If you’ve been reading newspaper articles about the real estate market you’ve likely arrived at either a state of utter confusion due to conflicting accounts of what’s happening, or you may believe that the ‘bubble’ has burst and the market is crashing… let’s take a deep breath and examine this further.
Below is an excerpt from an article in the Globe and Mail “Canadian home resales drop sharply in May, prices rise: CREA” 6/15/2017
“Resales of Canadian homes dropped 6.2 per cent in May from April, with Toronto sales plunging 25.3 per cent, as new housing policy changes side-swiped demand and new listings rose again, the Canadian Real Estate Association said on Thursday.
The industry group said actual sales, not seasonally adjusted, were down 1.6 per cent from May 2016, while home prices were up 17.9 per cent from a year earlier, according to the group’s home price index.”
What the heck does that say?! Is it good? Is it bad? Sales are plunging!!!
Here’s what I can tell you. Despite the naysayers the Toronto real estate market remains a very competitive, robust market fueled by a combination of factors, not the least of which being population growth. The Ontario provincial government has decided that there is an affordability issue and took steps to ‘cool’ what has been described as an overheated market. I think this was very unfortunate for two main reasons:
- What is the role of government in a free market economy? Put simply, a free market economy is one in which decisions regarding investment, production and distribution are based on supply and demand. Prices of goods and services are determined by supply and demand and when the government meddles it often produces unintended consequences. Our market has been so hot in part due to the provincial government’s 2006 growth plan for residential land development.
- A substantial increase in new listings was observed in the beginning of 2017 as compared to the same time period in 2016. As a Realtor working in the industry I can tell you that the effect was immediate and that buyers were beginning to slow down and not rush to the table on offer night. There were more properties to see and consider. Homes that were priced well did attract multiple offers but instead of the usual 8+ they would instead see 3-5. It’s also worth noting that some properties did not sell on offer night, or at all for that matter due to seller expectations being out of step with increased competition from the influx of new inventory.
Ok, but Sales are plunging!!!
I feel that this is more than a bit disingenuous. Again we need to delve a bit deeper than simply looking at the figures and try to understand the factors at play here. I have observed many listings which are simply not priced to sell; meaning that the asking price is well above what the home is worth and buyers are shy to offer. If a very comparable property to your home sold a month ago for $1,500,000 and you’re asking $1,850,000 then you are not priced to sell in any market. When acting as a buyer agent my view would be that you’re simply testing the waters and don’t truly intend on moving. Is it true that sales are plunging? Yes, the numbers are down and at the same time homes that are well priced and show well sell!
Slow down Chicken Little
After the past 4 years or so being a heavily weighted seller’s market we are returning to a much more balanced market where the number of sales-to-new listings is around 50 per cent instead of the 70 per cent territory we were previously in. I don’t believe when we look back at 2017 that we’ll find many instances of significant discrepancies when comparing what homes sold for in 2016 vs 2017, instead I feel we’ll see a Vancouver style rebound in time for the fall. Oh, and the condo market in the downtown core... it remains as competitive as ever.