How's the Market?
"How's the Market?" is the question I'm asked more often than anything else. This page is command central for information about Ottawa Home Sales. One of the reasons I chose real estate for my second career, after 19 years in the high tech sector, was that it's something people care about.
Media reports and industry news releases like those from the Ottawa Real Estate Board (OREB) tend to bend over backward to put a positive spin on the statistics. Like the stereotypical real estate agent who always says the market is great and it's time for you to { buy, sell, invest } - whichever one they believe you're thinking about doing at the time.
On this page you'll find 36 graphs, updated every month after OREB releases the raw statistics for the previous month and puts out its news release. The graphs on this page include the basic statistics (number of homes and condos sold in Ottawa and surrounding areas over the past month, average selling prices of homes and condos) but also a variety of ratios and trends that give you a complete picture of current market conditions and indicators of where the market is heading.
Ottawa Real Estate Monthly
If you're looking for the facts, and some insights into what those facts might suggest about the market, "good" or "bad", this is the newsletter for you.
It's an edgy, informative, and (I hope) entertaining read, focused on facts and data, information about new developments, legal and financial issues in real estate, plus the occasional story about the crazy things that happen out there helping people buy and sell real estate every day.
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Ottawa Real Estate Market Statistics
The Ottawa Real Estate Board generates raw statistics every month. Every licensed agent has access to this raw data, to perform analyses and arm their clients and followers with the information they need to make better decisions about buying and selling properties.
The Board also provides a set of graphs and each month they issue a news release, under the direction of the current Board President. That news release becomes the main source of market information for the media. It's not uncommon for the news release to colour the data with a positive shade. At times it can be a real twist.
The graphs provided by the Board are great, but they are somewhat limited. They don't illustrate all the ratios by property type, for example, mapping out all the trends over time.
For that reason, I've been tabulating the Board's statistics every month since 2012, and I generate additional ratios and trends that are objective mathematical metrics that you can interpret for yourself. The latest monthly charts are on this page, with my notes explaining what each set of graphs is measuring, with some tips to help you interpret them and make your own assessment about the market.
There are 12 sets of graphs. Each set has 3 graphs in it: one for freehold residential properties ("Homes"), one for condominium residential properties ("Condos"), and one for the two major categories combined ("Combined") (so, all residential properties). Note that these graphs do not include data for multi-family properties, farms, or vacant land except where agents have recorded listings and sales of such properties as residential rather than exclusively in their appropriate class.
Monthly Property Sales
This is a simple count of Ottawa home sales. This set of graphs shows how many freehold homes (detached, semi-detached, townhouses) and condominium homes (apartments, garden homes, terrace homes) sold through the Ottawa Real Estate Board's (OREB) MLS service each month. Sounds like a statistic that requires no interpretation, doesn't it? But think about it: what could impact the number of sales in a given month?
The Canadian economy, the Ontario economy, the Ottawa economy, Ottawa's population growth, a major health or other social concern, new mortgage rules, changes in prime lending interest rates, changes in mortgage interest rates, a pending election, a recent election - the list is endless. The number of sales each month is the result of many factors in an equation we typically cannot solve definitively. We can observe common annual and seasonal trends, and make a note of deviations.
To fully characterize the market to help us make better decisions about buying and selling, we must analyse the number of sales in conjunction with the other statistics. In combination, the many stats on this page give us a clearer picture. But in real estate, we can never be certain about the future - the objective is not fortune telling - it is informing our actions in today's market conditions.
A key question to ask about each statistic: does this stat tell us more about BUYER or SELLER behaviour? Every statistic is influenced by the behaviour of both groups; but most are driven more by one than the other. So - the raw number of properties sold - does this tell us more about BUYERs or SELLERs? The answer is: BUYERs. Yes, if there are not enough people interested in selling, it can hold this statistic back - but at the end of the day, BUYERs drive the number of properties that are selling.
Average Selling Price
How much houses and condos are selling for is probably everybody's favourite statistic. The average selling price each month gives a basic idea of where market prices are relative to the past. However, the number of sales each month is a statistically small sample set (ranging from about 700 to 2,700 through the OREB MLS) and therefore is a number that shouldn't be taken too seriously on its own.
More importantly, the mix of property types and locations of Ottawa home sales each month can vary wildly. This alone can skew one month's average price a lot. You see that in the graphs - average price can bounce around like crazy throughout the year.
There are two statistics that present a more reliable view of where prices stand and where they might be going: year-to-date average price, and HPI - home price index. I don't include graphs of these two statistics on this page - but I do share and analyse them both with clients and followers through my newsletter. I look at HPI typically in one or two editions each year. HPI factors the mix of property sales into the raw price data to derive a normalized price index for a location with a large enough sample set.
