After an unpredictable 2020, many had hoped that 2021 would more closely resemble 2019.
The Kitchener-Waterloo real estate market included.
In 2020, the demand for Kitchener-Waterloo homes soared, pushing values up a staggering 16.1%. And, those thinking about buying or selling in 2021 weren’t helped by market analysts who were, quite frankly, all over the map with their market predictions.
While we’re now finally showing signs of a return to normalcy, can the same be said for our red-hot real estate market?
To find out, let’s take a look at the data from the first half of this year.
For the reasons we’ve discussed a few times this year, demand for homes in our market has increased.
As a result, over the past six months, home sales are up 65.7% over the same period last year. June, in particular, was a record-breaking month for sales in Kitchener-Waterloo with 740 homes sold — up 10.1% over last June.
The more stringent mortgage stress test introduced on June 1 was intended to curb demand and cool the market. So far, as predicted, its impact appears to be negligible.
Low Supply of Homes
Plenty of homes have been listed in our region, but it hasn’t been enough to keep up with demand.
In June, for example, local homes sold in 11 days on average, leaving only 365 homes available for sale at the end of the month (for context, the 10-year average is 1400).
And while we had more listings than normal in February and March (15.7% and 63.9% more than the 10-year average, respectively), they have tapered off in recent months. In June, for example, 860 new listings hit the market – a 6.6% drop compared to June of last year and 5.4% below the previous ten-year average for June.
If this trend holds, and demand remains steady, sale prices will likely increase.
Speaking of prices…
The supply and demand imbalance in many markets outside of the GTA has led to sky-high sale price increases across Southwestern Ontario.
Kitchener-Waterloo home values shot up 19.6% over the past six months, with the average sale price landing at $759,115 in June.
Also notable: June’s average sale price was a 2.6% increase over the May average — a reversal of the slight cooling trend we had seen over the previous months.
Here are the 6-month prices increases by property type:
- Detached Homes have increased 21.7%, from $755,618 to $919,914
- Apartment Style Condos are up 16.3%, from $383,196 to $445,493
- Townhomes have risen 14.8%, from $514,760 to $590,980
- Semi-Detached homes have jumped 12.7%, from $574,659 to $647,918
16.1% in 2020. 19.6% so far in 2021. One would have to think that these kinds of gains can’t continue.
We don’t expect this pace to continue. Economically speaking, it can’t.
But, as we pointed out in a previous blog post, the sharp price gains we’ve experienced over the past five years have stuck — even if there was a short-term drop in prices along the way. Our current prices are likely here to stay.
And, when you look at neighbouring markets such as Hamilton and Toronto, where the average home prices sit at $865,339 and $1,089,536, respectively, we continue to be relatively affordable, which has been a draw for many GTA buyers, driving local demand and prices.
On the topic of demand, we also have to factor in immigration. This has stalled during covid but will eventually pick up. This will likely increase demand and put more pressure on home prices.
Any way you slice it, demand for homes in Kitchener-Waterloo should continue to remain strong. Until the housing supply increases to match demand, we can expect prices to continue to rise (but at a slower pace).