London, Ont., region home prices have tripled over the past 25 years

The average price of a home in the London, Ont., region has more than tripled in value over the last quarter century, from $127,261 in 1996 to $639,745 in 2021. 

The data was obtained from the London St Thomas Association of Realtors by request from CBC News and only includes information belonging to the two years in question. 

However, comparing the numbers side-by-side highlights the stark difference in not only the price, but the number of homes still up for sale at the end of each year, according to Michael Haan, a statistician and a professor of demography who uses housing data in his research at Western University. 

"Every single one of these numbers is at least three times higher in 2021 than it was in 1996 in terms of values and if you flip it and look at the inventory side, you see exactly the opposite, a tremendous reduction in the amount of listings over time." 

Comparison may help explain today's cutthroat market

Haan said the comparison helps illustrate how fierce today's cutthroat real estate market really is, where bidding wars break out over townhouses, buyers snap up homes sight unseen and penning a heartfelt letter can make the difference between getting the house of your dreams and walking away empty-handed.

"We have 550,000 people in the greater London area and there's only 550 active listings, you can imagine that anytime houses go up for sale, there's going to be fierce competition for them." 

Adjusted for inflation using the online inflation calculator on the Bank of Canada website to give the dollar amount a constant over time, $127,261 in 1996 is equivalent to $199,857 in 2021.

Here is the same table where Haan adjusted the numbers for inflation using the value of a dollar in 2021: 

It's not just homebuyers who are dealing with intense competition. So are the realtors. 

"It becomes very competitive, no doubt," said LSTAR president Randy Polawski, who is also a realtor with Sutton Group who operates a boutique realty firm in Komoka, Ont.

"Back when I started in '96, total LSTAR membership sat at about 1,350 realtors. Today we're pushing 2,200 realtors," he said. "There may not be enough to go around for a sustainable career." 

Is it a bubble waiting to burst? 'I don't think anybody knows.'

It's unlikely we'll see any reprieve from stratospheric housing prices or low inventories anytime soon, according to most analysts. 

Home values in the London area have already risen another $200,000 from last year, with LSTAR reporting the average value of a home at $825,000 at the end of February. 

The same phenomenon is being seen across the country. The Canadian Real Estate Association said average home prices increased by 21 per cent in the past year to $748,450 in January — the highest on record.

Whether this is a sign of a housing bubble, or the work of economic fundamentals, such as supply and demand, Haan said there's no way of knowing for sure.

"I did my dissertation on housing in 2005 and at the time there was a lot discussion about Canada's housing bubble and we still seem to be having those discussions now. If it's a bubble, it's a bubble that seems to be lasting a long time." 

"I don't know. I don't think anybody knows." 

Whether homes were more affordable 25 years ago than they were last year is a complicated question, according to Haan, but one way of looking at it is through mortgage payments. 

Homes may have been cheaper in 2019 than in 1996

Haan said a home at an average value in 1996 ($199,857) would result in a monthly mortgage payment of $1,525.34 under the eight percent interest rate of the time. 

Compare that to 2021, where an average value home ($639,745) would result in a monthly mortgage payment of $2,709 under a two per cent interest rate. 

Haan said while the value of the home tripled, the mortgage payment only grew by 55 per cent. Haan said, excluding the frenzied housing market of the pandemic years, he estimates that the price of owning a home in 2019 was about the same, if not more affordable than it was in 1996.