Year-to-date average price does not factor in the mix of property types and locations that have been selling, but as the year progresses, the sample size becomes large enough that the trend is quite reliable. Even so - it's imperative in making your real estate decisions to understand that overall market average prices do not correlate with the price of any individual property. If you're assessing the value of a property for purchase or sale, it's crucial to perform a detailed market analysis for that specific property in its particular location. My newsletter every month includes an easy to digest monthly snapshot table that compares sales and prices for the month and year-to-date against the previous year. For a monthly update on where year-to-date prices are heading, why not Check It Out?
Ask the key question: do property prices tell us more about BUYERs, or SELLERs? The answer is: BUYERs. I'll leave that with you for now. You'll find periodic examples and discussion on this topic in my newsletter and on the Blog.
New Listings Monthly
The number of new listings each month is one of the most basic statistics. It doesn't rely directly on any other statistic and by that measure is an almost pure indicator of SELLER behaviour in the market.
Keep in mind that in a slow market, properties that do not sell when listed for a period of time are often re-listed. Each discrete listing of a property counts as a new listing. This means that the number of new listings per month does not equal the number of entirely new properties hitting the market.
Furthermore, some agents make a practice of cancelling and re-listing properties on a periodic basis in a lame attempt to keep their listing "fresh". There are actions one can and should take to effectively improve marketing performance for a property that is taking time to sell - simply cancelling and re-listing is effortless and disingenuous. Don't hire an agent whose only weapon in a tough market is to run more paperwork. Hire one who thinks critically and has an active marketing plan.
Month-End Inventory
Month-end inventory is a straight count of the number of properties (combined, freehold homes, condos) on the market at the end of each month. From month to month, this is equal to (ready for some simple math?):
Inventory at the end of the previous month
+ new listings this month
- property listings that have expired or been cancelled
- properties that have sold firm (no conditions, or conditions removed by month's end).
Inventory represents choice for buyers and competition for sellers. Continuously rising inventory suggests momentum in favour of buyers in the market, while continuously falling inventory begins to favour sellers. You'll note there is a common seasonal curve to the flow of inventory. From January through May or sometimes June, overall market activity increases - but sellers lead the way (inventory grows) - properties hit the market while buyers take a little time to shop around and complete their purchases.
Year To Date Sales
Year to date Ottawa home sales is a simple tally of the monthly home and condo sales reported in the first set of charts. While sales volume fluctuates month to month, year to date figures allow us to see exactly how busy the market is compared to previous years. With population growing more or less continuously in Ottawa, it takes some serious negative economic setbacks for the overall number of sales to decline from year to year. This happened, for example, in 2022 when the Bank of Canada rapidly raised the prime interest rate multiple times in significant increments throughout the year.
There have been periods of several years in a row of approximately zero to very little growth, but sustained declines in the size of the market essentially have never occurred. This is the key reason that all of the gloom and doom predictions for the housing market that are raised every few years and repeated loudly in the media, have little grounding in reality.
New Listings Year To Date
Individual monthly statistics do not represent a trend nor necessarily indicate the beginning of one. A spike in new listings one month in most cases is statistically irrelevant and does not reflect any meaningful behaviour in the real world. New listings in particular can spike simply because by coincidence, a bunch of listings expire at the end of a given month and a significant portion of those property owners re-list the next month.
The inventory statistics combined with new listings statistics help us sort out that distinction. Year-to-date new listings smooth out seller behaviour as the year progresses, giving a more meaningful indication of the rate at which sellers are entering or re-affirming their position in the market. It measures the level of intent of property owners to sell. It provides the source of inventory replenishment as properties sell.
Average Days On Market
Average days on market counts only listings that have sold firm. To hammer this point home, I've changed the title on this set of graphs to read, "Average Successful Listing Time". This statistic counts only discrete listings and does not take into consideration properties that have been re-listed. If a home is on the market for 75 days under one discrete listing with a unique MLS number, fails to sell, is re-listed under a new MLS number with or without changes to the listing content, then sells in 6 days, the sale of the second listing will contribute "6" to the average days on market statistic. The 6-day listing was "successful" because the property sold firm, 6 days into the term of the listing.
"Fails to sell" means the listing is terminated in any way other than reaching a firm sale; primarily cancellation or expiry. A property that fails to sell might be re-listed at a new price, in a new season, with new photos and descriptions, or new representation. It is also possible, and common, that properties are re-listed with no changes. In the scenario above, if no changes were made between the first and second listing of the property in question, "6" may not seem like the appropriate number to contribute to "average days on market" since the property took 81 days to sell. This is the purpose of the "cumulative days on market" statistic, below.
