London and St. Thomas Market Update for the Second
Quarter of 2019
London:
The
Average price of a home across the City of London rose from $373,357 for the 12
months ending December 31, 2018 to $410,758 or +10.2%. This put an average
equity gain of over $37,000 in the average homeowner’s pocket across the city.
It took an average of 12 days to sell a home in June 2018. In
2019 this number of days to sell dropped to 11 days. This fast pace is driven by relatively fewer
homes offered for sale. It has be been
averaging 3 months of supply last year but rose to 4 months in December through
to the end of February and then fell again to 3 months of supply for the
average home.
Homeowners
averaged 100.7% of asking price in January. This number increased to over 102%
for February, March and April respectively and then dropped marginally to 101.5%
for May and 100.1% for June. It is being driven by First Time Buyers and Low
inventories.
The
following chart indicates the demand by price range.
The
hottest categories are between $150,000 and $350,000 averaging above 102.6% and
103.9% when selling.
As
you can see by the chart above, when homes go above $600,000 their owners are
negotiating at balanced market levels in order to get that firm sale.
It
is important to look at the variance to the listing (asking) price by price
category, as it varies significantly. If
purchasing or selling this is a good indicator of what you can expect in your
price range. The competition in the $200,000 to $300,000 range is still fierce
and are continually going over asking prices if properly marketed.
Negotiation
of price is occurring for categories of homes selling between $400,000 and
$500,000 and homes from $600,000 and above.
We
predicted we would see a 5% to 8% increase for 2019. We are already there for the first 6 months. Based
on current supply to demand this increase will hold. With the Feds offering
Down Payment loans to first time Buyer buying up to $350,000, this may still drive
our prediction even higher.
London North:
The
number of homes sold in North London for the first 6 months of 2019 are now
down 2.9% over the same period in 2018. The number of home available in June
2019 rose 5.6% above June 2018 2018. This combination of sales and higher
number of homes offered for sale is keeping pressure on months’ supply… It is
still holding consistently at 4 months of homes available for purchase. The number of days it takes to sell the
average home now sits at 25 days up from 20 days in May.
The
average price of a home in North London sits even higher on a year-to-date
basis compared to the increase at the end of the first quarter. The average price of a home in North London
for the first 6 months compared to the previous 12 months now sits at $552,569
versus $510,881. This represents an increase of 8.2% or $41,688 but is now
slowing in price gain compared to the City as a whole.
It
is apparent that the popularity of this area of the city because of its
proximity to the best of services, schools and access to the University is still
paying dividends for homeowners.
London South:
Sales in South London in
2019 are up 1.8% over the same 6-month period for last year. At the same time
the number of homes available for purchase fell -11.8% below last year’s low
inventories in the month of June. This had
effect on the number of months’ supply of homes offered for sale. Remember anything at 6 months’ supply or
higher is considered a balanced to buyer’s market where negotiations can be
applied. In January and February, we sat at an average only 3 months’ supply of
homes until the end of May! However, the
larger number of homes on the market has pushed the number of months’ supply of
homes available to 4 months. This will have a slowing effect on bidding wars. The average Selling price compared to Asking
price has been over every month so far in 2019. This average peaked in March
finishing at an average of 105%. Since then it has been coming down where in
June it sat at 100.1% This means that
homes priced between $250,000 and $400,000 will still experience bidding wars
(refer to performance by price category above for the city).This has driven the
number of days it takes to list a home in this area below the level of 17 days
experienced in June 2018 to only 14 days! Look at the graph under the City of
London, you can see this has been driven by First Time Home Buyers pushing
prices to an average of +107% of asking for sales between $350,000 and
$350,000.
All the above conditions have now pushed the
average price of a home sold in the first half of 2019 in South London up 10.4%
or $38,782 above the 12-month period ending December 31 2018. The average price
for 2018 was $373,559 and now sits at $412,341 after 6 months of 2019. There is no doubt that the aggressive bidding
wars will continue in the First Time Buyer category unless numerous properties
are suddenly added to the market in this area, which is unlikely. Again, the Federal program of lending down
payments to First Time Buyers will push demand further.
