Price Explosion: When Will It End?

Chart shows that the average house price in Prince Edward County increased by 41% over the preceding 10 months.

County house prices continued their explosive increase during March 2021.

If anyone thinks “explosive” is too strong a term, I don’t know what else to call it when the average house price increased 41% over the previous 10 months. Annualized that would be an increase of 49% over 12 months.

Strong demand from Toronto buyers continued during March with sales more than double from 10 months earlier. However, on the supply side there were only 41 active listings at the end of the month, down 84% from a year earlier.

An extreme shortage of listings coupled with strong demand meant that the inventory of homes for sale during March was 0.6 months when it’s normally closer to 8.

It does not take a Ph.D. in Economics to figure out that prices for County homes cannot continue to increase 40% or more each year.

So if it’s self-evident that the wild inflation will come to an end sometime, it’s not clear when or how it will end. Will the rising prices compared to Toronto squelch demand? Will the third wave pandemic throw a wrench in the knowledge economy? No one knows, and likewise no one knows if it will end with a whimper or with a sharp fall in prices or something in between.

What does this mean for buyers?

Even if you’re prepared to pay today’s prices to get a place in the County, now is not the time to buy here and then put your Toronto home on the market. In markets like these, sentiment can change from mania to depression in a week’s time. Those who buy now but sell another house later could be in for a nasty surprise.

A note on methodology: the numbers reported are limited to existing home sales and does not include new construction. Seasonal homes are also excluded.

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