrease from the average price in April.
Earlier in the year, when home prices were increasing by as much as 12% a month, this was in complete contradiction.
In May, total sales decreased considerably compared to the same month last year.
While the industry was still not back to normal in May, there were numerous indications that it was attempting to do so. Residential listings reached their highest level since November 2019 at 1,645, an increase of 18% year-over-year.
Similar to a year ago, there were 470 condominiums listed. Recently, there has been increasing action on the condo market, in part because first-time buyers were unable to purchase homes.
There was also an increase in the amount of time it took for homes to sell after they were first listed. In May, houses typically sold in 14 days as opposed to 11 days in May 2021
However, unless stocks exceed at least one month’s worth of sales, the resale market cannot be deemed fair.
Resale prices in Ottawa began to rise quickly enough to cause the imbalance three years ago. The average price for a residential resale in May 2019 was only $494,000, and annual price growth was less than 7%. Since then, the average gain has increased by 63 percent to around $310,000.
Three years ago, in May, condos sold for $281,000 each. By the end of last month, the price had increased by about $192,000, or a 68 percent average increase.
Things have changed—both positively for a cohort of households who just so happened to buy real estate in 2019 and negatively for tens of thousands of would-be owners who either paid more than they anticipated to enter the market or were left back.
Data from the board for the month of May maintains a recent decreasing trend that signaled a significant change from the beginning of 2022, when trading volumes rocketed well above historic rates and bidding wars for houses were frequent.
Climate is a Contributing Factor
Ottawa’s resale market is changing away from the scorching pace of 2021 with year-over-year resales dropping in March and April, and now with this negative trend extending into May, historically the top-performing month for resales.
A major factor in the previous month’s underwhelming result was the weather. The potent and terrible storm that brought Ottawa to its knees has rightly damaged the market. As if higher interest rates, cost of living, and inflation weren’t enough reasons to trigger a downturn.
As the demand for homes declines, Ottawa’s supply of available inventory keeps expanding.
Notwithstanding a steep fall in new listings following the terrible storm of May 21st, 3,120 extra properties were listed last month, which is 5% more than the five-year average. While the city’s condo stock slightly decreased in May the supply of residential-class residences increased by 18%.
One-month sales cycles are the sign of a balanced market, but even if that is still far from being the case the city is getting closer to that condition.
While sellers may be experiencing a slight increase in pressure, buyers will have a little more room to breathe should this tendency continue.
