With two months into the 2020 real estate market, home sales have set a new record price for February historical sales. The average home price in February 2020 was $910,290 which is an increase of 16.7% over February 2019.
February sales leaped 45.6% amounting to 7,256 — a significant increase over 2019.
What’s interesting about these figures is how it compares to the months leading to the ‘peak’ of the 2017 market.
In February 2017, sales amounted to 8,014, and the average price was merely $875,983.
Here’s how the stats look like when comparing February 2020 with February 2017:
2020 – 7,256
2017 – 8,014
2020 – 10,613
2017 – 9,834
2020 – 8,816
2017 – 5,400
2020 – $910,290
2017 – $875,983
2020 – 17
2017 – 13
2017 vs 2020
To summarize, 2017 saw higher sales, lower new listings, lower active listings and a quicker sale time. This year, there are fewer sales, more new listings, greater active listings… and a record breaking new average price.
Is this something to be worried about, amidst global concerns over the coronavirus (COVID-19) and how it is presently impacting the global economy? Could real estate sales and prices lose steam, leading us back down to a cooling of prices in the spring?
As always, time will tell.
So far I’m confident in what this year’s real estate market has to bring. The price growth we’ve been anticipating looks to be sustainable. A significant increase over last year’s average price, even though it’s in the double digits, is expected simply due to how slow the 2019 market was.
Buyers sitting on the sidelines have decided to buy, but not in the significant numbers we saw in 2017 which ate heavily into the number of active homes for sale and drastically reduced total inventory.
Sellers waiting to get the price they want have adjusted their expectations, and yet prices have moved upwards signalling a sustainable growth.
Buyers will afford more and pass the stress test
The Bank of Canada interest rate has just been cut, with variable mortgage rates and fixed mortgage rates likely to follow. The government is about to ease off on the stress test in April, providing greater affordability to home buyers looking to enter the market.
Naturally we’ll see an increase in homes available for sale in March. The driving growth for home prices will be increased affordability coupled with limited demand. Multiple offers on homes are still happening — but a number of them are going into a conditional sale instead of a firm one. The only factor that will stifle this momentum is buyer confidence.
With lower interest rates and an easing of the stress test coming up in April, affordability will increase. Buyers will be able to offer more money for the home they plan to buy, be able to afford the mortgage payments, and to top it all off, actually pass the stress test at a sales price higher than what we may currently be seeing on the market.
What does this mean if you’re selling your home?
There’s a limited time window of about two weeks from now to really market your home and see the demand for it. While inventory levels are higher than 2017, there are a lot of buyers looking on the market and not seeing a vast selection of homes to purchase. If you price your home correctly, you’ll attract multiple buyers bidding for your home.
Various real estate statistical indicators show that the months-of-inventory levels have decreased, while sales-to-new-listings ratio remain steady. These figures support the fact that there really are a few homes available for sale while the demand from homebuyers is strong.
As the weeks of March pass, you will naturally start to see an increase in inventor through to April and May. This is part of the yearly real estate cycle of a busy spring market leading into a bit of a cooling before and during the summer, before picking up again in the fall and then cooling again in the winter.
What you’ll need to watch for if you’re selling your home this year is how many listings there are in your neighbourhood, whether or not homes are seeing multiple offers, and if sales are increasing, year-over-year, while inventory (the number of homes being listed on the market) is decreasing.
Will the coronavirus affect home sales?
The coronavirus has affected over 100,000 with close to 4,000 deaths worldwide. It’s a tragic pandemic affecting the lives of individuals, their loved ones, and on a larger scale, the global economy.
By now you’ve seen news about the stock market indices dropping in value, trading coming to a halt, and companies worried about what the rest of 2020 will look like for them. Demand is easing in many industries, and with the virus affecting people at a gargantuan scale, the interconnectivity of many of these businesses will lead to a ripple effect felt worldwide.
When it comes to local real estate, we’re looking at two perspectives: the buyer, and the seller.
Let’s start with sellers.
Right now, sellers can capitalize on a huge opportunity due to the limited supply of homes available for sale and the sheer demand of buyers entering the market with confidence.
But what if a mass lockdown and self quarantine happens? Or what if an infected person comes into your home and touches everything? What if you sell a house and can’t find a place to buy in time?
These are common concerns faced by home sellers right now, and they’re totally legitimate especially if you’re caring for other family members at home. Do you deep clean your house after each showing, disinfect all door knobs and light switches… or just move out for a week, and move back in after the home has gone into contract?
The way I would look at selling today is this: do you have a solid plan for preparing your home for the market, showing your home with minimal hindrances for potential buyers, and are you confident with your next move?
I totally agree that you should have concern over the potential spread of the pandemic. At the same time, you should be prepared. Ultimately you only really have two options. One is to sit on the sidelines and wait-and-see what happens with the coronavirus issues affecting your local market. Or, enter the market today knowing the variables you are facing (low inventory, high demand), have a strong plan for marketing and selling your home, and have total clarity over where your next move will be.
What if you’re buying a home?
You’ll encounter a limited number of homes listed for sale, and a frenzy of buyers bidding for attractive property types — namely condos, townhomes, and semi’s/detached freehold houses under $1 million. Chatter among Realtors in my office include stories about line-ups outside houses, homes setting record breaking prices in neighbourhoods where you wouldn’t have expected it to, and bidding wars going above the listing price.
Concern about the coronavirus could affect this, but we’re not seeing that happen quite yet. Naturally the market will enter a more balanced pace as more listings come to the market. If you’re waiting for bidding wars to subside so that you have a better chance at buying the home you want, who knows… your opportunity might happen in about 3-4 weeks.
Does this mean you’ve broken even if you bought your home in 2017?
The record breaking February average sales price suggests that you could have — but keep in mind March 2017’s average price was $916,567. If we see a cooler price growth in March, and depending on which neighbourhood you bought in, you might find out that homes selling in your are just around the same price you bought in 2017. If you bought in March, you’re just about at the breaking even level. If March 2020 active listings don’t increase much beyond February 2020, there’s a great chance you’ll be selling for higher than what you’ve bought for… if you wanted to sell. Such a move would imply your need to buy a home… and guess how much you’re going to be purchasing your next home for?