Is February the worst month of the year? In my mind, it certainly is, due to a couple of reasons. First, the weather couldn’t get much worse (typically). Fortunately, 2024 has delivered the best weather we have ever experienced for the month of February and I couldn’t be more grateful. That aside, there’s just not much else to get excited about in February. Valentine’s Day is sometimes a bright spot. Family Day was given to us a while back because the powers that be also understood how bleak a large amount of the populous felt during this short month. I read a funny comment online that I think explained February pretty well:
“You pay the same rent as every other month, but get the least for it”
Accurate and sad.
Regardless, we’ve made it through to March and brighter days are on the horizon/already here amazingly. However, before we look forward, we must look back and examine what we have just experienced in terms of a real estate market.
I will start with this, February of 2024 did not provide much in terms of excitement for the real estate market in London. Typically, we would expect a bump in price, sales and new listings from January, some of which we got, but not in a way that makes you jump out of your seat.
Yes, we saw more sales and new listings in February from January, but we saw a slight decline in sale price. While that is definitely welcome news to a lot of market watchers, I need to evaluate my own feeling of melancholy as I look at the market today.
Personally, I’m looking for something to bring us out of the hum drum market we have been living in for the past 6-9 months. Some signs of life, a renaissance if you will. Much like the coming months will deliver a “rebirth” to our weather and spirits, I am looking for a similar change in the market. I do think it’s going to happen, but I guess I’m surprised to not see more evidence of that change in our February market report.
When will it happen? The first rate cut from the Bank of Canada will do it. Perhaps rumblings of that event will be enough to spur buyers into action. But until that time, we plow forward.
So just how big was the drop in average sale price? 1.5% from January this year and 2.47% from last February. Is that meaningful? Probably not in an immediate sense but I do think it is meaningful when we look at the last 5 months of data. Prices have remained within a 2.3% band during that time. Talk about consistency! If we choose to include September of 2023 in that calculation, the price band expands to 3.6% (consistent).
It’s also interesting to note that those 6 months of data also coincide with the last 5 BoC rate announcements which were “no change” beginning in September 2023.
Average home prices and overnight interest rates have moved almost in lockstep, save for the typical spring market bump, which leaves the writing on the wall, clear as day. As soon as rates start dropping, prices are going up. But until then, I don’t expect our spring market to have the same impact it typically does on prices. Last year, the average sale price increased 8.5% from February to April, something I think will be hard to repeat this year.
Before we move on, I want to touch on price increases once rates do start to decline, because I don’t think those two things will move together. The overnight interest rate is going to decline slowly, Tiff Macklem said as much yesterday in his media address following the BoC’s rate announcement. I do expect price increases to outpace the declining interest rate because of human emotion which plays a big part in our market.
The “Fear of Missing Out” plays a massive role in the psyche of a buyer and as prices increase, there is more panic to get in while you can. That first rate cut is going to open the flood gates to the copious amount of buyers who are currently waiting for that exact announcement. Trust me, there are a lot of them.
Moving on!
Number of sales did increase from January, just as it always does. 405 sales in London last month, a 27% increase from January and a nice bump of 32% over last year. Keep in mind that last year represented the fewest sales in a February ever. The 405 sales we saw make up only 87.5% of the 10 year average for the month of February, so not exactly a home run. In January we had 94.8% of the 10 year average for those keeping track at home.
There were no abnormalities in terms of the make up of those sales, majority of which were detached homes.
New listings faired better. 655 new listings, up from 593 in January, up from 508 last year. 95.5% of the 10 year average. Keep in mind, new listings these days are made up of a lot of listings that didn’t sell or expired and are being re listed to gain attention from buyers who may have forgot about the home.
Combine these two stats to calculate our SNLR or absorption rate and we are sitting at 61.8%. That pushes us barely into “Buyer’s Market” territory which we started to see signs of last month. Throughout 2022 and 2023, that number was often below 50% and sometimes even 40%, something that was unheard of prior to 2022.
Along the same lines, active listings were 970 at the end of the month and based on our number of sales, we have 2.4 months of inventory. That is just outside of the buyer’s market territory so I wouldn’t say we are firmly there yet. And I don’t think the market is going to transition fully into a buyer’s market for the foreseeable future because we should still have a good amount of listings hitting the market this spring, likely outpacing sales. That will mean active listings going up, still plenty of choice for buyers and maintaining a fairly level market.
I also want to bring up what I perceive as a large discrepancy between homes that are being listed and homes that are selling. The average price of new listings last month was about 735K while the average list price of homes that sold was 609k. The sub 600,000 market is moving very well right now while anything over that is lagging behind. This is always the case with any market that is going through a transition. The lower priced homes will start to gain momentum and it will filter through to the very top end of the market as well. So expect that sub 600,000 market to get very hot over the next few months and anything 600,000-1M should start to have more traction as well. It’s going to take a while for anything over 1.2M to really start cooking but there have been a few sales in that top end market, just far fewer than there were pre 2022.
Last but not least, here are a few quick hitters that I like to look at on a monthly basis as well:
Days to sell fell to 34 from 41
Days on market fell from 100 to 64
Sale price to list price ratio was 98.2% which is a very normal number and doesn’t indicate buyer’s or seller’s market. AKA balanced.
Cheers to February, see you next year. Now bring on the spring weather!
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