The REAL Market Report: October 2024

I know that nothing exciting has happened recently in the news, so I am expecting a massive readership to flock directly to the newest edition of the REAL Market Report this week. Surely, there is nothing more pressing or more captivating than what I have to say about the real estate market in London, Ontario right now, right??!??!?!?!?!

Okay fine, I will share the internet’s vast attention with the small matter of the 2024 US Election.

Personally, I find American elections fascinating and entertaining. I watched CNN for 5 straight hours last night and even more this morning when it was announced that Donald Trump would be the 47th President of the United States. I fawn over the map of the states as they are filled in with blue or red tints to reflect the predicted outcome in each county. I love stats and data and hearing the pundits talk about percentages, voter turnout, exit polls, past performance, etc. really speaks to the math nerd side of my brain.

I’m not going to comment on the election because politics is far too polarizing in our world and I want to be friends with everyone, aside from the point that I think we all need to find ourselves a little bit more to the centre of the political spectrum than the extremes and stop seeking out problems and conflict in our daily lives to latch on to.

How might the election affect the economy and the real estate market??? Well, I am not an economist and we might be pushing it a bit too far for my understanding, but it seems that everyone expects Trump to enact inflationary policy that will make the cost of living worse for Americans.

But at the same time they expect the economy to hum and for bond yields to remain elevated which leaves fixed interest rates at higher levels than they have been at in the past. Do those two things go together? I’m not sure.

Here in Canada, we appear less concerned with what is happening in the states as of late as we head toward a weaker dollar amidst falling interest rates and a lagging economy. So I don’t think that this changes the trajectory that we are on here in the Great White North.

By the way, I love debating this stuff and hearing opposing views. In my fiery past, I might have been less open to hearing somebody’s opinion if it differed from mine, but now I welcome it. I don’t quite understand why we as a society get so offended when we disagree with our peers or fellow Canadians, it doesn’t have to be so personal. People can and should have differing views in a democratic society and they should be able to peacefully and respectfully discuss those views.

Anyhow, I will end my dialogue there and move on to the real exciting portion of this blog post: real estate statistics!!!

This past month was (finally) an interesting month in the world of London Ontario real estate. We broke away from some prevailing trends of 2024 for a brief 31 day period, something that I will be monitoring like a hawk. Any guesses as to what area we saw the biggest changes?

Was it prices, sales, or new listings? Did it have any affect on available inventory?

Let’s take a look back at where we have been and then discuss what the differences were this past month.

Since the early spring in 2024, we have seen sales start to slow down, new listings increase and as a result, a massive build up of available inventory sitting on the market in our area. Sales have typically been 65-70% of the 10yr average while new listings have outpaced the 10yr average by 20-30%. Those two things have been heading in different directions which creates our sluggish sales environment.

We can combine all of these stats to give us some secondary stats for context. As inventory has grown, we have hit highs for active inventory. With high inventory and low sales, that gives us lots of “months of inventory” meaning if no other houses were listed, right now it would take about 4.5 months to sell everything that we have on the market right now. That’s a lot of time. Sales to new listings ratio has been down as well, usually around the 30-40% range.

I said we started heading in a different direction last month and it has to do with number of sales.

Prices were down slightly last month compared to the month before, but were up year over year. The month over month drop was only .8% but the year over year gain was 1.9%. Neither of these are earth shattering numbers considering that in the last 12 years, the average price has gone down from September to October 8 out of 12 times.

I was actually expecting October to show a bit of a bump in sales prices compared to September based on some data that I was following throughout the month. There were some big sales that happened last month, but not big enough to carry us over September!

Here is the average sale price plotted since the beginning of January 2020. I wanted to highlight February 2022 for obvious reasons but also January 2023 to show how tight the average sale price has been since then. That is consistency.

Is that a good thing? We can argue if it’s good for the market for prices to go up, down, sideways etc. but I think it bears saying that prices have remained relatively flat in the slowest market Canada has seen since the 2008 financial crisis. For prices to not have gone down in that time period shows a lot of price resilience. And I think the potential for prices to go up. Note: POTENTIAL. No promises, no guarantees. Just potential.

New listings were unremarkable last month at 951which followed the trend of outpacing the 10yr average, or what we might expect based on previous years. Those 951 new listings were 126% ish of that 10yr average. It wasn’t as high as we had last year as illustrated by the graph below.

SALES! The number surpassed what we saw last year and it was better compared to the 10yr average than we have had in a long time. 443 sales in October was 20.1% higher than the year before. It was 81.2% of the 10yr average which was much stronger than the previous 6 months. I want to revisit this stat and talk about what this means if this is a real trend. Because September was stronger than last year also.

With new listings outpacing sales again, it is somewhat surprising to see that active listings actually declined on a month over month basis. In September there were 1869 active listings in London, there were 1829 active listings at the end of this past month. That is interesting and also might fall in line with an emerging trend in our market.

Here it is: If sales are recovering, and active listings are declining, these are the ingredients (along with interest rates going down) for prices to start to go up.

I have said for the past few months that there is too much inventory available to buyers for prices to really increase in a meaningful way, quickly. Based on how much is available out there, and what sales numbers were doing, even if interest rates bottomed out, it was going to take a long time for the market to absorb the inventory and then for prices to go up.

But as we can see, sales are increasing naturally over a two month period. That might end up being a blip on the radar, but it might be the beginning of an important trend.

I figured we would see a reduction in available inventory anyway as listings either expired in the winter or stale listings were cancelled. It happens every year as tired or bored sellers decide to try again in the spring. What is the likelihood that the right buyer comes along in December if they weren’t there in the spring, summer or fall? Slim to none I would argue.

It was always just a question of how low inventory went over the winter before the spring market picked up again in March. Is it possible that we go down to 1000 available listings? Probably. Anything less than that might not make sense. Active listing in January of this year were 965, but for inventory to be cut in half in a two month span? Higher sales numbers would contribute to that!

To me, this is the most important thing to look at before spring begins. How will sales perform and how low will active inventory dip. See you next month!