It’s been many years since we have seen a market with declining prices in Toronto. The vast majority of our 50,000 real estate brokers and agents have never experienced a market in decline, and it’s not hard to tell.
It is a very interesting time in our business, but not surprisingly, I will be the first to say that the sky is absolutely NOT falling.
Certainly we saw a runaway market in the spring of 2017. It was an emotion driven buying frenzy where we saw a shortage of supply and a surplus of buyers. The result was what we all witnessed as an “extreme seller’s market”.
While supply and demand were driving the base market, cheap mortgage money and the fear of missing out caused the “market froth” we seem to have lost now.
The question on everyone’s mind is “how far is it dropping and when will it recover?”
Every economist, realtor, investor, hairdresser and my uncle Louis seem to offer the answer to this question, and most I talk to have some great insights from differing perspectives. It’s only fair that I add mine to the mix of qualified and unqualified guesswork floating around out there. I should preface this by saying that my opinion has very recently changed and might change again by the end of the day. My initial outlook was towards a very strong Fall market with an significant increase in prices noticeable by the end of September. My reasoning was that as the market froth was primarily driven by emotion, or a herd mentality, so was the change in market. I reasoned that the summer market would be slower than typical and by the time September rolled around we would have had our fill of the media writing about the downturn in every sensational manner possible. September always has an increase over August simply by having more buyers in the market, summer holidays are done and people get back to looking after real life issues, like housing. It would be at this point in September some bright reporter would write a story about the market beginning to show signs of recovery. On news of recovery, I anticipated the herd mentality kicking in once again and the buyers rushing straight back into bidding wars and driving prices back to the stratosphere where they belong.
What changed my mind was a recent round table discussion I took part in with the top realtors from various neighborhoods around the city. Keep in mind that these are the very top selling agents from across the GTA and while there were only a dozen of us taking part, it offered a very good pulse of the market. When dealing with the top 12 out of 50,000 brokers and agents in the city, you get a very clear picture.
One of the insights gained during my monthly meeting with this group was that most agents had a much higher than usual stock of properties waiting to list in September. Back to the market fundamentals, if we are going to have a high influx of product it will serve to further level the supply and demand dynamic, causing a longer period of a slower market. The unknown here is our interest rates and how this may drive buyers towards a purchase before their pre-approval expires or away from a purchase as mortgages feel less affordable.
What we know for sure is that there are some great deals to be had in the market right now and the fundamentals driving our recent record prices have not changed. Toronto is still a world class city considered a safe haven for real estate investment and we still have a shortage of housing.
I will be buying real estate in 2017.