Toronto Real Estate Market Watch – 8/25/17
There is no doubt about it – the market has changed. The difference is in your perspective.
If you’re the media then the most dramatic headlines are going to frame what’s happening…the bubble is bursting, the sky is falling.
If you’re a homeowner, it depends. Did you buy in the peak of the market in the spring of this year and are now trying to sell your home today? Then you are definitely feeling the impact.
Are you a homeowner who doesn’t plan to sell in the near future? Then you’re on the path of a long term investment that historically increases in value despite some of the peaks and valleys. You’re also sitting on the biggest tax free capital gain source.
If you’re a condo owner, congratulations – you are just fine my friend.
If you’re a buyer then here’s the good news…those price drops you’ve been waiting for have come so take advantage.
There are some many factors at work here. First and foremost, it started with the absolutely crazy gains over the past few years. March 2016 to March 2017 saw a 33.2% jump in average sales prices. March 2015 to March 2016 saw 12.1% increase. That’s over 45% increase in two years.
The tight inventory that was responsible for many of those gains stared to release when homeowners simply couldn’t resist the opportunity to capitalize on the market. Throw in the government regulations that spawn a ‘wait and see’ mentality in buyers and there you have it.
From July 2016 to July 2017 there was a modest 5% gain. So let’s remember, even with everything happening in the past 3-6 months, we’re back to a nice moderate gain, not a full on market crash. It was due for a correction – and this is a healthy one from our perspective. Speculative sellers and buyers have been somewhat weeded out.
Buyers do not feel under the gun to bid on the first home they see and push beyond their limits due to the fierce competition. Granted sellers are seeing the lottery feeling windfalls of spring but let’s consider that a bonus, not a sustainable expectation.
The situation we’re in right now is an adjustment period. Sellers typically take approximately six months to adjust and come into line with the current market. Buyers are still in ‘wait and see’ mode to see if the prices drop even more. But the old adage “Better a month early than a day late.” will start to come into play.
There is another rate increase expected in the fall, and this should play a role in keeping the market in check, however any future rate increases will comes slowly and gradually. Meanwhile unemployment rates are still low.
We’re looking forward to a steady fall season with a nice balance of inventory and buyers but feel the true test will come in the spring to see how things play out once we come out of the adjustment period.
Buyers would do well to take advantage of homes on the market right now – sellers in August are typically motivated and they can make the most while everyone else is trying to capture the last days of summer.
Check out the most recent stats from July…