How much can a growing population effect the housing Market?
Firstly it’s good to know what is driving people to our gorgeous Region. Two big factors are great job opportunities and low cost of living.
If you’re a home owner or thinking of buying a home you’re probably curious like I am about how the population growth effects our local housing market. Wondering if it’s a good time to buy or sell is top of the list of questions I get from my clients. More on The Region of Waterloo here
Ill spend most of this article discussing how things progressed last year in 2019, and what you can expect in the coming months of 2020.
We ended 2019 with an extremely low inventory level. December saw a 9% decrease in sales when compared to the same time in 2018, but prices continued to rise. On average, prices grew at a pretty steadfast pace last year and were up 9% over the year before. One stat I do get asked for all the time is the average selling price of a home in our region. Well, the average price of any style of home in 2019 was about $528,000. The average single detached home sold for about $615,000.
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I’m going to pause here and offer some info that I’m sure a lot of you are familiar with, but I want to make sure we’re all on the same page. What you need to know for our purposes is that supply and demand are inversely related. For those that don’t know, when supply is low like this, and demand is high, it drives prices up. Similarly, if we had a ton of homes for sale and no one who wanted to buy them, it would force prices down.
Ok, so, rolling into 2020 here and we see that we started with the same low inventory numbers we finished last year with, but our demand hasn’t dropped, specifically with first-time home buyers. What this means is that prices are still on the rise. Now, this isn’t anything new for us. We saw prices jump dramatically in 2016 and they’ve been on the rise ever since. Our supply hasn’t been able to catch up with demand and it doesn’t look like that’s going to change anytime soon, but more on that in a minute.
If you ever have any question about buying or selling in Waterloo Region, please feel free to fire them my way and I’ll do my best to answer them for you.
What Drove our Demand so High?
First, let’s start with what you need to know about our demand. When most of us are looking for our first home, we can’t afford a million dollar home and are working within a budget. Keep in mind that, generally speaking, the hardest part of buying your first home is saving up the down payment and with prices continuing to rise, that number keeps growing too.
This has created a surge in the prices of homes on the lower end of the scale which has a large ripple effect on the prices of homes on the higher end of the scale. There are other reasons that higher-end homes would grow in price, but we’ll save that for another day. Now, in addition to all of our first-time home buyers, we also happen to be on the 401 corridor and close enough to Toronto to be affected by their market. Find out why people are making the move from Toronto to Kitchener HERE
Toronto’s prices went up, people couldn’t afford to buy there, or realized that they could get two homes here for the price of one there and they made the choice to buy here and commute. Investors also realized this price difference and started buying up investment properties here. And then on top of that, we have the people that are moving here from out of town for various reasons or are moving from within the region into their second, third, or forever homes; or are looking for investment properties themselves. We also happen to have a great job market and play host to two large universities, and one college which all attract even more people to the region. All of these people together have created a huge demand for homes in our area, but there just aren’t enough homes for sale to service them all.
Is it Time to BUY or SELL?
Well, in addition to our extremely competitive housing market, our rentals are also seeing a huge jump in price. Our vacancy rate is ridiculously low and we’re seeing bidding wars on rentals. What this all means for you is that it is a GREAT time to sell you home. I’m aware of the catch twenty-two here in that if you sell, you still have to buy in a competitive market but, if you can afford to upgrade, there’s less competition in the higher price brackets than the lower. Also, if you’re willing to add a little time to your drive, this is the perfect time to take the earnings on your home and head a bit outside of town where you can get a little more bang for your buck.
Which brings us back to supply and demand. Do we think there is a change forthcoming in our housing market that will have an effect on prices? We’ve already seen the government attempt to curve the growth through things like the “stress-test” which was also put in place to help prevent a market crash, but that’s conversation for another time; a foreign investor tax was added which seemed to cause a hiccup for a minute; there was a threat that interest rates were going to rise, which they did, ever so slightly, but they’re back down around the three percent mark, and really, nothing’s changed. Now, I’m no economist so take this with a grain of salt. My prediction is that our housing market continues on this upward trajectory through twenty-twenty, and I don’t think I’m going out on much of a limb with that prediction. The Bank of Canada tends to follow the US FED when it comes to interest rates, though late last year the BOC did hold firm while the FED dropped. Basically, these things can change quickly and can be affected by a number of factors, but short of a global recession, or some unforeseen circumstance, it looks like housing will remain stable.
Still have questions about how Waterloo Region’s growing population effects our housing market? You can get in touch with me HERE or shoot me a text at 226-808-1305. I can provide you with whatever information you’re looking for, or at the very least, point you in the right direction. That’s all I have for you today. Thank you very much for checking out the Best of Waterloo Region!