January 2019 real estate market stats are out. And it’s kinda confirming what we feel might happen with the Toronto (and area) real estate market this year. Flat price growth. Lots of homes to choose from (depending where you live, of course). And a longer time period to sell your home.
That doesn’t sound so exciting, does it? In fact… it sounds a bit… normal… right?
The number of homes sold nudged 0.6% upwards from January 2018. The number of homes newly listed jumped 10.5%. The number of homes currently available for sale remained flat compared to last year. Average price climbed a mere 1.7% to $748,328. And it took a bit longer to sell a home.
Yesterday I attended the Toronto Real Estate Board’s Market Year In Review and Outlook. The forecast is 83,000 sales (up from just over 77k in 2018), and the average price is expected to inch upwards a mere 4%.
When you look at previous years’ price growth patterns, you’ll see that the biggest price increases were realized amidst the 2016 and 2017 years, just before spring 2017 market’s decline in price.
So the Toronto Real Estate Board’s forecast reflects flat price growth amidst rising inventory levels, and sales levels in line with the average over the past decades.
In simple terms?
Depending on where you live in the city (which is another story), don’t expect a massive increase in price. Expect steady competition against other home sellers planning a move this year. And get used to your home sitting on the market a little while longer.
Buyers remain cautious because of tighter mortgage lending rules and the stress test. Even though there’s been calls to wipe out the stress test, I don’t see this happening immediately. A tiered system of qualification and ‘stress testing’ would probably be more effective than painting everyone with the same brush.
The government representatives in attendance practically patted themselves on the back citing an effective ‘cooling’ of the market rather than a gargantuan bubble bursting. Nonetheless, government intervention undoubtedly affected buyer sentiment, and their ability to actualize a home purchase.
What would happen if the stress test were removed? Buyer confidence would return. Upwards price growth would be stimulated. Sales would increase.
If interest rates remain the same (or even decrease), this would further encourage home buyers (and sellers) sitting on the sidelines to re-enter the market.
Time will tell what government policies will be enacted that will affect the market. The overall consensus seems to be a cautious move forward into 2019. This means the demand side of the real estate market, i.e. buyers looking to buy homes, will look similar to last year.
On the supply side, a few interesting ideas were brought forth by the government and urban planners. One idea was the concept of enhancing parking spaces around GO stations and transforming them into mixed use areas. By building commercial and possibly residential units in what is currently being used as free surface parking for GO train commuters, not only would new housing units be introduced to the market, but the GO station experience would be transformed.
Overall what we’re seeing is a return to a normal real estate market. Sure, it may seem like just yesterday sellers were seeing 20, 30, even 40 offers for a property, and selling for hundreds of thousands over the asking price. Was that normal? How about 30% year-over-year price growth. Was that sustainable?
Embrace 2019 as a normal real estate market. If you’re selling, expect your Realtor to show you comparable home prices from pre-2017, and even pre-2016. Be prepared for a few home buyer showings here and there, and to be showing your home for over a month.
If you’re buying — this is a great opportunity for you to really look for what you want, but don’t hesitate on putting in an offer and negotiating the price when you do find your ideal home.
Welcome back to a normal real estate market.