WinnipegREALTORS® just held its eighth annual forecast breakfast last week. The first year of 2007 still holds the MLS® sales record for most transactions at 13,079, while 2011 gave it a good run for its money just falling 12 sales off that lofty total. And 2012 made its own run to at least get over the new benchmark level of 13,000 MLS® sales.
As was mentioned at this year’s forecast breakfast, one of the main purposes of the exercise is to do a review of what any emerging trends are based on the annual MLS® sales results. Where are the gains or conversely the shortfalls? What are some key take-aways that couldn’t be confirmed at the beginning of 2013? What will likely happen in the upcoming year to build on the developments in 2013?
Of course, you have to forecast numbers for the year ahead and do your best to gauge what you think will happen.
As David Powell, the 2014 WinnipegREALTORS® president, said in his opening remarks at the breakfast, “We’re going to keep doing it till we guess right.”
Guessing, guesstimating, extrapolating, throwing darts on a board, whatever you want to call it, the prediction for home sales in 2013 was correct. After all the dust settled in 2013, home sales were down two per cent, smack dab in the middle of the downside risk forecast of 0 to -4 per cent. Average house price increases too were almost identical, with the two to four per cent increase just edged out by a final five per cent result.
With the drop in home sales, despite seeing a 13 per cent increase in condominium sales activity, the new 13,000 benchmark sales level was not achieved in 2013. Nonetheless, the 12,926 sales total was still the fourth best on record for MLS® sales.
While it is gratifying to predict a future outcome and actually get it right, the reality is that a lot hapens into a local real estate market over a year when tyring to determine eventual numbers and results. It is very dynamic, with over 1,600 REALTORS® working with thousands of buyers and sellers to convert a listing to a sale, which is certainly one indicator that WinnipegREALTORS® tracks to see how many listings each year are being sold.
In 2013, 63 per cent of all new MLS® listings were sold and 67 per cent of all residential-
detached listings met with a successful outcome. These conversions, while impressive when compared against other markets across the country, still fell off from previous years. In part, this was a reflection of the healthy increase in listing activity in 2013.
The MLS® annual listings total went over 20,000 and helped bring more balance to one of the tightest real estate markets in Canada. The more balanced market not only kept a lid on prices, but also made it more competitive for
sellers expecting above list offers. Not that there were not any, as 31 per cent of all residential-
detached sales went for above list price. However, in 2007, nearly one-in-two sales went for above list price.
As a result, even though there were not as many residential-detached listings in 2007 compared to 2013, the much higher conversion ratio created 546 more sales. This is significant when forecasting numbers, as residential-detached, or single-family, homes is the dominant MLS® property type. In 2007, it represented three of every four sales. In 2013, such sales still took the lion’s share of MLS® activity at just under 72 per cent. Gaining at the expense of less home sales activity were condominiums. They were edging up to 14 per cent of all MLS® sales in 2013, while they were just 10.5 per cent in 2007.
Here-in lies a trend that should continue in 2014 and beyond. Owing to both more favourable pricing in the first-time buyer market and lifestyle changes with baby boomers, in particular, looking for something different from the traditional large family home, condominiums are being seen more and more as a real alternative to a single-family home. New projects are part of this new reality and were very much part of the mix in adding to the record 1,759 condominium sales in 2013. The average sales price jumped nearly nine per cent and that was as much to do with the higher number of more upscale condominiums that sold in 2013. For example, 32 condominiums sold for over $500,000, with 17 new builds. In 2012, there were just 12 condos that sold for over $500,000.
One of the reasons condominiums are doing
better is that their most active price range is $100,000 less than residential-detached — $150,000 to $199,999 versus $250,000 to $299,999. Essentially, first-time buyers are more often being relegated to this property type, just as has happened in other more expensive real estate markets — it is what you can afford.
The vast majority of REALTORS® in a 2013 membership survey stated that it is more difficult to find first-time buyers a property that they wish to purchase.
This development can be backed up by the 10th annual Demographia International Housing Affordability Survey released this week. Winnipeg — which in the formative years of this annual survey was ranked affordable based on a rating of measuring how much a median home costs is in relation to the city’s median income — is now at the top end of the moderately unaffordable rating category, and could go into the seriously unaffordable category if it bumps up a few more rating points.
Rising prices, tighter mortgage regulations and higher closing costs are clearly making it more difficult for first-time buyers to become homeowners. With fewer first-time buyers active in the local
market in 2013, which was most apparent in March when sales under $300,000 were down three times more than those above $300,000, it shows Winnipeg is joining other major real estate markets in recognizing more affordable housing options, including less government-imposed costs (e.g., the land transfer tax), must be considered in order to create a more healthy market overall.
(Next week: part 2)