Ottawa Real Estate Market Hits Critical Low Supply
Today we’re going to be talking about the Ottawa housing market supply. We’ve talked before about the limited supply of affordable housing affecting prices for homebuyers but Ottawa Real Estate Market Hits Critical Low Supply as of late.
A recent Re/Max report outlines how Ottawa was uniquely positioned in the pandemic housing market. With many of its residents able to transition to remote work, demand for homes grew at a remarkable rate.
Every market across the country saw prices dramatically increase over the past two years. The pandemic created a perfect storm of low-interest rates, people working from home, and increased savings.
Some people were able to consider entering the housing market for the first time. Others were looking for more space as they spent more time at home. The result was high demand for the few houses that were for sale. As we’ve seen, those conditions drove up prices for homebuyers.
As we move away from pandemic restrictions, some of the conditions that led to the market boom in 2020 and 2021 are shifting. Interest rates are rising, and inflation is affecting the buying power of potential homebuyers.
If Ottawa had a robust supply of housing, those factors might be enough to ease the price increases. Without enough supply, we’re seeing prices continue to rise, making the housing market inaccessible for a growing number of potential buyers.
Looking at the Numbers
Let’s talk numbers. In December of 2021, 862 homes were sold in the Ottawa area. That’s down from the record of 997 in 2020 and indicates that seasonal fluctuations that were upended by the pandemic are returning to normal.
In January 2022, 936 homes were sold, compared to 963 in 2021. Again, it looked like sales were headed back to seasonal norms, with the winter months slowing down. The increased COVID restrictions during the Omicron wave certainly played a role as well.
In February, however, we saw an increase year-over-year. In 2021, there were 1,385 homes sold. Fast forward a year and February 2022 saw a 3% increase to 1,421 sales.
So what does this mean? Alone, these numbers only indicate that spring might be arriving a bit early for the Ottawa real estate market. Or it could be a little bounce back as pandemic restrictions ease once again. Ottawa is an extremely desirable area, with a strong year-round market that’s very resilient.
It’s when we look at other numbers that we begin to see the problems for people moving to Ottawa. Year over year prices rose between 16% and 20% in December. In January, those numbers were 14% to 18%. In February, Ottawa home prices increased between 15% and 17% from a year ago.
We also need to look at how many new listings entered the market during those months. In December, there were 600 new listings in the Ottawa area. That’s 15% lower than the five-year average. It represented less than one month of housing inventory.
This is a sign of the ongoing shortage of available homes in the market. Ottawa has slipped into a critical shortage of available homes.
Not a New Phenomenon AS Ottawa Real Estate Market Hits Critical Low Supply
This shortage is not a new phenomenon, but it has been worsened by high pandemic demand that is still going strong. New listings are bought quickly, often for prices above assessed value or asking price.
Potential homebuyers are tired. They’ve been in a strong seller’s market for two years and some of them have now been priced out of the market entirely. First-time homebuyers are unable to find affordable properties.
A Glimmer of Hope
There may be a glimmer of hope on the Ottawa housing horizon. The February numbers show 1,762 new listings. That’s 4% higher than the five-year average, suggesting that some of the congestion may begin to clear.
New housing starts also increased in 2021, up about 7% compared to 2020. As those new homes are completed, they will add to the market inventory. Higher interest rates and, hopefully, the easing of the pandemic may also reduce demand. That will decrease pressure on supply and hopefully begin to moderate prices.
Ottawa still has less than one month of available supply, but it is moving in the right direction. We would love to see a 3-4 month supply to balance the market. Until then, we’re going to continue to see a seller’s market.
With a seller’s market, we’re also likely to see continued price increases.
Available housing in Ottawa has reached a critical low. Many factors have influenced the market, but this situation has been in the making for years. If you’re living in Ottawa or moving to Ottawa, talk to us about ways to find an affordable home in the area.
Ottawa is a great place to live. That’s one of the reasons homes get purchased so quickly. As we head into the spring, we hope to see increasing supply combined with decreasing demand to open up the market. Keep tuning in to stay informed about the housing market in Ottawa and across Canada.