So many buyers; so few homes for sale!
Less Than 1 Month of Inventory in Ottawa!
Months of Inventory is a measure of how fast all the existing homes on the market would last assuming a) no more listings are added, and b) the rate at which homes sell is a constant figure based on the average of the last 12 months of sales.
By midsummer last year Ottawa was down to only about 1 month of inventory. And as of last month, February 2021, it has fallen below even that!
Not every house will sell of course. But less emphasis is being placed on reasons such as being priced too high or too much work or in a less desirable location, as buyers scramble to find a home in this overheated market.
Months of Inventory is often used to determine whether it’s a balanced market, a seller’s market, or a buyer’s market.
A common definition is that:
– < 4 months of inventory is a seller’s market
– 4-6 months is a balanced market
– > 6 months is a buyers market
As the number of homes has dropped, the number of situations of multiple offers (a.k.a. bidding wars) has skyrocketed. This used to be relatively rare in the staid real estate market of Ottawa. However, it has become increasingly common over the last couple of years to the point where almost every sale attracts multiple offers and some homes are selling for far more than anyone would expect from the prices of comparable sales.
And Pre-Emptive Offers (Bully Offers)
Many homes are listed with the notice that offers will be reviewed on a certain date and time. This strategy allows for more people to view the home with the hope/expectation of generating more interest and getting multiple offers. It has been particularly important during COVID-19 as showings have been restricted to only 2 adults accompanied by 1 agent in a home at a time.
Unfortunately, many listings that said they were delaying the review of offers change their minds when presented with a very strong early pre-emptive offer. (Above asking price with no conditions is the standard for this type of offer.)
This can be good if you are the buyer who is ready to buy and has an agent who can help you prepare this type of offer. But it’s certainly frustrating if you aren’t!
Scanning the Chart
When you look at the chart for the last 10 years, you can see that Ottawa was in a seller’s market until 2012 when the federal government fiddled with the rules for insured mortgages. Ottawa fluctuated from a balanced market to well into a buyers market. These followed the usual demand cycle of much higher volume in the spring and summer, dropping off in the fall and winter.
However, starting in 2017, Ottawa moved into a seller’s market. It still showed the seasonal pattern until 2019, although with less change from highs to lows.
Then, beginning about summer 2019, the fluctuations levelled off even more. And by the end of the first COVID restrictions last spring the number of new listings is barely keeping up with the number of sales.
At some point this will settle down again. It may take quite a while however, because buyers are able to access mortgages at amazingly low rates. Unfortunately, the supplies that builders need to construct new homes have been hit hard by COVID-19. We’ve heard of 2×4’s costing more than 3 times the price pre-COVID.