Ryan Hodgson

I had the opportunity to listen to a CMHC (Canada Mortgage and Housing Corporation) speaker recently present their information of London Ontario's real estate market and economy. I will briefly recap some of the main points discussed. This information refers to London, St. Thomas and surrounding area.

CMHC predicted around 7000 real estate sales for the market for 2009. This is about a 25% drop from 2008. They had previously predicted a 10% drop prior to the fallout in the US in October.

Homes for sale will be around 17,000 - which is around the same as 2008. (To compare, 2006 had about 8,500 homes for sale). One of the major reasons for the increase are homeowners cashing out their equity that they built up during the price increase from 2001 to 2008. The increase in homes for sale is the number one reason why it's a buyers market now compared to the sellers market of 2006.

Consequently, new home construction is suffering since homebuyers have ample resell homes to purchase and usually choose a resale home over a more expensive new home if given the option.

CMHC predicted average sales price to be -1% to no change from 2008. In other words, prices should flat line. (Remember this is average for the entire London region for every price range. There are certain price ranges that have seen a decrease etc)

Talked about the demand factors for the city and region:

1) Employment

Employment overall is fairly steady. It's increased from 7.1 to 7.8. (In early 90's it was around 10%).
We all know that the manufacturing sector has been hit really hard. So why hasn't unemployment risen to a higher level? It's because there are other sectors that are creating jobs. Health care and service sector are both creating jobs. (Hard to know that since the news always reports the negative stories). This is one of the strong points of London as I've mentioned before - diverse economy has helped ease the pain felt in some areas of the economy.

2) Population Growth

London has a 5% birth rate. Ontario overall has 7%. London lags behind the average a bit but a least it's growing.

3) Migration

London has a net migration (meaning more people move here compared to moving out)

Seeing international migration to the city. While still a fairly conservation city, it's a very slow change as immigrants are moving here.
Seeing migration from larger centers to London - namely Toronto area. The 25-45 year old age group is finding London a lot less expensive and more affordable. $200,000 vs $350,000 for the same house.

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Vacancy rate for 2009 is predicted to be 4.2%. It was 3.9 in 2008 and 3.2 in 2007. The main reason for the increase is the completion of new apartment buildings (If you want proof, look at the skyline of downtown). So these new units will take a little time to be absorbed into the market.
Who are going to fill this apartments? empty nesters (older people selling and renting), international migrants and students, cautious renters, and youth moving our from parents house.


Mentioned also was that first time buyers and baby boomers (ages 25-45) will push the market. This demographic has always had a big influence over the London Ontario real estate market. The conditions are there for them to be purchasing real estate (low interest rates, supply, and steady economic conditions). The CMHC speaker mentioned that consumer sediment is a major factor right now with the public. I agree - the buyers are out there, it's just a matter of them feeling confident to do so.

Real Estate homes sales numbers have been updated for the month of February. The news report can be read HERE

480 Homes exchanged hands for the month. I predicted in my previous post the number would be around 500 so I was pretty close. This number is obviously down from 2008 February which was one of the best on record. Looks like the London area market is on pace for around 7000 sales for the year - which is off for the 8000 plus we've seen in recent years when the market was a strong sellers market - but is still good enough for what you would call a "normal" year.

Communicating with a lot of buyers, there are a lot of purchasers ready to jump in the market. A lot of these buyers will be first time buyers - these are the buyers that traditionally make the London market move. Once the weather warms up, and people get past of the negativity they keep hearing in the news and realize the market is still fundamentally strong, they will take advantage of historically low interest rates and a great selection of homes to purchase their home of choice.

Ten years from now, what neighbourhood in London, Ontario are going to see a dramatic change in value? Look no further then most people's favorite location to bash - East of Adelaide.

The Old East Village (Dundas, Adelaide, Central, Quebec) is currently undergoing a major shift from it's 1990's - run down, crime ridden, poor demographic, falling apart neighbourhood; to a vibrant community, rich with history, and a great place to live.

Now, I'm sure some people might shake their head at what I just wrote. But if you are paying attention, it's happening. I want to make one thing clear, I'm not saying it's there yet - that's clear by driving down Dundas street. To put it in perspective, if we are talking about a 9 inning baseball game, the Old East revitalization has just completed the top of the 3rd, and is looking at a one, two, three bottom of the 3rd. It's a process, and before you know it, it will be the 7th inning stretch. To put a general time frame on it, I would give it a 10 year period before the transformation is really complete.

