It has been a rollercoaster ride for the London, Ont., housing market. Just a year after reaching its peak, residential real estate values have plummeted by a staggering 24%. Gone are the days of frenzied sales activity and bidding wars; instead, a sense of calm has settled over the market. This drastic decline, from an average price of $825,221 in February 2022 to $621,912 last month, marks the largest drop ever recorded by the London St Thomas Association of Realtors.
A Steep Drop Unlike Anything Before
"This is the steepest drop we've ever seen," says Adam Miller, the president of LSTAR. He attributes these dramatic numbers to what he calls "COVID craziness" – a period during which an influx of individuals from the Greater Toronto Area sought more space at affordable prices, taking advantage of low interest rates. Miller explains that this surge in demand was always bound to fade, especially as the effects of the pandemic began to wane and the Bank of Canada gradually increased its trend-setting interest rate starting last March.
Shifting Tides in the Market
Last month, the number of home sales hit an all-time low for February since 1995, with only 436 properties changing hands. Additionally, new listings continue to outpace sales, bringing the total number of homes available for sale to 1,320. This has resulted in a sales-to-listings ratio of 57%, favoring buyers. Miller believes that this shift in power is a welcome change for buyers who have long felt disadvantaged in the market.
Cooling Effect of Higher Interest Rates
While market conditions may have shifted in favor of buyers, the higher interest rates imposed by the Bank of Canada have undeniably had a cooling effect on the real estate market. Since the central bank began its quest to rein in sky-high inflation last March, buyers have found it increasingly challenging to navigate the market. Miller acknowledges that while the rates have impacted the market as a whole, those who bought during the peak are feeling the effects more significantly than those currently looking to buy.
Realtors' Hope for a Stable April
Currently sitting at 4.5%, the prime rate stands at 4.25 basis points above the 0.25% rate offered by the Bank of Canada when home prices peaked in February 2022. However, the bank has indicated its intention to hold steady on any further rate increases, following a series of eight consecutive rises in the past. Realtors are eagerly awaiting the bank's decision in April, hoping for a sign of stability as the spring market enters full swing.
"We're waiting to see what everybody does. If the Bank of Canada helps us out with no increase in April, that will be an early Christmas for most of us."
As the London housing market adjusts to the ever-changing landscape, the future remains uncertain. However, those in the industry remain hopeful that stability will be restored, and buyers and sellers alike will find their footing once again.
