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b-LOG: The MOST Important Factor in Today’s Market

b-LOG: The MOST Important Factor in Today’s Market
Date Posted: 06/05/2020

We have all likely stumbled upon supply & demand at some point in our schooling. For me, it was a high school business course in the late 80s. Aside from teaching me typing, we also discussed the impact that flooding the market with “product A” would have on pricing.

When looking at the Niagara real estate market, or any market as far as I can tell, the impact of new listing inventory is always important. Here in the 2nd month of The Covidian Times, the number of new listings is as important as ever.

Looking at the market from 3 angles, here is where we’re at for April 2020 v April 2019:

1. Number of Sales are down 40 – 70% across the region

2. Number of New Listings are down 40 – 75% across the region (except for Thorold)

3. Average Sale Price is all over the map (due to reduced sales volume)

The big driver behind the market is available inventory. Here it is in a nutshell:

Where the % of sales and the % of new listings are within 10% of each other, the average sale price has generally been stable or increased.

Where the % of sales are down 40 – 60% but the number of new listings is only down marginally, the average sale price has pulled back due to increased choices for the buyer.

High school economics.

If 60% less buyers are walking into your store but you keep stocking the shelves as normal, you’re going to have to reduce prices to move that product.

The MOST important factor in today’s market is new listing inventory(*).

If the difference between new listings and sales is 10% or less (+/-), then pricing has held. A few examples:

St.Catharines # of New Listings down 55% # of Sales down 62% Average Sale Price up 5.1%

Niagara Falls # of New Listings down 50% # of Sales down 61% Average Sale Price up 3.1%

Niagara Region # of New Listings down 50% # of Sales down 62% Average Sale Price up 2.9%

…compared to

Thorold # of New Listings down 10% # of Sales down 63% Average Sale Price down 9.7%

Fort Erie # of New Listings down 46% # of Sales down 80% Average Sale Price down 4.8% (*)

There is one big caveat with this. In a city with low sales volume (under 20 sales in a month), you have to put a bit of an asterisk beside the numbers.

Fort Erie above for example had sales in April 2019 at 69 and April 2020 at 14. So, the relative pricing can be easily impacted by an outlier in either direction.

What does it all mean? For us, we see it as a reassuring character trait of the current market. It’s a market that is more or less supressed as people essentially pull back and wait. What will get really interesting is what takes place in the next 60 – 90 days as the markets starts to get active.

It’s the difference between gradually opening the valves and opening them as fast as we can. Rapid opening will lead to a market flood of new inventory which in itself will take time to settle as the market finds its new footing.

A gradual opening will more likely see buyers and sellers adjust to the new dynamics as we go which will be less of a quick shock to the system. And as important, is no one really knows.

All we can do is look at past market activities and follow the trends.

So we will continue to do what we’re doing here. Track the data trends. Follow days on the market (time it takes to sell). Keep track of the balance between new inventory and sold inventory.

We’ll be here watching on a daily basis.

If you’re curious about your home or the market in general, feel free to reach out anytime.

Thank-you for visiting.

….and thank-you to Amadej Tauses for the intriguing photo.