The numbers from the May 2021 new-home market are giving out mixed messages, says Cheryl Rice, Ottawa president of industry analyst PMA Brethour Realty Group.
There were 401 new-home sales in May, which was up a whopping 60 per cent over the 250 sales in May 2020. Sales were also up 17 per cent for the year to date compared to last year (2,410 vs. 2,049).
But the jump is misleading. “This comparison is skewed due to the dramatic plunge in sales in the two months immediately following the March pandemic lockdown,” Rice says.
May sales were below the five-year average of 458, she notes, and they were down almost 20 per cent from April. Typically, May sales are on par or higher than April sales in the traditionally popular spring housing market.
“The market data that really got our attention was the increase in inventory levels over the past months,” Rice says. “Since the relaxation of health and safety restrictions last summer, product released was product sold — immediately.”
While she says that’s still the case at many sites, PMA is seeing a trend in the absorption rate of newly released inventory.
“According to our data, unsold new inventory in April sat at 33 per cent, and in May 51 per cent of new units remained unsold. This is a significant month-over-month change.”
PMA’s analysis of the data is also showing the percentage of new inventory sold in 2021 is decreasing:
- January — 69 per cent
- February — 74 per cent
- March — 71 per cent
- April — 67 per cent
- May —49 per cent
For about half of Ottawa builders, sales continued to be very strong, with demand as hot as ever, while others have noticed a softening in both demand and sales, Rice says.
A new leader
Claridge Homes, in particular, is having a strong year, surpassing traditional market share leaders Minto Communities and Mattamy Homes for highest sales for the year to date, with 427.
“It’s very rare to see a builder other than Ottawa’s two largest builders at the top of the chart,” says Rice. “Adding to Claridge’s numbers were about 118 additional condo sales from previous months, which boosted their overall year-to-date share.”
Rice says that despite the mixed messages, current market conditions beg a few questions:
- Is overall demand falling off and, if so, why?
- Have buyers simply given up after months and even years of looking for a new home?
- Are higher prices a factor? The price of a new single-family home has increased by 34 per cent since May 2020, and townhome prices are up 44 per cent.
- Or is the post-COVID consumer simply settling in to the new normal? “Maybe they’ve already moved to their desired home and location and, with the lifting of restrictions, maybe their focus is shifting from needs to wants, such as family time, travel, socializing with friends.”
Rice says it’s difficult to forecast what the next few months will look like, “but we know some of the factors that will influence our market. One is that new home prices will continue to increase, albeit not with the same steep increases we’ve seen over the past year.
“And although the market is showing early signs of buyer pushback on price, and slower product absorption, this is not at all a doom-and-gloom scenario. Our market can afford a slowdown in demand that will eventually lead us to a more balanced market later this year or early 2022.”