July real estate sales dropped 47.4% year over year, while prices inched up 1.2% year over year (but down 6.2% month-to-month). Although the months of inventory (MOI) trend came in at 1.2 months in July, the actual number of active listings (15,335) compared to sales (4,912) returns a 3.1 month of inventory when you’re not calculating it based on a 12 month moving average.
What does this mean if a higher number of active listings persists while sales continue to drop?
We may enter ‘neutral’ territory, though many would argue it already seems like a buyers’ market.
With the number of new listings entering the market recorded at 12,045 (though a good portion of those are cancellations and re-lists), active listings is certainly at higher levels but not at the point where there should be too much concern.
High demand neighbourhoods continue to see multiple offers for nicely presented, competitive priced homes. Condos continue to see a healthy price increase year over year (and have dropped the least amount in terms of average price when compared to other property types).
What we should watch out for is one of the following to happen in August:
- An uptick in sales activity, which usually precedes the active fall market.
- An uptick in average price, which shows buyers becoming confident in the market.
When you see the average price pattern on a seasonal basis, comparing each month year over year, you’ll see there’s a great likelihood that the average price will dip below August 2021 levels next month. Look at July 2022’s price increase just being a touch above 2021.
When it comes to average price, we’ll either see August 2022 prices hover slightly above 2021’s, or we may see a crossover into negative year-over-year price growth territory, but not by much.
What will keep the average price for August 2022 above 2021 is an increase in sales, a greater distribution of sales being in the higher price points, and a steady level of active listings.
What could cause it to drop into negative territory is a lower number of August sales, where most of these sales are happening at lower price points.
It’s more than likely that we’ll see steady price movement and low percentage increases year-over-year for the rest of 2022, considering further planned rate hikes, inflation still at higher than normal levels, and a lot of active inventory on the market that is not selling.
Keep in mind we’re still in the summer sales period, and the summer months are typically slower when it comes to sales, and average prices are usually lower during the summer season.
A more aggressive increase in average price growth would commence when the government puts an end to rate hikes, when lower inflation numbers are announced, and if buyer confidence returns to the point that sales start picking up again.
We won’t see that kind of aggressive price increase this fall (and when I say aggressive, I mean double digit year over year price growth) — although I am confident that sales and prices will rise reasonably over last year’s.
Hang tight, the fall market is coming!