Ottawa Real Estate Prices Soar, Approaching 2022 Levels

The real estate market in Ottawa has experienced a significant rally in prices since hitting a low point in November of last year. Both residential and condominium prices have been on the rise, and they are now approaching the levels seen in 2022.

In May, the Ottawa Real Estate Board reported that a total of 1,477 residential properties and 462 condominium properties were sold by its members. This represents an increase of 7.7% and 0.7% compared to May of the previous year.

According to a chart provided by the Ottawa Real Estate Board, the sales per week for both residential and condo properties in 2023 are either at or slightly above the levels seen in 2022. This indicates a strong market performance.

The average sale price of a residential freehold property in May was $745,902, while the average condominium sale price was $442,859. Interestingly, freehold property prices experienced a slight decline of $2,530 on average compared to the previous month, while condo prices continued to increase by 1.6% month over month.

Year-to-date, freehold residential properties have seen a price increase of $69,695 or 10.3%, while condominium prices have gone up by $30,615 or 7.4%.

Analyzing the weekly chart of residential and condo prices, it becomes apparent that the current prices are trending at or slightly above the levels observed in 2021 but still below the peak prices of 2022.

The average number of days on the market for freehold residential properties has increased to 35 days, while condos are spending an average of 36 days on the market. This marks a significant increase from 14 and 17 days, respectively, compared to the same period last year.

It's worth noting that the market data discussed in this video pertains specifically to properties sold within the City of Ottawa and does not include sales in neighboring towns like Alexandria, Almonte, Smiths Falls, etc.

In May, 322 properties in Ottawa were sold over their asking price, accounting for 21.9% of all sales. On average, these properties sold for $26,020 above the asking price. There was even a case where a buyer paid $260,000 over the asking price for a property listed just above 1 million dollars.

Examining the list price to sold price ratio, sellers, on average, received 98.5% of their original asking price in April. The graph illustrates that many homeowners are aiming to sell their properties at higher prices than what buyers are willing to pay.

Looking at the broader time frame, it becomes apparent that sellers continue to list their properties at prices reminiscent of the peak in March 2022 when the Benchmark Rate began increasing from 0.25%. With the current rate at 4.5%, many speculate that the Bank of Canada might raise it again at its June 7th meeting.

Inventory levels in Ottawa have been decreasing, with 1.3 months of residential freehold and condo inventory in May, down from 1.5 months in April. This downward trend began after reaching a peak of 3.2 months in January. The current inventory is slightly higher than what was observed in May of the previous year (1.1 months).

Active listings on the local Multiple Listing Service (MLS) for the city of Ottawa increased from 1,762 in April to 1,900 in May. Looking at the 10-year chart, active listings remain relatively low.

In May, there were 2,083 new listings added to the MLS, a 33.6% increase compared to April. However, this is still lower than the 2,470 new listings recorded during the same period last year.

Moving on to the latest news and market data, the International Monetary Fund (IMF) has published an article titled "How Falling Home Prices Could Strain Financial Markets as Interest Rates Rise." According to the IMF, countries with high housing prices and significant household debt, such as Canada, Australia, Norway, and Sweden, face the greatest risk when it comes to falling home prices and tightening monetary policies.

While the IMF doesn't believe that falling home prices will cause a financial crisis, they suggest that a sharp drop in prices could negatively impact the economic outlook. This raises concerns, especially considering that Canadian consumer debt has reached a record high of 2.32 trillion in the first quarter of 2023, as reported by TransUnion. This increase in debt has occurred alongside rising interest rates and high inflation, leading more Canadians to rely on credit.

Key takeaways from the TransUnion report include a 2.9% increase in the number of Canadians with access to credit, with 30.6 million individuals having credit accounts. Additionally, the volume of consumers adding more credit products has risen by 6.2%. This trend is driven by Gen Z consumers entering the credit market and new Canadians.

The higher credit balances have resulted in an increase in minimum monthly payments, particularly for mortgages and lines of credit, which are sensitive to interest rate changes. The average monthly payment for a line of credit has risen by 43% to $436, while the average monthly mortgage payment has increased by 15% to $2,032.

Regarding mortgage rates, there have been recent increases in fixed-rate mortgages due to rising Government of Canadian bond yields, which influence fixed mortgage rate pricing. Disappointing Consumer Price Index (CPI) data released on May 16 has contributed to this yield spike. The data showed an increase in the consumer price index in April, ending a five-month trend of deceleration. These developments suggest that the Bank of Canada might face challenges in bringing inflation back down to its 2% target.

On June 7th, the Bank of Canada will announce its interest rate decision, prompting speculations about whether rates will be cut, increased, or kept steady. The odds of the Bank of Canada raising rates have risen in recent days due to strong GDP results. While household spending increased in the quarter, housing investment slowed down due to higher borrowing costs. Some economists believe that raising interest rates might be necessary to control inflation.

Lastly, artificial intelligence (AI) has been a popular buzzword lately, and various online apps have emerged that utilize AI technology. One such website is RoomGPT.io, which allows users to upload pictures of their rooms and receive AI-generated redesigns based on chosen themes. The AI technology can provide ideas for room design projects, although it may require further fine-tuning.

In conclusion, the Ottawa real estate market has seen a remarkable increase in prices, approaching 2022 levels. However, concerns arise regarding the potential strain on financial markets due to falling home prices and rising interest rates, as highlighted by the IMF. Canadian consumer debt has reached a record high, and recent increases in fixed-rate mortgages indicate potential challenges in managing inflation. The upcoming Bank of Canada interest rate decision will shed light on the central bank's strategy.

On a different note, artificial intelligence (AI) has become a prevalent topic in recent times, and various online apps have emerged to harness its capabilities. One such example is RoomGPT.io, a website where users can upload pictures of their rooms and receive AI-generated redesigns based on chosen themes. While the AI-generated designs may not be perfect, they can serve as valuable starting points and sources of inspiration for further fine-tuning and customization.