THE RIDE OF 2023 IN THE NIAGARA REAL ESTATE MARKET
In the ever-fluctuating landscape of real estate, the Niagara region has experienced a tumultuous journey in 2023. From initial hope in the first two quarters to a sudden downturn marked by rate increases, the market has been on bumpy ride. This bLOG delves into the nuances of the Niagara real estate market, exploring the factors that shaped its trajectory and forecasting what the future might hold.
Spring Hope: Q1-Q2, 2023
The beginning of 2023 brought hope to the Niagara real estate market. In May, sales showed a promising improvement, hovering just 7% below the 10-year average – the closest it had been since April 2022. Listings were also nearing normal levels, with March witnessing a 2% increase and April experiencing a 7% decrease.
The period from February to May saw prices surging at a rate of 3-5% per month, culminating in a substantial jump from $637,000 in January to $741,000 in June. However, the optimism was short-lived as interest rates increased by 0.25% in June and another 0.25% in July, leading to an instant impact on the market.
Instant Impact: Sales Drop, Listings Jump
The repercussions of the rate increases were swift and pronounced. Sales plummeted to 25% below the 10-year average, while listings spiked to 25% above the 10-year average. Niagara's Average Selling Prices (ASP) reflected the changes, with consecutive declines from July to November:
July: $721,397 (-2.6%)
August: $686,066 (-4.9%)
September: $679,066 (-1.0%)
October: $676,006 (-0.5%)
November: $664,503 (-1.7%)
St. Catharines experienced wonky data due to low volume, especially in October, which saw the highest monthly number of sales over $2 million, making it the highest monthly ASP since spring 2022. However, November revealed a different story, with the median sale price hitting its lowest point since October 2022 at $545,000, indicative of sellers either tapping out or holding tight.
Supply and Demand Dynamics in November:
Examining the supply and demand dynamics in November provides further insights into the market's condition:
Niagara Region:
- New listings: 1,135 (+49% compared to the 10-year average)
- Sales: 380 (-35% compared to the 10-year average)
- Annual sales: 6,120 (-22% compared to the 10-year average)
St. Catharines:
- New listings: 262 (+28% compared to the 10-year average)
- Sales: 115 (-30% compared to the 10-year average)
- Annual sales: 1,591 (-27% compared to the 10-year average)
Niagara Falls:
- New listings: 210 (+24% compared to the 10-year average)
- Sales: 72 (-42% compared to the 10-year average)
- Annual sales: 1,051 (-33% compared to the 10-year average)
MARKET METRICS: VACANT PROPERTIES, INVENTORY LEVELS & PRICING TRENDS
Vacant & Tenanted Properties:
The prevalence of vacant or tenanted properties added another layer to the market's complexity:
- Niagara Falls: 40% of active listings
- St. Catharines: 47% of active listings
- Thorold: 61% of active listings
Inventory Levels:
Active listings reached their highest point since 2014 in November, totaling 2,666. While November showed a slight improvement from October, it's essential to note that November typically experiences a decline compared to October.
Months of Inventory (MOI):
- Niagara: 6.2
- St. Catharines: 4.9
- Niagara Falls: 6
- Welland: 6.6
- Fort Erie: 8.3
- Niagara $1M+: 15.3
- Niagara $2M+: 57
2023 Prices:
The average selling price (ASP) for Niagara is projected to be just under $700,000, marking an 11% decrease from 2022 and aligning closely with the figures from 2021. St. Catharines is anticipated to settle at $642,000, reflecting a 9% decline from 2022, while Niagara Falls is projected at $650,000, indicating a 12.8% decrease from the previous year.
The gap between asking and selling prices for properties under $2 million widened to $120,000 in September and October 2023, the largest in a decade. This translated to asking prices being 118-120% of selling prices, a range typically seen in wonky markets such as January 2023, during the COVID pandemic, and in 2018.
WHAT'S NEXT? ACKNOWLEDGING THE POSITITVE AMIDST THE CHALLENGES:
Despite the challenges, it's crucial to acknowledge positive perspectives. Benjamin Tal, Deputy Chief Economist at CIBC, characterizes the current real estate market as being in recession and considers it the most significant test since 1991. The Bank of Canada's (BoC) decision to adopt a hawkish stance is seen as an attempt to balance the dehumidifying effect of interest rate increases on inflation.
Tal predicts a potential rate decrease in May and June, amounting to a total of 2 x 0.75% decreases. As the market faces unprecedented unpredictability, considering both the positive and negative aspects becomes imperative.
Answering the Questions:
If you could go back to talk to yourself in January of this year, what advice would you give?
Reflecting on the market's journey, it becomes evident that foresight is a luxury in the real estate domain. Nevertheless, a prudent approach to financial planning, risk mitigation, and adapting to changing circumstances would likely be the advice given. Being prepared for unforeseen events and staying flexible in decision-making would have been valuable insights.
Describe 2024 in 3 words or less?
Uncharted. Recovery. Journey.
If next year could be any year (market), what year would you choose?
Optimistic 2016 Resurgence.
CONCLUSION:
As the Niagara real estate market navigates unprecedented challenges, it'll be important to remain vigilant and adaptive. From hopeful beginnings to sudden downturns, the market has showcased its resilience and ability to respond to external factors. While 2023 brought negative year-over-year trends for the first time since the Blue Jays won the World Series, the potential for recovery remains, contingent upon factors like interest rates, economic stability, and external influences. The wavy ride continues, buckle up :)