If you’ve been actively searching for homes for sale over the past month, you’re probably wondering why you aren’t seeing a lot of houses for sale. At just 4,140 active listings in January 2022, the number of properties available for sale in the entire area covered by the Toronto Regional Real Estate Board has hit a historic low — one that hasn’t been reached in over two decades (according to TRREB).
As you see on the chart below, the next lowest point was in December 2016 at 4,746 listings. In December 1999, active listings sat at 6,461.
Months-of-inventory also settled at an historical low — 0.9 (with some places like Ajax and Whitby sitting at 0.4 months of inventory).
What does this mean?
For sellers — it means historically high selling prices, and a quick sale.
For buyers — it means intense competition amongst other buyers vying for the same property. (And paying record high prices as well.)
Even though sales declined 18.2% (January 2022 vs January 2021), the average price rose 28.6% (same time period comparison) and is now sitting at $1,242,793.
If you’re selling now — you’re selling high. If you’re buying now, you’re buying high. Relatively speaking, as long as you need to make the move, and your move makes financial sense, and you can afford the mortgage (or if you’re paying cash) — go for it… but be prepared for the competition out there.
Will buying conditions get better?
Every year, as the real estate sales cycle unfolds, more listings are introduced heading into the spring market. You’re probably seeing more listings popping up than usual — and this is normal.
At the same time, more buyers (who were sitting at the sidelines and just watching) are starting to come out and enter the market as well. This is why you will still see quick sales and multiple offers on recently listed properties.
Time will tell if this will continue on into the year. With interest rate hikes put on pause (until perhaps next month), buyers are trying to move ‘ahead’ of the market by securing their property now.
Be patient. More listings will be introduced to the market. The amount of buyers entering and competing may reach an equilibrium point where the competition won’t be as fierce as it was in late December and into January.
With double digit price growth happening as a result of world events unfolding around us, the biggest question to ask is if your move makes financial sense.
Can you afford your new mortgage?
Do you really need the extra space?
Or should you wait and see what happens to prices?
At a recent meeting conducted by the Toronto Regional Real Estate Board, 2022’s average price appreciation is predicted to climb 12% to $1,225,000, and sales are expected to dip to 110,000.
Remember — regardless of a decrease in the number of sales, we are comparing a dip to recently high levels of historical sales (121,693 home sales in 2021) — and 110,000 sales sits well above the number of home sales in 2020 (which was 95,066).
The last time we saw sales in the six figure count was in 2015 (101,213) and 2016 (113,040).
A dip in home sales doesn’t mean the market is crashing.
What we’ve really got to look at is how the inventory level (number of homes for sale) compares to the sales level. And what you’ll see is that despite falling sales, inventory just isn’t keeping up.
Until we return to a healthier level of homes for sale on the market, competition among buyers will continue amidst a scarce number of homes on the market.
But then we have to ask — why aren’t a lot of homeowners selling right now?
Empty nesters are opting to stay in their home rather than move to a condo or even out of town to a bungalow after realizing that the property they can afford isn’t as desirable as the home they’re living in now — even though they’re selling at record high prices.
Think about it — if you’re living in a three bedroom, two storey home that will sell for $1.2 million — and you’re looking to buy a two bedroom condo for $800,000 — and let’s assume your mortgage is paid off — why would you make that move just to free up $400,000 in equity? Trading off the amount of space you have to live in a smaller condo and pay maintenance fees isn’t as desirable as staying put, and paying someone to mow your lawn and clear your snow.
Similarly, some move up buyers are realizing that selling their home even at prices they’ve never thought imaginable will result in them taking on a bigger mortgage to move into that next home (or forever home) — and then question whether it’s best to stay put, or to go ahead and take on such a financial responsibility at these times when the cost of living is increasing.
The biggest question for homeowners is — if I were to sell now, where would I move? And not having an answer to this question is leading to hesitation by some homeowners to list now.
Over the next few weeks, we will see more listings introduced into the market. Next month, we’ll find out where interest rates are going.
And as the spring market unfolds, we will get better insight about where the prices are headed.
Photo Credit: Felipe Moura via Unsplash
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