Do you love apple pies as much as I do? If you do, you’ll understand why the Toronto real estate market is like a half eaten apple pie.
Looks delicious, doesn’t it?
Sure, I’m trying to be funny. But this half eaten apple pie is a fitting metaphor for the Toronto real estate market.
Last month, February 2017, the number of ‘active listings’ (a.k.a. homes available for sale) was down 50.5% compared to February 2016.
Imagine going back in time to February 2016, and seeing two homes listed for sale. In February 2017, only one of those homes is listed for sale.
Only one out of every two houses available last year is on the market this year.
And that’s driving prices up.
It does make sense. Imagine you come home to find that your apple pie, once whole, had all of a sudden been reduced to just half.
Wouldn’t you want it more? Wouldn’t you value it more?
Now imagine you live in a household of four people, all vying for that half piece of pie.
All of a sudden, the remaining piece of pie has just become a lot more valuable.
Now take that example and let’s apply it to the Toronto real estate market, where half of the total inventory of homes available for sale last year is just not available anymore.
People want their slice of the Toronto real estate market. And the lack of homes for sale is pushing prices higher.
Double digit growth continues in Toronto real estate market
The average price of a home in the GTA is now $875,983, up 27.7%. It may not seem like a big deal. But if this kind of growth continues, it would mean home prices would double every five years (or sooner).
Is this sustainable? Can people still afford to live in Toronto, where the average detached Toronto house price is $1,573,622?
The number of people buying homes continues to rise while fewer people are actually listing their homes for sale.
One question asked by homeowners is — if they do end up selling their home, where would they move to?
And the answer is typically out of town, where prices have also gone up but still remain within reach.
Who’s buying all these homes?
First time buyers? Investors? People upsizing? Or downsizing?
It seems everyone wants a piece of the pie. But what would be troubling is if majority of these buyers are simply ‘investing’ their money to grab a piece of Toronto while the prices are still where they are.
This type of activity would keep on fuelling home prices, while tightening the inventory of homes for sale.
According to an article on Better Dwelling, there are 99,236 unoccupied homes in the city of Toronto alone. This is 4.5% of all homes in the city, reflecting a 10.5% change over the past 5 years.
Think about it: who’s buying homes in Toronto and leaving them unoccupied? And where are these buyers coming from?
Foreign buyers, or speculators?
You’d probably jump at the opportunity and say people eating up Toronto homes are foreign buyers. To a certain degree, you might be right. But it certainly doesn’t account for everything. The number of vacant homes sitting in Toronto signal that a certain level of speculation is going on.
People are buying homes, letting them sit empty, and waiting for prices to go up.
It’s not just a theory.
In fact, I have a colleague who did just that. He bought a house at $800k. Within a day of firming up the offer, he found out another buyer wanted to pay $1 million for that same property.
Hold onto the house, sell it for $1 million in a few months, and use the profit to pay off his condo mortgage.
Now this is just one case that I know of, and if you don’t call that speculation, especially with the desire to have instant gains in just a few months, what would you call it?
I’ve said it before — and I believe it because I’ve had actual interactions with the FOMO crowd. Fear Of Missing Out.
These buyers are gobbling up Toronto real estate but they’ve been wanting to buy three to four years ago.
Now that prices are jumping drastically, they just can’t stand the thought of having the delicious real estate apple pie getting eaten in front of them — without them getting a piece of it.
That would explain the constant increase in the number of sales every month.
And yes, immigration, foreign buying and speculation form part of it.
But now you’ve got the FOMO’s kicking into high gear.
If they don’t buy now, when will they ever enter the market?
Is it the best time to sell?
Ask a typical real estate agent when the best time to sell is, and they’ll tell you it’s always the best time.
Oh, and it also happens to be the best time to buy real estate as well. Always.
But can they tell you why?
I’ve outright told some of my clients not to sell their homes. Unless they absolutely have to.
And for those who absolutely have to sell their home: you are seeing one of the best times to sell in over 15 years.
Not because I want to make a commission off your sale.
But here’s why.
The number of homes available on the market, like that half eaten apple pie, is at a 15 year low.
Price is driven up because of scarcity — and extremely high demand.
Sales are reaching record numbers.
So… if there’s very little inventory of homes available for sale, and a crazy number of buyers wanting them, what happens to price?
It gets pushed up. Big time.
It’s been a seller’s market for several years now.
And who knows, maybe we’re reaching a peak (but then again, I don’t have a crystal ball).
I’m confident enough to say, if you sell your home in today’s market, you’ll get a record breaking price for it. Guaranteed.