2017 was a turbulent year in Prince Edward County for single-family homes worth $300,000 and up. The County market heated up and then cooled off in tandem with the Toronto market, ultimately bringing good news for buyers. However, things were different for homes under $300,000 where monthly sales continued a downward trend over the year. Given the distinct dynamics for each market, this report will focus on homes under $300,000 while a separate report is devoted to the market for homes above that figure.
Historically, homes under $300,000 (also referred to loosely in this report as affordable homes) were typically purchased by local buyers, with trends influenced more by local economic developments than by happenings in Toronto. However, in recent years the affordable housing segment has been increasingly affected by demand from Toronto.
The graph above shows the number of affordable detached homes selling each month. Starting in 2013, the number of affordable homes has fallen consistently each year, with the number of monthly sales down nearly 30% over the five years shown.
The decline in the number of active listings, a trend which has been accelerating since 2013, was even more pronounced than the decline in sales. Between the start of 2013 and the end of 2017, the number of active listings available for sale fell by more than 80%.
The graph (above) comparing active listings to sales on a common scale shows the dramatic change over the last 5 years. At the start there was a healthy ratio of listings to sales, reflecting a good selection available to buyers. With the dramatic fall in listings since then, we have reached the point where sales are limited by the lack of product, or in other words, there was little for buyers to choose from.
With constant demand and shrinking inventory, it’s expected that the bargaining power of sellers would increase and that there would be greater competition among buyers. The strong seller’s position would normally be reflected in an increasing closing-to-listing price ratio, meaning that sellers were able to get closer to asking price.
For County homes under $300,000, the closing-to-listing price ratio (above) began to increase starting in 2014 and continuing through the first half of the 2017. (The ratio returned to the historical normal level of 95 to 96% during the last part of 2017, but it is too early to tell if this is a sustained impact of the Toronto slowdown or it’s just a typical seasonal variation.)
As expected, there was also a sustained decrease in the time needed to sell a property (above) which by December 2017 had fallen to one-third the time needed five years earlier.
The sustained shrinkage in the supply of affordable homes in the County was a result of several factors:
- Many of the homes in this price range are older and in need of upgrades. A significant number are bought and renovated by owner-residents, while many are also upgraded to serve as vacation rentals. In either case, many of these homes will be worth significantly more than $300,000 at the point when they eventually come back on the market.
- As renovations are using up the existing supply of these affordable homes, almost no new ones are being built in this price range.
This sustained and continuing shrinkage in the market for affordable homes under $300,000 has implications at two levels:
- At the level of social policy, the trend underlines the desperate shortage of affordable housing in the County.
- For potential buyers of homes in this price range, selection is extremely limited and homes continue to sell quickly by County standards.