It depends on what your definition of crashing is. Is a drop in sales a crash? How about prices? Before we jump to conclusions about what the market ‘might’ be doing, let’s look at some data to gauge where the market could be going.
April sales dropped 41.2% but prices jumped 15%. Active listings were up 12.3%, but new listings hitting the market dropped 11.7%. Year over year prices generally saw a double digit increase for all property types. Even in spite of a huge drop in sales.
When you’re comparing year over year, April saw an increase of 15% compared to last year’s average sale price.
April 2021 – $1,090,414
April 2022 – $1,254,436
But when you’re looking at a month to month trend, April 2022 prices saw a dip of 3.5% from March 2022.
March 2022 – $1,299,894
April 2022 – $1,254,436
How does this compare to April average prices over the past ten years? Let’s have a look:
April 2013 – $524,868
April 2014 – $578,354
April 2015 – $636,094
April 2016 – $739,762
April 2017 – $918,184
April 2018 – $804,926
April 2019 – $820,373
April 2020 – $820,226
April 2021 – $1,090,414
April 2022 – $1,254,436
As interest rate increases affect affordability (monthly mortgage payments and housing costs) and perception (buyers thinking prices will drop lower and waiting on the sidelines), are more homes getting listed and staying on the market?
Let’s have a look at the level of inventory of our current market dating back from 1996 up to present:
Now let’s look at the active listings inventory in April over the past ten years:
Back to our initial question: is the real estate market crashing?
The answer: not really.
Sales have decreased from record high levels.
Prices are dipping slightly which is a typical seasonal occurrence after a busy spring market (which, in 2022, was front loaded to January and February).
The inventory of homes for sale is still at historically low levels, while the number of new listings being introduced to the market are decreasing when comparing year over year figures.
Yes, interest rates are forecasted to increase — and there is certainly likelihood that this will happen.
Affordability will be affected as rates continue to rise.
Buyers will have to be prudent when considering their budget for housing.
But there will continue to be demand.
If you’re living in a condo right now and need bigger space, you’re still in a time window where you can get an ideal price for the sale of your condo, and negotiate the purchase of a freehold detached, semi or townhouse.
If you’re moving from the city to the suburbs, you’re in for a great deal — as city prices remain relatively stable, and prices outside the Toronto area decrease at a bit of a higher rate.
If you were planning to move out of the Greater Toronto Area, multiple offer nights have quieted, listings are sitting on the market longer, and prices are repositioning to reflect the current market situation.
There are opportunities to buy the right property in this market. There are opportunities to make a move that make financial and lifestyle sense for you and your family.
Work on your budget so you can understand your financial situation. Study the market so you can set realistic expectations. And navigate your next move carefully.
Remember — real estate is a long term investment. If you’re not ready to buy in this market, it’s okay to rent, and save, and enter the market when you feel more confident about it.
Don’t rush into any decisions. But definitely keep in mind that there are opportunities in every market.
Photo by Mackenzie Marco on Unsplash
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