We all know that nothing lasts forever; a ‘true-ism’ that applies within every realm of our material world. For many months it was the turn of homeowners to watch their property values climb up and up and up, and to cash in on record-breaking sale prices all over Southwestern Ontario. Meanwhile, for anyone else who found themselves on the purchasing side of a real estate transaction, the past two years have presented a brutal lesson in the realities of a true ‘seller’s market’. But now, heading into the middle of summer ‘22, there’s been a dramatic reversal of the trend which dominated our pandemic-era market. A combination of factors are playing a hand in the softening of prices here in Kitchener-Waterloo, all of which I will explain in some more detail a little later on. For now, let’s take a quick look at where the numbers stand halfway through the year.

The average sale price of a home in Kitchener-Waterloo as of the end of June was $791,674 – a figure which, although up by more than 4% over last year’s amount, still constituted the fifth straight month in which that average has fallen. This figure is down by 9.6% just since May, and down from the heady heights of February when KW’s average sale price was over one million dollars.

When we look at where property values are today on a type-by-type basis over June of 2021, the news is somewhat rosier for homeowners, as many people will have seen significant increases in their home’s value year-over-year. Townhomes are up by 11.9% since last June (to $662,305), apartment style condominiums by 11.7% (to $497,429), semi-detached properties by 9.5% (to $710,284, and single detached homes standing pat at where their average sale price was last June ($920,349). Although the notion that single detached homes are right back to where they started the year following their meteoric rise to more than $1.21M just this past February might be shocking at first blush, that which goes up the highest is almost always sure to face the most impactful correction when the market cools. And, don’t forget, the average sale price of a single detached home in KW when the pandemic began in March 2020 was ‘just’ $679,728 – meaning that detached properties have gained, on average, over $240,000 in value in the past two years. That’s over 25%, and easily enough to overcome any adjustment for inflation during the same period.

So, despite the reality check imposed by the market over the past few months, home values here in Kitchener-Waterloo have remained incredibly resilient in the face of the past couple years’ turmoil. Not to mention the welcome relief that recent price drops have been for the next generation of local residents and prospective homeowners.

The first two forces which have helped to cool the nation’s housing market will be immediately recognizable to anyone who’s held a passing interest in national and international news since the beginning of 2022. With inflation reaching 40-year highs in much of the developed world as a result of the massive infusions of money into the global economy deemed necessary to combat the effects of the pandemic, our central banks (including the Bank of Canada) scrambled to find a lever to slow things down. One of the most important tools at the bank’s disposal is their control over Canada’s benchmark interest rate – a number which our other major banks use as a waypoint in guiding their own monetary policies. The Bank of Canada thus raised the overnight rate to 1.5% this past June, meaning that mortgages have suddenly become much more expensive for most Canadians. With debt becoming a more costly burden for homebuyers, the overall amount of money many people can spend on a home has dropped – applying significant downward pressure to the housing market.

The second major influence is somewhat more metaphysical – at least for those of us lucky enough to be living here in North America. The conflict in Ukraine, underway now for the better part of five months, has done much to upset markets all over the world. Given the interconnectedness of today’s economy, upheaval even several thousand kilometres away can make waves in our own backyard. Consumer confidence has been rattled by the Russian invasion of Ukraine, with widespread uncertainty effecting the movement of money and investments. While this is felt most in the world of investment real estate and foreign investment, every segment of our market is being impacted to some extent – making for another factor working to cool housing costs here in Southwestern Ontario.

Finally, a phenomenon that’s a little closer to home is also helping to shift the market back towards a more normal buyer/seller balance – an influx of new resale inventory. Human nature being what it is, plenty of folks who’ve been observing their neighbours getting record high amounts for the sale of their homes have decided they’d like a piece of the action, too. So, where a major shortage of supply was key to driving our pandemic market way up, a sudden flood of new listings has restored the balance between supply and demand – bringing home values back down closer to Earth.

According to the KWAR’s latest media release,

“The total number of homes available for sale in active status at the end of June was 991, an increase of 165.0 per cent compared to June of last year, and 20.6 per cent below the previous ten-year average of 1249 listings for June.

The number of months of inventory increased to 1.8 months in June from 1.6 months in May. While inventory is still at historic lows, this is the highest it’s been since September 2019 and a return to where inventory was in the pre-pandemic June of 2019. The number of months of inventory represents how long it would take to sell off current inventories at the current rate of sales.”

I hope this has helped to shed light on the state of the market for you! It’s a complex time, with several inter-related influences coming together to make for the dramatic numbers you’ve been seeing lately. But with the right advice on your side, you’ll feel more confident in navigating even the most challenging of markets. 

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