Housing sales in London, Ont., hit 'historic' low in November

Residential home sales in London, Ont., declined in November, with the number of transactions down to nearly half of what they were during the peak of the  pandemic three years ago, according to a local realtor.

It's a 'historic low' — and a trend that's expected to continue into the first quarter of 2024, as more home buyers feel cautious amid inflation and high interest rates on mortgages, said Marcus Plowright, owner of RE/MAX Hallmark A Team real estate brokerage in London.

"We had 420 transactions residentially in London in November of this year, and that was a pretty significant reduction to the historical average. We did over 800 transactions in November during the height of the intense real estate market that we were experiencing a few years ago," he said. 

"Looking back five years ago, it's still significantly less than we were experiencing on an average pre-COVID volume in November, which would've been 20 per cent higher than this year."

Plowright believes pent up demand and a year of continual interest rate hikes have left consumers feeling less confident in the real estate market altogether, he said. 

On Wednesday, the Bank of Canada announced it will hold interest rates at a steady five per cent into the new year since raising them to the current rate in July, as Canada's economy shows signs of cooling down.

"The fad has done it's job of making everybody think around the verge of a recession. They're trying to slow down the economy to slow inflation down — and it's dramatically working," said Plowright.

Dallas Martin, an agent with the Mortgage Firm in London, said he's glad the central bank hasn't raised interest rates because doing so would increase pressures that Canadians are already under, raising concerns that more people will default on their mortgages.

"The potential of people defaulting their mortgages is probably based on their affordability," he said. "If their monthly mortgage payment is higher due to high interest rates and the cost of living that's through the roof, then everything adds up. For a lot of people, it's either the roof over their head or food on the table."

Housing inventory not keeping up with immigration

Median house prices in London last month were around $565,000, Plowright said, adding housing inventory above that number sits at around 1,500 but the amount of houses below the median is only about 400.

"We have about two months inventory of what we would term affordable — less than $565,000 — and we have seven months inventory of house listed above that," he said. "The moral of that story is it's much more challenging to find and buy the lower-end than it is the upper-end." 

Both Plowright and Martin predict if interest rates go down, house prices may increase. Another factor contributing to increased home prices is immigration levels, they both said. 

"A lot of people are immigrating here from overseas and they're going to need places to live too, but we don't have enough houses. Right now, even rent is super expensive, especially in Ontario and London specifically," said Martin. 

The rental pool of housing has not grown enough to keep up with the pace of immigration to London, and policy makers need to consider when they talk about the housing crisis, said Plowright. 

"Affordability won't improve, simply because interest rate reductions will be offset by house price increases," he said.

"We don't desperately need million-dollar houses, we desperately need affordable rental housing."