Which City Has the Best Home Values in the Region? - Issue 359

Has the market returned to “normal”? Are prices still dropping? This market is horrible!

The April numbers are out and you might be surprised by what you are going to see.

There’s a lot of negativity in the real real estate market today and I’m going to chalk that up to a combination of factors with information saturation being one of them.

So here I go contributing to said saturation!

Let’s start with pricing.

The fear in the market place is that prices will continue to drop. That fear takes a lot of motivation out of the market on both sides of the sale. Sellers that don’t have to sell will sit on the sidelines and hang on to their homes expecting prices to start creeping back up. Buyers, on the other hand, are now motivated to sit on the side lines and wait for prices to continue to drop, even more so now that interest rate increases have stabilized.

Yes, prices in Guelph are down 13.5% over April of 2022, yet remain $85K above the April 2021 price. Sellers are still in a very comfortable positive equity position if they bought prior to 2022. For a market that was supposed to come crashing down, these numbers seem to indicate more of a slight swerve, like you would swerve trying to avoid the dead skunk in the middle of your lane.

Looking at the new listings in April confirms a much slower market compared to April 2022. Guelph is down by 47% to 224 homes listed, vs 423 in 2022 and 372 in 2021. It’s the same across the region with listings in all four cities down double digits from 2022 and 2021.

The April new listings numbers add to the narrative that the market isn’t keeping up with demand. This is the biggest reason prices remain strong in the area. The question here is - where are all the sellers? You’d think they would want to take advantage of the strong market.

April sales were “ok” despite the overall price drop. It’s interesting to note that sales are down by 39% from 2021. Our last true Spring market was April 2021, with 294 homes sold in Guelph that year. A bit of a disturbing trend. Over the past 10 years, April sales have averaged over 220 homes sold.

Could that mean buyers are avoiding our market? Worth exploring.

These next two charts will reinforce that our market remains stubbornly strong and buoyant.

I like to look at the sales/list price ratio. That number tells me how much negotiating power buyers have in the market. As you can see, Sellers in Guelph are actually lagging behind the rest of the region in terms of getting more than asking. Fair warning, this number is skewed in the Cambridge/KW markets because Realtors there are still employing the “list low for multiple offers” strategy and as a result, they show a sales/list ratio well above the Guelph numbers. Guelph agents and their sellers seem to be pricing more to the market rather than trying to “fool” buyers with artificially low sales prices.

But is that strategy working?

Not really!

The real number to look at is the sales price per square foot. This number takes the gaming of the system out of the numbers and levels the playing field. This is how condo apartments are typically priced and sold. How many square feet are you buying and here’s the price!

Guelph outperforms the region on sale price/square footage by a significant percentage. I’d argue that the artificial “low list price” strategy may generate a flurry of activity and a number of offers being presented, but it appears not to achieve the number one goal of most sellers - to sell for the most amount of money.

Any sellers seeing these numbers would be smart to re-consider the "list low and expect multiple offers” to lift the sales price beyond expectations. It appears that a more realistic list price and smart marketing plan will outperform the herd and actually deliver on a seller’s expectations.

So where’s the best value in the region?

The numbers suggest that if you were a seller, Guelph is the place to be. For buyers, Cambridge still represents the best value in terms of lowest median sales price.

But at the end of the day, the most important question to answer for any buyer is which community you feel most at home in and ultimately decide to put roots down in.

Thanks for reading.

Have a great weekend.

Paul Fitzpatrick

Broker of Record

Keller Williams Home Group Realty

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