The detached market has struggled more than other sectors following the stress-test change occurring in 2018. However, after several years of adjustments, and steeper price declines in 2019, we are expecting to see some signs of improvement in 2020. Further declines in inventory, coupled with expected sales growth, will help reduce the oversupply in the market and slow the pace of decline in prices.
However, as was the case in 2019, the market will continue to see divergent trends based on price range. Price declines, favorable lending rates, lower wages, and job growth that is occurring in non-traditional and lower-paid sectors are creating conditions that support modest demand growth for lower-priced product. In addition, we benefit from a younger buyer demographic that is looking for homeownership options. These trends should support improvements in the lower price ranges, both in terms of sales growth and price improvements.
While improving conditions in the lower end can eventually spill into the upper end of the market, this is not expected to occur over the next year. The lack of employment growth in higher-paid sectors and the risk associated with economic prospects will continue to weigh on demand for higher-priced homes. The elevated supply-demand balances in those ranges will likely continue to impact prices until they ease enough to support changes in supply and demand.
A LOOK BACK AT 2019:
- Sales activity was slightly lower than last year’s levels, making it one of the slowest years of sales since 1995. Stricter lending requirements and weak job growth in higher-paying jobs have impacted demand growth for the higher-priced detached homes.
- Nearly 60 per cent of the inventory is priced over $500,000, and with easing sales for higher-priced homes, it does not come as a surprise that the detached market has not seen the same pickup in sales as the other sectors.
- While 2019 sales improved in the North West and South districts, activity declined across all other districts, with the largest declines occurring in the North district.
- The challenge in some districts is the competition between the new-home and resale markets. Many homebuilders have adjusted their prices to be more competitive with the resale market, resulting in some demand shifting away from resale to new.
- Adjustments in supply helped push the market toward more balanced conditions by the end of the year. However, persistent oversupply in the detached market this year resulted in stronger-than-expected price declines of over three per cent. Overall, detached home prices remain nearly eight per cent lower than 2014 highs.
- Despite some shifts in sales by district, persistent oversupply weighed on prices across all districts, with 2019 price declines ranging from a low of one per cent in the North East to a high of over five per cent in the City Centre district.