Oct. 20, 2014
A quick snapshot of MLS® across HRM (Halifax Regional Municipality) residential sales in the last 30 days as compared to the last 3 years, 2005 and 2001 suggests that average prices have fallen just over 1% in the last year;
2014 – Sold 343 – average list price $266,813.41 average sold price $255.835.06 – list to sale ratio 95.9%
2013 – Sold 355 – average list price $269,108.25 average sold price $258,847.39 – list to sale ratio 96.2%
2012 – Sold 433 – average list price $252,334.13 average sold price $245,433.97 – list to sale ratio 97.3%
2008 – Sold 408 – average list price $221,522.42 average sold price $215,925.09 – list to sale ratio 97.47%
2005 – Sold 470 – average list price $187,758.94 average sold price $181,318.50 – list to sale ratio 96.6%
2001 – Sold 490 – average list price $129,376.69 average sold price $125,130.59 – list to sale ratio 96.7%
Considering the speculative spike in prices and new housing sales from 2012-2013, this adjustment on primarily re-sale properties was inevitable. The question is, ‘is our market moving up again?’
A comparison of Halifax median household incomes from Statistics Canada says that before tax dollars has risen an average of 2.06% each year from 2008-2012. More importantly, using a factor of 3x household income and the 2012 Halifax median household income of $80490. suggests a safe affordability of $241380 in 2012. Average prices were almost 2% higher. That may not sound like a lot but given our Maritime cautious progressive growth culture, market price sensitivity and other factors, it was enough to tip the market scales in favor of buyers in 2014.
Assuming similar median household income increases from 2012-2016 the safe affordability average price in HRM should increase to $267387.42 in 2016. Still lower than the average selling price 2013 yet based on the current average selling price, if average prices increase 2% per year for the next couple of years, the average price could be $266170.80. Some experts suggest that real estate markets become severely unaffordable when average real estate prices exceed 5x household incomes. Others suggest that the affordability factor should now be 5% to reflect the low interest rates and reductions in household debt.
What determines market conditions? In its simplest form a buyer’s market happens when there are more listings than sales, a seller’s market happens when there are too few good listings to satisfy buyer demand and a balanced market happens when both sides are more or less equally satisfied. Until recently, our local challenge has been a buyer’s market with too many seller’s holding at list prices that are too high. Their rational? In quite a few cases seller’s want to recoup both their original investment and 100%+ of their expensive renovation costs. The reality is, unless we are in a seller’s market, approximately 50% of renovation costs is a more realistic expectation if completed within the last 3 years on homes purchased in the last 7 years – unless the renovations are utility items i.e. windows, roof, wiring, plumbing in which case 100% payback is acceptable by most buyer’s.
Earlier this year I attended a CMHC market review session and challenged the accuracy of list to sale ratios being presented to the public. My question was ‘are these calculated numbers telling the whole story including the original list price?’ The response was ‘the original list price is not the marker, it is the list price that ultimately attracts the winning offer – even if reduced – that most accurately reflects the list to sale ratio’. And that ‘days on market’ are also presented to the public which should help everyone understand the tenacity and conditions of the market. Agreed. However… I continue to maintain that for the sake of simple accuracy and headlines, list to sale ratios should reflect original list prices to be true to reflecting market conditions. That this is significant information on many levels but most importantly they guide confidence levels and decisions of real estate clients and they feed into government considerations regarding interest rates. As my clients know, as an agent I review the list price history of the subject and comparable properties as part of determining market value and guiding our negotiations strategy. High list to sale price ratios suggest a changing market in favor of seller’s.
Next article… a comparison of annual list to sell ratio’s. In the meantime, with so many listings still on the market there are some exceptional ‘deals’ out there. Please call me anytime to move on your real estate goals.
~ Michele Vyge-Fraser (Red Door Real Estate Agent/Associate Broker) (902) 830-6397