Temperatures may have heated up, but the Ottawa market turned cold as June 2022 new-home sales ground to a halt.
There were a paltry 102 sales for the month, down a staggering 64 per cent from June 2021 and 75 per cent lower than the five-year average, according to the latest monthly report prepared by market analyst PMA Brethour Realty Group on behalf of the Greater Ottawa Home Builders’ Association. That broke the record for the lowest June sales since 1995, when there were 109 new homes sold, says Cheryl Rice, PMA’s Ottawa president.
“Although home sales have temporarily plummeted, the Ottawa housing market is trending to a more normal market condition,” she says.
Ottawa has seen a remarkably hot market that began in 2017 and lasted until this past April, with demand far exceeding supply, price increases that often jumped several thousand dollars every week or two and new-home sales well above the five-year averages. In February, for instance, there were 656 new-home sales — 30 per cent higher than the average. But by April, that had slipped to 284 sales (the average is 415) and May was even worse, with just 195 sales (compared to an average of 383). As a result, the year-to-date total of new-home sales to the end of June was down 12.5 per cent from last year.
The new-home market’s biggest competitor is the resale market and, as resale market inventory tightened over the past few years, buyers shifted to new homes, which had ample inventory and selection, Rice notes. “Now with resale’s inventory replenishing, the competition is back.”
The softening of the market has left many builders with higher-than-normal inventory levels, prompting some to slow or pause price increases, she adds. And for certain new-home models, prices have decreased.
“Ongoing adjustments to price and incentives are expected to be the norm for the remainder of the summer.”
Almost 60 per cent of the homes sold were singles, which doesn’t surprise Rice, who notes that the price point for many comparable resale townhomes is now lower than a new townhome, whereas previously they were close to par. And the inventory for new townhomes was up 52 per cent in June compared to April.
“Townhome sales tend to suffer when interest rates rise because investors no longer consider this product an attractive investment.”
The prevailing economic factors — high inflation and aggressive interest rate hikes — will continue to hit buyers’ pocketbooks, as well as tamper with their psyche, she says. “Buyer fatigue and waning consumer confidence have created a wait-and-see attitude, which is expected to supress new-home sales for the remainder of the summer, with some relief in late fall leading to a more normal spring market in 2023.
“There is no quick fix for new-home buyers. The higher cost of living and borrowing, combined with a new and higher benchmark for home prices, will continue to present affordability challenges for the consumer this year and in 2023.”