After a flat real estate market in March, things look like they’re starting to pick up in April. Sales were up 16.8% year over year, and the average price of homes sold in the Greater Toronto Area saw a modest 1.9% increase. New listings also increased by 8%, while homes available for sale saw a slight drop of 0.9%. Homes sold a day quicker compared to last year April.
Is this the return to a normal market? Time will tell. When you look at the Toronto real estate market statistics, the trend line for total sales is following the usual seasonal pathway based on a consistent pattern year to year with the exception of 2017 and 2018 (when the market ‘peaked’ and subsequently ‘cooled down’).
The average price is skirting 2018 price levels, and is understandably still significantly lower than the peaks we saw in 2017.
It could be safe to conclude that price growth has normalized. The massive double digit price gains seen in the 2017 peak market were ‘given back’ and now we’re working our way back up again.
How long will it be before we see peak 2017 average prices again? At this rate it could be two years or so. But it depends on a lot of other factors.
What will happen to interest rates? Will government policies around the mortgage stress test change? How will the economy look over the next few years? Will anything impact immigration?
The value of real estate has a lot to do with supply and demand. Factors outside of market driven forces influence either the supply side or the demand side. From an affordability perspective, demand was stunted due to the mortgage stress test, which subsequently increased supply and dampened price levels.
We also have to remember that within the Greater Toronto Area, there are many neighbourhoods, communities, and pockets of micro-markets each with their own dynamics and forces driving their prices. Buying and selling in any market requires you to do a bit of homework to figure out what to do to make the right decision.
Will we see a further decline in prices? Are prices at ‘rock bottom’ and getting ready to start climbing again? Time will tell. And though we have a lot of statistics, indicators and measures to choose from to gauge what’s happening in the market, let’s keep it simple and understand supply and demand.
If we continue to see buyers snap up houses (more demand), the number of properties on the market will start to decrease (less supply) and prices will go up.
If buyers stop buying (less demand), but sellers keep listing homes for sale (more supply), prices will go down.
If external factors affect either one of these, prices may go up or down.
So you really need to understand not just what’s going on in the macro scale, but also what’s happening in your local market.