Record August Home Sales Help Put Ottawa Market Back on Steady Track, with Stable Prices

Following an August of record sales, Ottawa’s real estate market rolled steadily into the fall, continuing a pattern of stable average home prices and a tendency for homes to take longer to sell this year than in 2015.

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“August was a record month in terms of the number of home sales, but we have to caution that prices remain flat—though they haven’t gone down—and it’s taking a lot longer to sell,” observes Patrick Morris. “When you look at the stats, the price ranges selling are much lower than what we expected, with the most popular being the $300,000 to $400,000 range. That has been a consistent pattern all year.”

Members of the Ottawa Real Estate Board sold 1,484 properties in the month of August 2016, compared with 1,267 sales in August 2015—a staggering 16.3 per cent increase. Patrick attributes the surge to “pent-up demand.”

When buyers returned in August and the market went gangbusters, the rise in demand predominated in the $300,000 to $400,000 range for residential properties—which accounted for more than a third of home sales so far this year—and the $200,000 to $300,000 range for condominium properties. Given how sluggish condo sales have been over the past couple of years, says Patrick, “We’re very pleased about that.”

Although the average sale price for residential properties and condos year to date (to August 31) remains almost the same as it was last year, the number of sales is up by about 6.7 per cent for residential properties and 5.8 per cent for condos. Whereas in 2015, 8,655 residential properties were sold from January to the end of August, in 2016 that figure rose to 9,234. Condo sales for the same period rose from 1,910 in 2015 to 2,020 in 2016.

However, it is taking considerably longer to sell properties this year.Average_Cumulative_Days.JPG

In 2015, it took on average 62 cumulative days on market to sell a residential property. This year, it’s taking nearly one third longer to sell, at 83 days on the market. The same is true for condos; year to date, the average cumulative days on market is 106 in 2016, compared with 82 days last year.

Why is this happening?

“Buyers are taking their time making decisions,” explains Patrick. “The number of properties on the market has decreased—the inven­tory is much lower than it was a year ago at this time—so buyers are being selective. They’re taking a lot more time to do their research compared with previous years, which is a good thing, so that when they do see the right property, they are able to make an informed decision.”

Patrick anticipates that the trend of stable prices and lengthier selling times is going to persist over the next few months.

“Unlike some Canadian cities, where properties sell quickly and prices continue to rise, our region has a stable housing market. We don’t witness monumental price increases or declines. I think we’re going to have a steady market between now and the end of the year.” 

ASK PATRICK:

Should I rent or buy my furnace or air conditioning unit?

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I always recommend owning your furnace, your air-conditioning (AC) unit and other appliances.

Furnaces have a life expectancy of 15 to 20 years, and AC units can last more than 20 years. It’s fine if the furnace or AC rental company says, “We’ll maintain it for you—you won’t have to pay the $125 annual maintenance fee,” but it’s difficult to determine what the true interest rate is on the rental amount. And that’s the issue. It’s buried in the contract, and no one can determine what it really is.

Before entering into a long-term rental contract, it helps to do a bit of research, and weigh the pros and cons:

PROS OF RENTING

You avoid a big upfront payment. Furnaces cost around $4,000 to $6,000, and most people are not prepared to pay this, so renting might seem more attractive.

Repairs may be included along with yearly maintenance.

The unit may be replaced if it breaks down; this is true for straight rental agreements. If the unit is “rent to own,” you may be responsible for servicing and replacing the equipment.

 

CONS OF RENTING

Being locked into a contract. Rental contracts usually last 10 to 15 years or more, and it may cost you dearly to break free; you could be responsible for the full amount outstanding on the rental contract.

Exorbitant interest rates. If you’re paying monthly lease payments over a number of years, you could end up paying double the cost of the unit, i.e., a 15-year contract at $75 per month winds up costing $13,500.

If you have a rental appliance, there’s a lien registered against the property. When you decide to sell, it’s always easier to dispose of a property without any liens.

Having rental appliances can reduce the resale value of your home; home prices are based on the units being owned. At the time of sale, you will likely be asked to pay out the contract, as most buyers will not want to assume another monthly debt.

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TIPS:

  • Do your research before the coldest or hottest days of the year to avoid getting stuck if your furnace or AC unit break down on you.
  • Crunch some numbers to figure out the total cost of renting versus using bank financing to purchase a unit.
  • Ask the rental company a lot of questions: e.g., how long is the contract? Is it a rental or rent-to-own? Who is responsible for the cost to service? If it needs to be replaced, who pays? Do you have to pay for yearly maintenance? What is the annual interest rate, and how is the rate calculated?

 

OTTAWA:  Still Affordable.

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Need help selling your home or finding the perfect house? Call or email us. You can rely on our intimate market knowledge and professional service. Let us help you. 613-238-2801 mail@morrishometeam.com