Numbers have tapered off from the healthier ones we saw in May, but July 2024 new-home sales show we’re still doing better than we have in the last few years.
The latest numbers reported by PMA Brethour Realty on behalf of the Greater Ottawa Home Builders’ Association (GOHBA) illustrate the tepid market that persists in the city: they’re up from last year, but then last year was a particularly slow one so it wasn’t hard to improve.
There were 254 new-home sales in July, up 26 per cent compared to July 2023, which saw 201 sales, but still well below the 10-year average of 342. For the year to date, there have been 2,114 new homes sold, up 35 per cent compared to last year’s 1,567 (the 10-year average is 2,728).
“Although July and year-to-date 2024 new-home sales saw remarkable improvement over the previous year, the market has not yet fully recovered,” says Cheryl Rice, president of PMA’s Ottawa office. Buyers last year were moved to the sidelines due to high interest rates, increased borrowing costs and elevated home prices, she says, adding that 2023 “truly was a test to our market resilience, having delivered a hard correction by the close of the year with a cooling of demand and lower home prices.”
As is often the case, sales in July were down from the month before, in this case off 23 per cent from the 332 sold in June.
“Summer vacations typically slow sales in July and August,” Rice says, “but, as usual, we expect to see a rise in activity in both resale and new-home markets come late summer and early fall. Supply for both markets is sufficient to meet an increase in demand, with home prices remaining relatively stable for the remainder of the year.”
In a mini video series launched this week by GOHBA, Rice says recent rate cuts by the Bank of Canada have not yet been enough to entice buyers back into the market. “(There’s) hesitancy on the part of the consumer where demand continues to be tempered.” While she doesn’t see falling interest rates showing up in mortgage rates until next year, “it’s a level of overall consumer confidence knowing that the interest rates are going down … (but) it’s going to take time.”
GOHBA executive director Jason Burggraaf notes that his sense of builder expectations earlier this year that things would pick up in the second half of the year seems “to have eased back” and they are no longer expecting a huge rebound this year.
He also notes that home price percentage increases, which were in double digits from mid-2020 to the end of 2022, have been two per cent or less since. That’s a welcome sign for buyers who have been priced out of the market in recent years. Yet “despite that low price growth, the sales and the buyers aren’t there,” he says.
There’s still the question of affordability, says Rice. “Is it low enough, especially for those first-time buyers looking to get into the market?” Pre-COVID, the Ottawa market was quite stable, seeing single-digit year-over-year growth. Then it took off, hitting up to 22 per cent growth. “That’s not sustainable.”
In the past year, Rice has seen builders “do what they can to improve affordability. They’re listening to the market and I love that… They know that they need to bring their prices down.” That’s being done with things like smaller homes and revised specifications (think laminate instead of quartz or an unfinished basement).
“Over the last several months, they’ve actually reduced prices by $100,000 on some homes… and that’s what the market needed in order to move sales.”
The slow market is doing little to help the city reach its target of new-build homes as directed by the province. By the halfway point of the year, Ottawa had built only 12 per cent of its quota of homes assigned by the province, with few housing starts to spur things along.