London East:
Last
year the east set records in price increases over 14%. This area also continues to have higher sales
than the other areas of London. At the
end of the second quarter of 2019 the number of homes sold is virtual identical
to the number of homes sold last year for the same time period. 965 homes were
sold in the first 6 months last year. This year the number of homes sold to
date is 982, an increase of 1.8% over last year with fewer homes available to
purchase. What this means is inventories
are still critically low in this area. In March and April there were 2 months’ supply
of homes offered for sale. This has now increased
marginally to 3 months’ supply. You need 6 months’ supply of homes or more in
your specific price range to even consider trying to negotiate. You are just wasting your time if you try.
(refer to the chart in the City overview at the start of this analysis). In 2018
sellers received an average of 101.2% of asking price in this area. In the
first 6 months of 2019 homeowners received an average of 103.4%. This indicated
that virtually everything in this area is in a bidding war. The year started
with the average home selling in 24 days and has since continued dropping first
to 16 days for February, 17 days for March, 15 days for April & May, and
only 14 days in June!
So,
what happened to the average price? The price of the average home sold in the
first 3 months of 2019 rose 4.9% or $14,031. The average price for the 12-month
period ending December 31, 2018 was $298.300. That average price at the end of
the first 3 months is now $303,331. With
the higher sales in January and February and flat inventory compared to the
same period last year and months’ supply in March dropping to 2 months’ supply
of homes offered, watch for a very aggressive next 6 months in this area with a
lot of bidding wars.
St. Thomas:
Inventories
of homes available for sale in the first 6 months declined 7.5% versus the same
6-month period last year. As far as
months’ supply of homes, this did not change from 3 months. This continued to put upward pressure on
prices in this area. In every month
since January the number of active listing offered for sale has been lower than
2018. In June for example, the number of homes available dropped 4.9%. The number of months’ supply of homes runs
consistently between 2 and 3 months Remember 6 months is considered a normal
market and above where a buyer can negotiate.
Last year this City set records for the area for average prices growth
consistently achieving an average of 100% of asking price. In 2019 the average
homeowner is still getting 100% pushing prices further up and it only takes an
average of 27 days to sell a home.
St.
Thomas stole the show, pushing prices up 16.7% or $49,820 for the first 6
months of 2019 above the average for the 12-month period ending December 31,
2018. The price of the average home in St. Thomas now sits well above the
$300,000 mark at $348,558 up from $298,738 for the 12-month period ending on
December 31, 2018. This area is still
well below the average price of a home across the City of London currently
sitting at an average of $410,758. We
consider this market excellent value as a bedroom community with all the
services of London and provides easy access to recreation, Lake Erie and Port
Stanley. This record setting trend will continue in this community.
Summary:
As
previously stated, and worth repeating, the loan program for first time home
buyers is now out there , it will add more potential buyers to the mix. Bidding wars will cause these buyers to walk
away but will initially bring more offers to each home priced below
$350,000. The reason they will have to
walk away is the way Chartered Banks do the pre-approvals. Example: A Buyer may
have a pre-approval of $350,000 and is putting an offer on a home offered for
$329,900. Generally, the appraisal will come in around this price. The bank will not lend money for more than
this appraisal. This means the Buyer
must come up with the additional down payment to cover their excessive bid. Obviously, the government is not going to
provide the 5% down payment loan above the appraised value. This will cause a
lot of offers put in “Conditional on Financing” to fail based on the
appraisal. A Buyer should never put in a
“Cash Offer” (one without conditions) unless they can make the additional down
payment themselves. A qualified Buyer
may have a 20% down payment and they offer Cash, they may find themselves using
Canadian Mortgage and Housing Insurance because their purchase based on the
appraisal by the bank is now 10% below their bidding price. Remember, that a Buyer that has an accepted
offer without conditions, that fails to close is responsible for any out of
pocket expenses incurred by the Seller in order to resell the home.
In
closing, this continues to be another year of price increases based on the
continued demand, more First Time Buyers, Home Owners cashing out their equity
in Metro Toronto, and everyone taking advantage of what are still considered
bargain prices in our area. Couple this with Months’ Supply in London and St.
Thomas running at 2 to 4 months, the only way is up again… We believe now that
we will exceed the current gain of 10.2%
for the City of London. A great time to buy that first home, Invest or move up
to the dream home. This is not the time
to cash out. In this case wait for the eventual balanced market when it finally
arrives, not this year
Gib & Mary Heggtveit,
Broker & Sales Representative
Direct: 519-421-2626
Cell:
519-535-3975
