Kitchener-Waterloo Real Estate Market Report for November 2019
18.7% – yes, that is a huge number. That is the price increase we just experienced in November compared to November 2018. The average price of residential homes sold just popped to $566,866. That’s like buying a house a year ago for $500,000 and just 12 months later it’s worth $93,000 more – you can sell that same house for $593,000. Wow!
Detached homes are up 14.2% to an average of $660,071
Condominiums are up 13% to an average of $342,561
Townhouses are up 22.4% to an average of $443,633
Semi-detached homes are up 3.5% to an average of $431,635
Why is this happening?
Well, according to Statistics Canada we have 531,497 more people in Canada than we did a year ago. See here: https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1710000901
That’s a lot of new people. And when you consider jobs and affordability in KW you have to anticipate that a lot of those new people are moving here or population growth is causing people to move here. That brings up the point that our Regional strengths are attracting people – not just new people, but those moving here for jobs and affordability and maybe because of that Blue train that just loves stalking me – surprise, intersection stopped for an eternity and now you’re late!
Here is what sold in November:
424 Total Residential sales: Down 12.4%
265 Single detached sales: Down 1.5%
46 Condo sales: Down 28.1%
75 Townhome sales: Down 38.5%
38 Semi-detached sales: Up 31%
I think that the numbers are pretty clear about what is happening. A massive supply shortage caused by lots of people moving to KW looking for homes, and locals not wanting to leave the area or not finding a suitable place to move in the area. Causing an upward movement in home price.
New Listings in November: 432 – Down 27.9%
Active listings at the end of November: 553 – Down 34%
Only 1.1 month’s supply of homes (seriously!)
The median price also shot up 17.6% to $516,500.
As can be seen in the graph above, the trend shifted in 2016. There was a pop in 2017 right before the Foreign Investment tax kicked in and then a knee jerk reaction the other way. It took a year to get back to the 2017 peak levels and now we see the trend continuing. This is the new normal. Employment continues to be strong and we are all spending.
There has definitely been a lot of fear circling the macro economic landscape – I have definitely been cautious with my future outlook. I felt like a recession was in the cards, but perhaps the new normal allows for slowdowns that recharge the economy resulting in avoidance of any large recession event. Because of very low interest rates, even small slowdowns where people spend less, allow those who have borrowed to get debt under control. When interest doesn’t pile up it’s a lot easier to pay down the principle.
The idea is that markets need to avoid euphoria or overheating in order to have continued success. Home Buyers are not in a frenzy and Sellers are not hitting the exit button to cash in on a topping event. Yes, we can still consider the Real Estate landscape as a Seller’s market because of the strength in entry level sales, but there is enough balance that level heads prevail and the market continues at a controlled pace.
In KW, there are areas of opportunity. Higher priced homes are a relative bargain – there is good bang for you buck currently. Also, investing in rental properties – single detached homes in core redevelopment areas and preconstruction condominiums are my favourites.
The rental market is very strong: we are seeing Millennials and GenXer’s delaying home purchases as they figure out schooling, careers, family life and savings for down payments – all of which seem to be a much slower and longer process these days, which is creating a much broader tenant base. We are also seeing those retiring/close to retirement looking more to rentals rather than attempting to downsize. Downsizing in the current environment where lower priced homes are being bid up and higher priced homes are
relatively weak is not ideal for downsizing. And given the shortage of affordable homes some Buyers are just giving up and deciding that home ownership may not be in the cards.
If you are looking for something longer term that could have big payoffs I think looking to some of the smaller areas around us is a great strategy: Elora, Fergus, Wellesley, Elmira, Ayr, Breslau, Conestogo.
As usual the Real Estate market slows down into the Christmas Holidays and into the first few weeks of the new year. Showings typically slow down, while some Sellers decide to remove their listings for the harsher months of the winter. Buyers are also concentrating on Holidays and kids and they also anticipate increased scarcity of listings which also causes slowing of the market. Keep in mind though that the spring market starts in early February and lasts until about May with a top that typically happens in June for closed sales that were negotiated 30-90 days prior. So if you are looking to sell January is a great time to do those touch ups and fixes around the house. If you are looking to buy use January as a time to research and educate yourself on what’s available and to chat with banks/mortgage brokers about what you can borrow.