For London real estate: $330K may be 'the new norm'
The spring frenzy may be over but one agent believes prices will hold firm through fall
Last year, the average price of a home in London was just under $284,000.
With fewer than four months left in the 2017, that total is now $339,000.
The surge in both sales and prices began last fall and culminated in what one agent calls a "crazy spike," one that took some of London's most seasoned agents by surprise.
Each month from January to June, the London and St. Thomas Association of Realtors (LSTAR) reported sales totals that smashed records stretching back to 1978 when it began tracking sales data.
The high water mark came in May, when LSTAR reported 1,539 homes were sold, an increase of 33 per cent over the same month in the previous year. June continued the run of record-breaking months but the place began to slow with 1,245 sales, a jump of 10 per cent from the previous June.
Beyond the 'Toronto factor'
London prices were forced upward — in part — by what many called "the Toronto factor." As home prices in Canada's largest city rose a jaw-dropping 33 per cent in March, many were looking for more affordable options.
Real estate agents who work outside the local area are required to register with the local board before showing clients properties.
LSTAR president Jim Smith told CBC that a total of 371 agents from other jurisdictions registered with his board this year. It's an indication that many out-of-town buyers are locking in on London.
"You had these Toronto people who were cashing out in the spring when things were going nuts there, they were coming to London. They were coming down the road. It was almost like a trickle-down effect."
Smith believes the rise in Toronto prices threw a spotlight on London as an affordable option.
And while agents weren't complaining, many would prefer to see more balance in the market.
Peter Meyer is a broker with Royal Lepage Triland. He uses a weather analogy to describe what happened to London's real estate market this spring.
"Between 2010 and 2015 the temperature was about 80 degrees Fahrenheit, nice and comfortable. Everybody was used to it. What we saw happen this spring was that the temperature automatically went up to 115 F. Everybody was caught off guard. It was very hot. A lot of people were uncomfortable in that type of marketplace."
Smith heard stories about properties that drew 20 bids and purchase offers that topped $100,000 over the asking price.
"There were wild stories," Smith says of those heady days of spring. One involved an agent who hired a school bus to take buyers to a subdivision in St. Thomas. "That's how crazy it was."
Then things came back to reality.
In April the province announced measures to cool Ontario's red-hot real estate market. Two consecutive interest rate increases, the first in July the second in early September, are also tempering factors.
Toronto's market dropped dramatically over the summer, where sales were down about 35 per cent in August compared to the previous August. However those same numbers also show that year-over-year August prices appear to be up slightly from 2016, not down.
The average price for a GTA home hit $732,292 in August, a three per cent increase from August 2016.
Here in London, LSTAR reported average year-to-date sale prices in the region of just under $330,000.
Smith said he's still seeing multiple offers in London.
"I lost out on two deals last weekend because of multiple offers," he said. "They're still out there but they're not happening with the frenzy that we saw in the spring."
Both Smith and Meyer believe that even if London's real estate spring fever is over it will evolve into a more balanced — but still very robust — market heading into fall.
"I don't believe there will be a correction," said Smith. "I think this is the new world order here in London. Because of the fact that we've been so low compared to the rest of the province, let alone the rest of the country."
Good value over other markets
Here's how London's average sales price stacks up to other markets in southern Ontario. These are average sale prices across all residential types, reported by local real estate boards:
- Toronto: $732,000.
- Hamilton: $558,000.
- Barrie: $548,000.
- Kitchener-Waterloo: $430,000.
- Ottawa: $420,000.
- London: $339,000.
- Windsor: $257,000.
Meyer said he believes London real estate remains a good investment, particularly for buyers in it for the longer haul. He advises both buyers and sellers to not be overly influenced by the market's peaks and valleys
"The market is not made up of two months," he said. "The people who bought in the frenzy trying to flip, they might end up with the short end of the stick. But buying for long period, things are going to balance out. Real estate has a tendency to balance out over time."
And what about the next few months? Smith believes local prices will continue to hold firm, and possibly edge up higher.
"We're going to have a strong fall," he said. "Our market is strong and vibrant right now. I see it continuing right through to next year. We're not done catching up I think."
Starting Monday, CBC London begins of week long series called Home Values.
We'll be looking at the real estate market in London and area.
We'll ask people why they live where they live. We'll ask them why they love their homes.
We'll also delve into the issues surrounding rent and affordability in London.
And, on Friday Sept. 15, London Morning will broadcast live from Ilderton, one of the communities that has been attracting new residents.