Home buyers continued to buy homes at a pretty good rate last month. However, while May sales were 27.7% higher than the 10 year average for May, we saw the second month in a row where sales declined significantly from the prior month: May sales were down 13% from April and April was already down 14% from March 2021. We saw the highest recorded monthly sales for April in history; HOWEVER that trend did not continue into May and sales were not as high as they were in March 2021.
There are a number of factors at play pushing sales down. These include:
-the number of homes for sale has increased reducing the pressure on buyers to move fast and "take what they can get"
-many buyers have decided if they wait they will see much better prices (based in part on the incredible number of articles in the media suggesting a severe market correction)
-mortgage rates have increased slightly although they remain very low at just over 2%
The mortgage stress test, which came in on June 1, 2021 also reduces the buying power for most buyers by approximately 4.5 percent. This is not a huge hit, given it only reduces the spending amount by $4500 per $100,000 BUT for some reason this type of change can affect the market. Perception may lead to reality when people think there will be a significant impact on the buying market. We will have a better idea next month of how this will impact the market.
Last month we saw a significant reduction in the number of offers we received on each property listed. We also saw the return to offers with buyer subjects in them. In some cases newly listed homes which would have "flown off the shelf" with high multiple offers in March received only one offer....some received no offers at all.
Last month did still remain seller favourable and for May 2021 we saw:
-sales of all types of homes were still up 187.4% over May 2020. However this is of course due to the fact that in May 2020 people were just starting to buy again after the almost complete shutdown from Covid. As a result we are comparing last month to a very low sales volume month the year before so the increase is deceiving.
-sales of detached homes were up 166% over May 2020 (again, May 2020 was almost completely shut down so sales were very low last year).
-sales were down 13% for May 2021 compared to April 2021 (this continues the trend we started to see in April-where sales were down 14% from March 2021).
-sales were up 27.7% over the 10 year average for May (so despite a slowdown, still amazingly good for sellers who are prepared to sell for what buyers will now pay).
-May was the first month where we have not seen a new record high number of sales for quite some time. Even with sales down last month, the sales volume for April was still the highest on record for April (so of course still very good for sellers). May 2021 was not the best month for sales in May.
-new listings for May were 7.1% higher than what we saw in April and new listings for April were already the HIGHEST on record for April. This significant number of new listings pushes the critical supply and demand metric in favour of buyers. However we are still in a sellers' market.
-the benchmark price for detached homes in May was up 1.7% over April 2021. However this is an average and there are significant variations, higher and lower, depending upon where in the Province one is selling.
Obviously, most sellers are still doing very well when they sell. However there are many sellers who are likely to lose money by not accepting good offers, wanting to see the bidding wars, and associated (often crazy) prices they would have obtained just 2 short months ago. The Real Estate Board news release this week warns the public that they now need to "price their homes based on current market conditions". The Board is highlighting the fact that the market has eased off the record setting pace we saw earlier this year. It is still good but not as good. Failure to realize this could be very costly to sellers. Over the past month we have seen sellers rejecting offers because they expected multiple offers and higher prices. We know from years of research in many real estate markets:
-most of the time, the first offers received are the highest. The most keen buyers show up first and offer the most. Prices go down the longer a home is on the market
-if a seller does not receive multiple offers the first week, unless there is a price DROP or the market is trending upward (the opposite to what is happening now) it is very unlikely they will receive multiple offers
-when the market turns, it turns fast; hoping it will go back to where it was almost always costs sellers. In the Lower Mainland, that cost can easily run into the hundreds of thousands or the millions
Timing is EVERYTHING in real estate....and the best time for this cycle has likely come to an end. Sellers are still doing very well if they are willing to sell for less than they would have received in March. The sellers who think they will get more if they wait are likely to leave money on the table. As we know from past markets, what starts as a gradual slowdown can become pretty dramatic quite quickly.
If you have been thinking of selling your home you may want to act fast! If you would like to discuss the current market (or anticipated future market) and how it may affect you, please let me know.