Back in 2002, I took a long hard look at the area and what struck me right away was the huge potential the area had. It had the history, the century homes, close to downtown, a potential self sustaining business district, homes were affordable etc. Most importantly as it turned out, it had the people in it that wanted it to change, improve, and succeed. A couple of groups to mention are the Old East Village Community Association and Old East Village Business Improvement Area.

Through the efforts of the people in the community, many changes have already occurred. The entire neighbourhood has been named a heritage district - the largest in Ontario. There is a very noticeable improvement in the neighbourhood and is good place to live. The commerical corridor has seen some improvements with owners renovating their store fronts. It's a long process to convert a commerical district into a vibrant place to live and do business (This goes for any place or city ie, see Downtown London - it's a 20 year process which is currently working and is on pace to meet its goals)

But it's happening. The efforts are paying off and one of the biggest confirmations that it's working is future investment made by private business. It was recently announced that a 150 unit condo projectis going to happen at the corner of Dundas and English, in the process some old worn out buildings will be torn town. This is coming of the heels of Medallion Developments announcing that they are going to build a 600 unit residential complex, revitalizing an entire block spanning King, Lyle, Dundas, and Hewitt. (Interesting because back in 2003 I had the same idea about developing that piece of land - not that I was in any position to do anything at that time, it's just nice to see that other people/business have similar visions)

This is big news. This will bring 1,500 - 2,000 new people to the area. I shouldn't have to explain the effect this will have on Dundas Street corridor and its businesses.

So, if you were looking to purchase a home or an investment property, what neighbourhood do you think will have a very high rate of return over the next decade?

Looking at the sales activity though the first half of February, it's not all doom and gloom - homes are selling. From what I can see, homes sales for the month are on pace to be around the 500 mark. This would be less then the previous 5 years for February - which would average in the 600's. Yes, sales numbers are down, put there is nothing to suggest the market is falling apart. Buyer's are taking advantage of historically low interest rates and great selection of homes to purchase. A buyers market it is, and talking to potential home purchasers they are going to be ready to purchase come spring.

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Ryan Hodgson
Coldwell Banker 1st London, Sales Representative
London, Ontario
Phone: 519-685-4190
FAX: 519-685-7497
Ryan@RyanHodgson.com
www.ryanhodgson.com

The numbers are in for January and they are down from January 2008 - which everyone knew was coming considering the current economic environment and strong sales last year. The month isn't broken down, but from what I saw home sales were very slow in the first half of January and picked up in the last half. (Picked up meaning what would be considered normal sales numbers for a buyers market in January)


There were, and still are, a lot of buyers who are waiting a bit for things to settle out. The buyers are out there - particularly with historically low interest rates at 4.49% 5 year term mortgage - what will be buying. Once the weather warms up (don't discount this factor, it's not an excuse. Weather has always been a factor in any year and our very cold and snowy start the year effects home sales and holds back buyers a bit).

Like in my previous post, we are in a buyers market, and buyers have the leverage and will have an easier time finding a home and negotiating a good price. With the low interest rates, homebuyers will be able to take advantage of a good opportunity.


Here's the press release:

Last month, 305 homes exchanged hands in the jurisdiction of the London and St. Thomas Association of REALTORS® (LSTAR), including 245 detached homes (down 35% from January 2008) and 60 condos (down 31% from January 2008).

"The decline in home sales last month is directly attributable to two factors: a drop in consumer confidence due to the downturn in the stock market, not to mention a government in apparent crisis and whole heck of a lot of snow and cold weather," says Joe Hough, LSTAR President, "A bad month does not mean a bad year and our January 2008 numbers are only the third lowest for January in a decade where real estate sales broke record after record. When the dust on the global economic crisis settles . . . and the snow stops flying what we're going to see in London is a more balanced market, with more opportunities for buyers than here have been over the last several years."

"Moderating home prices in Canada should not be confused with the downturn in the U.S. housing market," says Canadian Real Estate Association President Calvin Lindberg. "But any local real estate market is not immune to global economic challenges, and that is what we face today. Low prices are not the concern as much as the perception of doom and gloom. Buyers are waiting to see if the real estate market has hit bottom, and that is a very complex thing to try and calculate. Most of us will only be affected by the market correction psychologically, because the majority of Canadians will not buy or sell property in the coming year."

"Average prices will remain under downward pressure during the Canadian economic recession," says CREA Chief Economist Gregory Klump. "Shaky financial market confidence is pulling down business and consumer confidence. The consensus economic forecast predicts the economy will rebound in the second half of 2009, so housing market trends should strengthen next year ...

There has been a fundamental shift in consumer confidence, with job insecurities prevailing in every region of Canada," he added. "That is unlikely to change until the worst of the recession is behind us."