Last month I said prices wouldn’t drop because of interest hikes. Well… this month, prices did drop. Compared to February 2022’s average sale price of $1,334,544, March saw the average sale price drop 2.6% to $1,299,894.
Compared to March 2021, the average price jumped 18.5%.
So let’s set things straight. The price drop didn’t occur as a result of interest hikes. In fact, even with upcoming interest rate hikes to be announced, prices were bound to dip.
Every year, the average sale price of homes recorded by the Toronto Regional Real Estate Board drop around May or June — after a very busy spring market with lofty sale prices.
This year, the price drop happened in March.
How could that be possible?
Aren’t we still in the middle of a spring market?
Doesn’t the average sale price usually climb even higher?
Are buyers worried about the market crashing — and thus holding back their decision to purchase thus resulting in the current price drop?
While the media is talking about so many various factors affecting the housing market, the numbers don’t lie. Over the past three to four months, we have seen unusually high sales activity, historically low inventory levels, and double digit price growths.
It seems the flurry of sales activity resulted in a ‘super early’ spring market… that probably started in December… and continued through to February.
With all that buying activity, the real estate market was bound to take a breather, and it did, albeit a small one.
A 2.6% price drop when comparing average prices month to month isn’t quite concerning, especially considering the double digit price year over year price growth we’ve been seeing.
It will be a concern if prices continue to drop over the next few months, and if it happens at a much more aggressive rate.
With possible interest rate hikes coming up, the Ontario budget being announced, and measures to address the housing issues, buyers are bound to wait, sit on the sidelines, and react to what the market is going to do.
But is this a wise move? Are buyers better off waiting and seeing what happens next? Or should they enter the market, negotiate a deal, and secure their homes while the market is taking a breather?
Over the past two decades, we haven’t seen the market drop at a a significant rate without recovering later on. The most recent occurrence of a drop in prices happened in 2017, after the announcement of a non-resident speculation tax. At the most, prices dropped 20%, and subsequently stabilized in 2018.
In any market where there is uncertainty, the masses sit and wait, indecisive about their next move.
Buyers literally got what they were asking for when there was a scarcity in listings. Today, there is an abundance of listings, still far from the number of active listings on the market three to four years ago, but certainly more than enough selection for buyers to choose from.
And yet most choose to wait. They’ll wait to see prices drop. They’ll wait for stability in the market. Some may wait until they see the number of homes available drop again and multiple offers increasing.
Right now is an opportune time for a serious buyer to aggressively negotiate a desirable purchase price for their home, and hold onto that home for years to come.
If you think prices are going to drop 10%… 20%… even 30%… the worse case scenario would only bring us back to last years price levels.
Instead of waiting on the sidelines — try putting an offer through with a price that’s reflective of what you think is going to happen as far as price trends are concerned.
Chances are you’ll find a motivated enough seller, who has bought a home, and whose closing date is drawing near — and they may accept your offer at a price you wouldn’t have been able to pay this past January or February.
Keep in mind — there are still multiple offers happening, and some houses are still selling over asking. Desirable properties that are priced well will always be in demand.
The question is — what’s your next move? Are you going to sit and wait… or are you going to find the right opportunity to buy a house at a price you like, and under terms that put you in control?
Photo by Dillon Kydd on Unsplash
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