Average Cumulative Days On Market
A few years ago, the Ottawa Real Estate Board introduced this new statistic to provide more accurate insight into the length of time properties are taking to sell. Prior to the introduction of this measurement, there was no easy way to distinguish between the current listing time and the total time a property is on the market, as in the 6-day vs. 81-day example from the previous section. The cumulative days on market (CDOM) count exposes the agent strategy of periodically cancelling and re-listing properties to bolster apparent days on market performance
If you are house hunting and asking your agent how long a property has been on the market, be sure to ask for the property's cumulative days on market, not just how long the current listing of the property has been active.
The cumulative days on market for an individual property is the total number of days a property has been on the market, counting the days of each separate sequential listing of the property. The statistic is reset to zero if a property is off the market for 45 days.
These two statistics once reported and graphed do not completely describe the current success rate of Ottawa home sales because properties that fail to sell are not counted. In fact, OREB does not directly report on success rate - and I do not have a set of graphs for this statistic as a result, but I occasionally report on listing success rate in my newsletter by analysing a combination of MLS data with direct search queries.
Listing success rate is a statistic I share with you during a selling consultation. I calculate the current success rate in the precise neighbourhood market or building (for condos) of the subject property. This is a key piece of information ignored by most people, that informs your pricing and positioning strategies. Or whether it is in fact a good time to sell.
I've re-labelled this set of graphs to read, "Average Time To Sell" for clarity. For properties that sell, this indicates the average total number of days the property was active on the market to achieve a successful sale, allowing for pauses (periods of time off the market) up to 45 days in duration. CDOM is tracked for every listing throughout its lifetime. You can inquire about the Days on Market and Cumulative Days on Market for any property listed on the MLS system, regardless of its status (active, cancelled, conditionally sold, etc.) - but these graphs are meant to record the amount of time it takes to successfully sell a property, and therefore only include properties whose status changed to sold in each month.
Ratio of Sales to New Listings
The simple ratio of the number of sales in a given time period divided by the number of new listings in the same time period, has been used for decades as a measure of market momentum. The lower the ratio, the more inventory is growing - there are more sellers than buyers in the market - pushing things toward or further into buyer's market territory.
A higher ratio of sales to new listings indicates that properties are selling faster compared to the number of new listings hitting the market - the higher this ratio goes, the more momentum shifts into or further into seller's market territory. Traditionally, a ratio from .4 to .6 is thought to represent a balanced market. Higher than .6 is a seller's market, and lower than .4 is a buyer's market.
The weakness of this statistic is that it is momentary. Typically it is reported on a per month basis, measuring a short window of activity. You can see in the graphs below that this results in a strong seasonal component to the ratio. Early in the year, there are more new sellers than buyers in the market. Later in the year, not as many sellers enter the market but many buyers who have been searching for months will continue to hunt for and purchase the home they've been seeking.
For this statistic to mean something on its own, you have to compare this year's curve to those of previous years. Ask yourself, is the whole curve higher, meaning more of a seller's market than last year? Or is it lower, indicating a market favouring buyers more than previous years?
Ratio of Sales to Inventory
Similar to the sales to new listings ratio, this statistic measures the ratio of sales to total inventory each month. Measuring against all listings on the market, not just new listings, reflects performance of all properties on the market. Buyers do not only purchase new listings and therefore this is a better measure of market performance as a whole. A sales to inventory ratio of 20% (.2) or more over a given time period indicates solid turnover. The higher the ratio above that, the more the market favours sellers. Below .2 is decidedly buyer's market territory.
This ratio virtually never drops below .2 in Ottawa, except on a temporary seasonal basis some years in late December or early January. In Ottawa, compared to expectations established over decades of living in arguably North America's most consistent real estate market, a ratio of less than .4 can "feel" like a buyer's market. We are simply not accustomed to homes sitting on the market for many weeks, let alone months. We are a little spoiled.
If this statistic measures buying activity against all properties on the market, why continue to track "sales to new listings?" The probability of a property selling on a given day decreases the longer the property has been on the market. A significant portion of standing inventory can be considered "stale" - some properties are over-priced, some are less desirable for a variety of reasons, and then others are in niche markets with low turnover.
Perhaps the best example of a niche market is the luxury segment. Very high value homes often take time to sell. Sales to new listings gives us a read on uptake of "exciting new inventory", though in reality the statistic does not take into consideration which properties are being sold and how long they have been on the market. I would love a set of more complex statistics but I'd have to employ a data analyst to set it up.
