Home buyers from different generations share a connection due to oversupply in the apartment sector
It’s the kind of thing that plays out in movies. A connection develops between the younger and older generations — think Matt Damon and Robin Williams in Good Will Hunting.
And while that fictional relationship was initially fraught with tension, the bond they developed benefitted both parties. It’s a storyline not unlike the scene playing out right here in the local real estate market.
Across the giant swath of prospective home buyers stands a new crop of first timers – those looking to climb that first rung of the property ladder, alongside the ever-growing cast of last-time buyers – Boomers looking to drop some square footage. The common denominator for both groups is apartment product, which still has deep pockets of supply and access to the lowest price points in the market.
“It’s not unusual to see two buyer groups having similar interests,” said CREB® president David P. Brown. “What’s a little more unlikely is to see purchasers on completely opposite ends of the spectrum having similar real estate needs.”
There are always multiple factors that drive consumer decision-making, but price and square footage seem to be the main priority for first and last buyers, says Brown.
“I’m generalizing, but affordability typically matters most to first-timers. Getting that initial down payment in place to make mortgage payments reasonable is really important.”
The downsizers are looking through a different lens, says Brown.
“These consumers have spent a considerable amount of time in the market and are generally searching for a more functional space for their long-term needs. Both buyer groups should be able to find what they’re looking for in the apartment market.”
Growth in new condominium apartment listings continue to outpace growth in sales, according to recent monthly housing statistics from CREB®. This is leading to higher inventory levels and a months supply that’s nearly six months.
There are always multiple factors that drive consumer decision-making, but price and square footage seem to be the main priority for first and last buyers
Apartment oversupply runs counter to the direction of the overall market, which moved toward balanced conditions in the first quarter of 2017.
“Detached product has not faced the same supply pressure as the apartment sector,” said CREB® chief economist Ann-Marie Lurie. “Detached supply from new construction didn’t surpass previous highs. That helped prevent steeper price adjustments in the detached sector when demand eased.”
While the detached sector is driving momentum in the resale market, excess inventory in the apartment condominium sector has continued to place further downward pressure on pricing.
In April, apartment benchmark prices totaled $269,200, which is 0.19 per cent below last month and 4.23 per cent below last year’s levels. To date, apartment prices have contracted by nearly 12 per cent over 2014 highs.
“The apartment condominium sector is the area of the market that has recorded the largest price correction since the downturn,” said Lurie. “This is partly caused by the higher supply levels for new condominium product, rental product and improved choice in the resale market.”
While activity continues to vary by location and product type, more balanced conditions in the wider market will help to support overall price stability.
Employment will be a key driver in the months ahead, says Lurie. “Economic recovery is still expected to be slow, impacting the pace and quality of job growth. Based on
current expectations, this should translate into a more prolonged period of recovery.”