You’ve probably seen it on the news already — sales are down a whopping (almost) 40% from last year. Average prices continue to dip. It’s taking longer to sell houses in today’s market.
But that’s just a small part of a bigger picture.
Did you know that sales are in line with the average for the past ten years? Prices are only slightly down over the past decade (in spite of double digit gains)?
How about Toronto homes continuing to get multiple offers, sell over asking, all in just a matter of days?
The media loves to put a spin on the market.
And the latest flavour is the big decline of the market. In sales. And in prices.
But the truth is, it really depends on where in the city you are.
And also the fact that these declines were based on the steep increases in price amidst a scarcity of listings in the 2017 market.
When you compare sales and prices to the heights of the 2017 market, and you use an average price indicator to compare it to this year, of course it’ll look bad.
You’re comparing a peak of the market to what’s going on right now — which is in line with 2014 to 2016 market activities.
Watch — wait and see what the numbers look like closer to June of this year, when 2017’s lofty heightened market came back down to ‘normal’ when sellers decided to flock together and list their homes for sale.
Sure, in hindsight it may have made sense to list your home and sell it in the height of 2017.
Or perhaps hold off buying until prices came down.
But this is based on hindsight. And hindsight is 20/20.
When you look at the long term trajectory of real estate, 2018 is seeing a healthy price growth still above 2016’s average prices.
Am I saying we should totally disregard what happened in 2017?
But we have to understand what drove prices up so high — then why listings flooded the market causing prices in certain areas of the GTA to drop.
When you look at the stats I publish on my website, you’ll see under ‘active listings’ that leading up to 2017, the number of properties being listed on the Toronto MLS has been in decline from 2013 to 2016, and the early part of 2017.
Supply and demand dictates that as supply diminishes and demand increases (as shown by the increasing number of sales year after year), prices must go up.
And as supply (properties listed on the market) reached record lows, prices shot up.
Then the government intervened.
Housing rules. B-20. Stress tests. Foreign buyers tax. Everything was thrown at the market to ‘slow it down’ and bring it back to reality.
And in anticipation of this, sellers flooded the market with listings, and buyers backed away.
So what happens when supply exceeds demand?
Prices come down.
This affected certain areas in the GTA (such as York region) more than others.
And when you look at the average prices and average number of sales, it paints a picture that the market is worse off than it actually is.
If you’re in York, you’ve seen a big decline in prices — but remember, you also saw a huge rise in prices.
In Toronto, especially in high demand neighbourhoods, prices continue to climb. Buyers continue to buy. And the ‘average’ numbers published on the news don’t come anywhere close to showing what’s really happening in those markets.
What should you do if you’re buying in the next few months?
In Toronto, be prepared for multiple offers and rising prices. It’s still a strong market in many parts of Toronto.
Outside of Toronto, there are pockets of neighbourhoods where activity is still busy, but others where it’s taking longer to sell.
Know what you can afford. Budget accordingly. Get a pre-approval before you go out house shopping. And be realistic about your finances.
There are many buying opportunities right now but make sure you have a long term view and expectation of the market. Buy where you want to live in the next five years.
What if you’re selling?
Know what’s going on in your local market. Don’t price too high — it’ll help other homes around you sell faster. And if you’re selling and buying in the same market, even if your home has come down in value, chances are you’re buying a home that has done the same (unless you’re coming from the York area and moving into a hot Toronto neighbourhood).
Have a clear understanding and expectation about what your home is worth in today’s market. And remember — you’re trying to attract buyers so price competitively so your home doesn’t stay on the market for an extended period of time.