If I was to pick three measures (metrics) to most accurately reflect today’s real estate market, those would be:
Inventory (Supply)
Sales (Demand)
Months of Inventory - velocity of sales compared to inventory
Simply, Inventory is how many homes (Active Listings): Answer: 1,104
Sales - How many homes were sold in most recent month: Answer: 206
Dividing Active Listings/Sales gives M.O.I. Answer: 5.4 Months
As at July 31, 2024, if no more listings came on the market, it would take 5 1/2 months to deplete the current inventory to 0. This is squarely in Balanced Market territory.
To show this and confirm where our real estate market is in the cycle, these guidelines provide the best prediction of where the market is going:
When Months of Inventory (M.O.I.) is less than 4 months = Sellers Market - (2020 - 2021 - Spring 2022) Prices Rising
When Months of Inventory (M.O.I.) is between 4 - 6 months = Balanced Market (YTD 2024) - Prices Flat
When Months of Inventory (M.O.I.) is greater than 6 months = Buyers Market Prices Declining
Comparatively, at the peak of the market in 2020 - 2022, there were less than 1 Month of Inventory and Sales were north of 300 homes per month on average in our QDAR (Bay of Quinte/Hastings & Prince Edward County) area. That’s why prices were increasing at 30% + per year over this time period when we enjoyed an unprecedented increase in home values — a perhaps once in a lifetime anomaly during this time period.
Realistically, increases in home prices of the magnitude we saw in 2020 - Spring 2022 will not return anytime soon, especially with the current interest rate environment faced by Buyers and anyone renewing a mortgage. Interest rates are just recently starting to decline, see separate post on interest rates.
With the current 5.4 Months of Inventory, we continue to be in a “Balanced Market” and prices are expected to remain at this level over the next several months.
The real estate market is very localized, so each area can differ dramatically. 5.4 Months of Inventory is for all of the Quinte and District market (including all of Hastings County, Bay of Quinte and Prince Edward County). There are big differences between geography, type of home (detached, condo, townhome, waterfront, etc.) urban vs. rural.
Quinte & District - Residential Market Activity
Sales in July, 2024 were 206 units, a 7.3% increase from July 2023.
Inventory (Active Listings) as at July 31, 2024 increased 12.0% to 1,104 from 986 July 31, 2023
The average price of homes sold in July, 2024 was $592,825 a decrease of 3.4% from July, 2023.
The 12 month residential house price index (HPI Index) was flat with an 0.8% increase compared to July, 2023 for Quinte & District.
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Not all listings sell, which is reflected in the Sales to New Listings Ratio (SNLR) which is currently 43.8%, down from 49.1% July 31, 2023. Therefore, less than 1/2 of new listings will sell, keeping inventory on the market for longer.
With 5.4 Months of Inventory in the current market, we are technically in a balanced market. However, on the street, it very much feels like a Buyers Market, so it is important that you have a well educated up to date adviser that understands the nuances in the current market and where it is heading.
The Bank of Canada took the lead earlier this summer in decreasing interest rates twice by a total of 50 basis points. The Policy Rate had held steady at 5% since July 13, 2023. The rate was decreased by 25 basis points on June 6, 2024 to 4.75% and then again by an additional 25 basis points to 4.50% July 25, 2024 where it currently sits. The next policy setting date is September 4th, 2024.
South of the border the U.S. Federal Reserve held interest rates steady over the past several months and is widely believed to be overdue for a reduction when they meet Sept. 17th/18th. Current Federal Reserve’s target rate is 5.25% - 5.50% and all signs point to a reduction as we move into the Fall, 2024.
With rates on both sides of the Border heading down with the most recent inflation numbers finally giving the central banks the evidence and comfort that they needed to lower interest rates, this all bodes well for the residential real estate market, future affordability and Buyers coming off the sidelines.
To really understand your local market, you need a seasoned and experienced realtor that understands these differences and the market nuances and is not afraid to get into the weeds to simplify and articulate today’s complicated market for you.
IT’S TIME FOR REAL MARKET INSIGHT AND A FREE MARKET UPDATE ON THE VALUE OF YOUR HOME
CALL KIM TODAY | 613-968-0251
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