3rd Quarter 2022 Real Estate Stats: The shift toward a balanced market begins

It’s hard to believe that a few months ago, all real estate indicators were pointing to an overheated market. In the 2nd quarter of 2022, the hike in inflation and the rapid increase in the key interest rate were putting off some buyers, who chose to be cautious or even to postpone their property buying plans.

How was the real estate market doing in the 2nd quarter of 2022? Take a look back at the previous Real Estate Minute  and our overview of the real estate market from June!

The 3rd quarter is confirming the trends that had been observed previously: a growing inventory of properties, decreasing selling prices and less overbidding. Data from the months of July, August and September indeed show that the provincial market’s return to baseline is accelerating. Here’s our snapshot of the 3rd quarter of 2022 and our forecasts for the future in the Quebec market: The Real Estate Minute.

Contents:

• Finally, some housing stock for buyers!
• Selling prices on the downslope
• Fewer fast sales
• Less overbidding
• Trend analysis and a look forward

Finally, some housing stock for buyers!

Good news for aspiring homeowners: in the 3rd quarter, there was a steeper increase in the amount of real estate for sale in Quebec. In fact, the number of properties on offer increased about 6% per month between July and August, and 8% between August and September!¹ Overall, there were 37,221 properties for sale in the province at the end of September², versus only 31,327 on June 30.³

While this growing inventory is good news for many, it’s still only a little over half the 72,800 properties that were listed in the same period of 2019⁴. So, there’s still a long road ahead before this market indicator hits prepandemic levels!

Regional inequity

The balance sheet of properties available in the 3rd quarter varied by Census metropolitan area. While we did see strong growth in most large cities, in Saguenay and the surrounding area there was an 11% decrease in inventory compared to the 1st quarter⁵ and the increase in the city of Québec was only 3%⁶. At the other end of the spectrum, the Gatineau region saw an increase of 96%⁷. These variations seem to be reactions to the level of activity in recent years. Markets that were the most overheated are now seeing the strongest movement to get back to a baseline.

Hike in new listings

One of the reasons for the larger housing inventory is that the number of new properties put up for sale rose in the 3rd quarter, as compared to the same period last year. While in the first three months of 2022, there was a 14% decrease in new listings compared to 2021⁸, in the 3rd quarter there was an 8% increase⁹.

A slower pace for real estate sales

The other factor explaining the rise in inventory is a lower selling performance, in terms of the number of properties sold relative to those listed. Remember that, at the start of 2022, it was rare for properties not to find a buyer. In fact, competition between buyers was fierce due to the low inventory and high demand. But the situation in the last quarter was rather different. The drop in market momentum was obvious as the number of sales fell steadily compared to the number of listings. This ratio for the 3rd quarter was only 56%, down from 71% in the 2nd quarter, and 78% in the 1st quarter¹⁰.

Selling prices on the downslope

The increase in the number of properties on offer in the province, combined with a higher mortgage rate, re-established some balance between sellers and buyers. Thus, we observed a decrease in the median price of single-family homes in the 3rd quarter, especially starting in August¹¹. This applies to all Census metropolitan areas except Sherbrooke, where the median price of single-family homes rose 3% compared to August 2022¹².

The price of single-family homes has fluctuated greatly in the province since 2020, but the percentage increase differs from one municipality to the next. See our ranking of cities with the highest growth in the last 2 years!

For condos, we saw the median price in Quebec go down by 0.6% between the 2nd and 3rd quarters, to $362,776¹³. As for multiplexes, the median price in the 3rd quarter returned to the same level as in the 1st quarter of the year, namely, $450,000—a 1.1% drop from the 2nd quarter¹⁴.

Fewer fast sales

The time has come for sellers to lower their expectations about how fast their real estate will sell. While most of the properties listed on DuProprio.com were selling within 30 days of being posted online during the first six months of this year¹⁵, we saw this phenomenon slow down in the 3rd quarter. From July to September, only 22% of the properties listed on DuProprio.com found a buyer in under a month¹⁶, a 37% change in the likelihood of selling within 30 days from the 1st quarter of the year¹⁷.

While the real estate market evolves at a different pace in different Census metropolitan areas, the decrease in the number of quick sales (30 days or less) was seen everywhere. However, the regions where the likelihood of selling within 30 days remained highest is the Trois-Rivières and Saguenay regions¹⁸. In Montréal and Gatineau, more patience was required because the probability of selling within a month of listing was down to 16% and 19% in the 3rd quarter¹⁹.

As in our 2nd-quarter analysis, the average selling time for properties is not indicative of the reality on the ground. This is because some properties found a buyer so quickly that they trend the data downward for the period, even though many other properties put on the market in the ensuing weeks or even months still haven’t sold. As a result, a more representative figure is the percentage of likelihood that a property sold within 30 days of being posted online.

Less overbidding

As the market stabilizes, the overbidding phenomenon is subsiding. In the 3rd quarter, the percentage of properties in Quebec on DuProprio.com that sold for more than the last price posted in the listing was 23%²⁰, a drop of 19% from the year’s 1st quarter²¹. This decline entrenched itself further in September, when overbidding occurred in only 19% of the properties sold with the help of DuProprio²².

Since this figure only takes into account sold properties, not those whose listing is still active due to a longer selling time, it is reasonable to think that overbidding is even less prevalent than the numbers indicate.

The reality for sellers is still hard to predict province-wide, because, in the 3rd quarter, the percentage of sales over asking continued to vary by Census metropolitan area. In fact, while there was a slight hike in overbidding in the Saguenay region—just 1% higher than in the 1st quarter²³—in Gatineau and area there was a marked decrease of 36% for the same period²⁴. Thus, the areas that had the highest percentage of properties selling above asking in the 1st quarter (Gatineau, Montréal, Sherbrooke and Trois-Rivières) were also the places that had the greatest readjustment in the 3rd quarter.

Trend analysis and a look forward

Does the 3rd quarter signal the end of the seller’s market? When we rely on the most recent statistics, we can see that we aren’t there yet. Given the overheated market that Quebec experienced in the last two years, returning to normal won’t happen overnight. Despite the rather generalized slowdown province-wide, the inventory of properties is still low, the proportion of sales vs. listings is still high, and overbidding may be less widespread but it continues to occur. These are all indicators that still favour sellers.

The continuing rise of the key interest rate, which directly impacts people’s borrowing capacity and therefore the number of qualified buyers, along with the decreasing selling prices and the spectre of a recession seem to foreshadow a return to normal and a more equal balance of power. It will be interesting to see whether the current trends continue over the coming months. Will prices go down even further, when some cities have seen an increase of up to 104% since 2020? Will the real estate inventory return to its prepandemic level? If we have learned one thing in the last few years, it’s that the real estate market is subject to change—sometimes very (very) quickly.

It’s still a good time to put your property on the market while it’s still a seller’s market! Want to find out more? Get a free consultation or watch our short webinar.