The London-area housing market is showing signs of a rebound with more home sales and the average price by $18,000 last month, “fragile” growth that may not continue if interest rates rise Wednesday, one real estate observer rising says.
The London-area housing market is showing signs of a rebound with more home sales and the average price by $18,000 last month, “fragile” growth that may not continue if interest rates rise Wednesday, one real estate observer rising says.
Nearly 1,400 new listings came on the market in May, the London St. Thomas Association of Realtors (LSTAR) said Monday, with 846 bought and sold during the month.
While the number of new listings is about 24 per cent lower than the same month last year, sales were up 1.3 per cent from May 2022.
“We’ve been on an upswing since January for sales. Slowly creeping up, a more healthy increase month over month,” LSTAR president Adam Miller said.
“The Bank of Canada interest rate announcement is in two days. Three weeks ago, I think everybody predicted a zero per cent increase, but now I think there’s a lot of projections that it will increase.”
The central bank held interest rates steady at 4.5 per cent in March and April, a big-picture economic decision realtors could see playing out on the ground in London, Miller said.
“You could really see the effect when the interest rates didn’t go up twice in a row. Buyers that had been wary to get into the market really started coming out of the woodwork,” he said. “A new increase, as small as even 0.25, might make them pull back and wait and see for another period of stability.”
Though the London-area housing market is nowhere near the frenzied peaks of the pandemic years – where some homes had 19-plus offers and were selling for $100,000 over asking price – strong demand and limited supply is continuing to drive up home prices in the region , Miller said.
Most London-area homes sold last month drew multiple offers, with sale prices typically $25,000 to $30,000 over asking, he said. The average home price in the area last month was $682,560.
Single-family homes continued to lead the pack in sales last month, with 608 changing hands in the London area. Condo townhouses made up 128 of the sales, with apartments accounting for 68, the latest LSTAR report said.
The average home sale price in May varied widely within the LSTAR district. East London homes sold for an average price of $527,848 last month, the lowest of LSTAR’s seven subsections, while the average home price in Middlesex Center – a municipality that includes Ilderton, Kilworth and Komoka – was $972,914.
Even with the price rally in recent months, the average selling price of a home in the LSTAR area – which includes Strathroy, St. Thomas and parts of Middlesex and Elgin counties – is down about 10 per cent from May last year, the organization said .
At the time, the average sale price of homes in the London area was $762,397, decreasing rapidly due to Bank of Canada rate hikes meant to address inflation. The average selling price in London hit an all-time high of $825,000 in February 2022.
While an interest rate increase Wednesday might cause a “temporary flattening” in London area home sales, there are many other factors that will keep the local housing market ticking along, one analyst said.
“One of the things that has kept the housing market percolating even when interest rates are high is a decent job market,” said Robin Wiebe, senior analyst with the Conference Board of Canada.
“London is coming off a few years of pretty good employment growth.”
The London region unemployment rate hit the lowest level on record in April, plunging to 4.4 per cent, Statistics Canada data shows.
Wiebe said population growth is another factor that can keep the housing market from cooling down even when interest rates are high. The London-area population continued to boom in 2022, rising three per cent, Statistics Canada data shows. The total population for the London metropolitan area, including Strathroy, St. Thomas and parts of Elgin and Middlesex counties, hit 574,238.
Some would-be homebuyers might sit on the sidelines until there’s more certainty on the Bank of Canada’s next moves, Wiebe said, but any cooling in the market likely will be fleeting.
“Canada is a sellers’ market nationally,” Wiebe said.
“Ultimately I think house prices have nowhere to go but up.”
Average selling price for home in London-area in 2023
January: $585,252
February: $621,912
March: $653,611
April: $664,149
May: $682,560
Source: London St. Thomas Association of Realtors (LSTAR)
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