12-Month Pace of Sales
This is a statistic you are not likely to find anywhere else, and yet it has proven to be the best leading indicator of changes in market direction. Individual monthly sales figures jump around for a variety of reasons. Year to date sales clearly show overall volume from one year to the next. Tracking the average number of sales per month based on a 12-month sliding window of sales provides a normalized view of the trend in sales activity. In a growing City like Ottawa, it will have a tendency to trend upward, but sustained dips in this trend have proven to foretell a slower, even a buyer's market. Sustained increases in this statistic have accurately predicted a strong seller's market.
You might expect the 12-month pace of sales statistic to incur the least impact of all the stats because it measures average sales over 12 months. The impact of one or two slow months should be somewhat minimized in that context. But look at these graphs. This statistic illustrates how hard the dramatic lowering of interest rates at the outset of the COVID-19 pandemic in March 2020, sustained through 2021, then followed by equally stunning interest rate escalation by the Bank of Canada in 2022 artificially impacted the market. Now in early 2023 we watch for the market to normalize, how long that will take, and what exactly the new "normal" patterns will be.
Absorption Rate
"Absorption rate" is a commonly used market momentum indicator, but it can be confusing or even misleading. The good thing about absorption rate is that it combines supply and demand into one number, acting like a thermometer for market momentum. An absorption rate of X% means: sales at the current average monthly pace (over the defined period for establishing the average - in my case, 12 months) would "absorb" X% of current active inventory.
For example, if the "month-end inventory" graph shows that there are currently 1,000 active property listings, and the "absorption rate" is 28%, then you would expect 280 of the 1,000 active listings to sell over the next month. Remember that new listings will enter the market over the ensuing month, so there will be more than 1,000 - 280 = 720 properties on the market at the end of the next month (month-end inventory), and the pace of sales (average number of homes sold per month) is always changing and therefore more or fewer than 280 properties may sell (using a 12-month window "smooths" out this rate of change, resulting in an absorption rate that is more indicative of the longer term momentum of the market rather than providing a momentary, more volatile measurement).
Also remember that the rate is based on average monthly sales, and that all sales are not drawn from the active month-end inventory - newer listings are often more popular in the market and could represent a substantial portion or even the majority of homes that sell over the next month. The average days on market provides some insight into the mix between sales of new listings and listings drawn from existing inventory.
The problems with absorption rate are several:
- everyone uses a different time frame over which to establish "pace of sales". I believe the most "standard" window is three months; but I frequently see sources from the Brokerage & Agent world using a one month period, which effectively equates this statistic to the sales to inventory ratio, rendering it rather useless as a separate indicator
- most references to absorption rate in the media don't tell you what time frame they are basing the rate on; without context it isn't very meaningful
- most sources invert the absorption rate, reporting on the number of months it would take to sell off existing inventory; some may feel that is a more tangible number that people can relate to, but the reality is that it becomes a projection based on an assumption of constant sales and inventory growth; furthermore, expressed as the number of months to sell off inventory, it isn't really a "rate" and would be best given a different name
- because it is impacted by two underlying rates, absorption provides an indicator that is only meaningful at a precise point in time. Absorption is directly based on the pace of sales (how many properties are selling on average over a stated period of time). But as you measure absorption at distinct points in time - including within a single time period as defined by your pace of sales, the underlying pace of new listings hitting the market (how many new listings are hitting the market over a stated period of time) indirectly impacts absorption. I say "indirectly" because it is not part of the mathematical calculation. "Average new listings over the time period" is not used in the equation - but rather, current listings at a specific moment in time. This means that absorption rate can change very quickly, even when you use a long time period for the pace of sales.
I use a 12-month period to establish the pace of sales and basis for the absorption rate because I am more interested in identifying the earliest reliable indication of movement through the market cycle. Markets always cycle, more or less in the shape of a SIN curve. When the long term pace of sales curve starts to change direction, it has proven to quite reliably indicate movement through the curve from seller's market to buyer's market territory and vice versa.
The long term absorption rate curves slide up and down the scale as a result. You can see the market cycle changing as the gaps between the absorption curves for each year on the graph grow or shrink, moving up or down the Y-Axis. These measurements can let you know when to expect prices to start levelling off, climb, or potentially fall. In the Ottawa market, they rarely fall; usually they level off and flatten. Some segments or specific locations will fall.
Final Word
I hope you find the statistics interesting and informative and my lengthy explanations helpful.
In each month's edition of the newsletter I interpret the latest data reflected in the charts on this page, and make my observations of the current market, factoring in my experiences on the street helping people buy and sell homes and investment properties every day.
I also include additional statistics and featured analysis of specific neighbourhoods or property types.
Oh, and I provide a "Market Snapshot" at the top of the newsletter that you can digest in 30 seconds, providing the most essential statistics when you want a quick update and don't have time to read more analysis.
Thank you for reading.