Wondering if it is a buyer or seller’s market in Durham? Before we attempt to answer that, let’s point out that in our June market update we strongly suggested the market was shifting away from a seller’s market to a more balanced market. But we were somewhat surprised by how fast the market shifted and the question now is are we in a balanced market between buyers and sellers or has the market actually shifted in favour of buyers?
Let’s look at some of the numbers for the Northumberland (Durham) region. According to CREA, the number of homes sold through the MLS® System of the Northumberland Hills Association of REALTORS® totalled 83 units in June 2022, down 36.2% from a year ago.
On a year over year basis, sales are down 31.2% for the first six months of the year.
Stacy Vermiere, President of the Northumberland Hills Association of REALTORS® said, “With demand weaker and supply stronger, the market has switched from favouring sellers to a more balanced position, with overall inventories up from record lows.
Still, housing prices are up 4.9% for houses sold in June 2022 versus June 2021. Meanwhile the number of new listings was up 16.3% from June 2021, with a total of 221 new residential listings in June 2022.
Looking at inventory, the months of inventory at the end of June 2022 stood at 2.9, up from only 1 month of inventory recorded at the end of June 2021 and also below the long-run average of 3.2 for this time of year. Months of inventory is the number of months it would take to sell the current inventory of homes at the current rate of sale activity.
Is it a Buyer or Sellers Market in Durham?
Based on the numbers above, we suggest the market is cooling off, largely driven by interest rate increases. Houses are taking longer to sell and some of the more aggressive buying behaviours are abating. There appears to be more equilibrium between buyers and sellers as indicated by our graphic above.
This leads naturally to the next question “Where is the real estate market headed next?” In large part this depends on where interest rates go. According to Mortgage Sandbox, “5-year mortgage rates are expected to continue to rise.” Higher interest rates means higher mortgage costs. Moreover, potential house buyers are battling increased costs on all fronts – gas prices are making going to work much more expensive, while food and virtually the cost of everything else is also going up dramatically.
Supply Versus Housing Demand
All of this has the effect of dampening the purchasing power of potential buyers which in all likelihood is dampening demand. Less demand means less competition for housing that are being sold reducing price pressure. It’s economics 101. Price is determined by the intersection of the supply and demand curve for the given market as per the diagram below.
While the factors above make a strong case for the continuing shift of the market in favour of buyers, the risk of a recession is rising too. But perhaps surprisingly, home prices remained steady or even rose during the last five recessions. What really determines how the real estate market is affected is more a matter of deamand and affordability.
Inflation is outpacing wage increases (especailly after taxes!) and home price growth has been very strong. Theses factors susggest we’re headed to a cool-down in housing price demand.
The potential of the real estate market to shift from neutral to a buyer’s market is growing quickly. People interested in selling their homes may not want to procrastinate. Buyers, on the other hand, who have the luxury to wait, may see better prices ahead.
In the coming months, we will plan to revisit the question as to whether or not it is a buyer or seller’s market in Durham region. It would not surprise us to see the pendulum shift further in favour of buyers over the next several months.