The most common question I get asked these days is “What is going to happen with the real estate market?”
You might put the question up there with “When is winter going to be over?” or “When will my RRSP statement stop making me cry?”.
The truth is, no one really knows. If someone did, they’d be very rich and very lucky.
But I do love to hear everyone’s opinion. I’m collecting these predictions on my poll to the right. Email me if you want to put money on it as I’m always up for a good bet. We’ll call it the Real Estate Pool.
Although we don’t know exactly what is going to happen, I’m going to share my view on the market, as well as things to consider when you read the news reports.
At the end of my blog I’ve also included excerpts from major real estate organizations and associations if you really want to dive in to the muck.
Real Estate is Local
The majority of what you are reading out there (and in the clips below) is based primarily on national, provincial and city-wide numbers.
Contrast what is happening in the GTA compared to Vancouver and it’s a totally different picture. Prices in the west were incredibly over-inflated and now they have a harder fall. It’s even different from Rosedale to the Beach.
Lumped into those stats are various types of homes; condos, the burbs, and large detached homes. There is no accouting for the unique nature of each of those markets.
The market on a wider scope can seem daunting, especially when you blend it all together and look from 20,000 feet.
So unless you own homes of every shape and in every part of the country, read on…
Don’t Trust the Local Stats Either
You can’t take local monthly stats for one MLS sector literally (i.e. E02, C09) as average home prices can sometimes be based on just a handful of sales.
If a home sold for $1M in an area that typically has homes in the $750,000 range, the average price will be pulled up and vice versa.
I’ve found the best measure of what is happening in the market is to talk to agents as they are the ones who know the history, the activity and the pricing strategies the best.
In the Beach for example, we’re seeing about a 7-8% drop since the peak months of 2008 but we don’t expect to see much more of a drop this year, if any.
Supply and Price Range
Supply and demand are playing a huge role in countering some of the media predictions. In some areas, we are still seeing multiple offers for homes because they are the only decent property in a particular price range.
The recent stats are based on months that are traditionally slow. The winter season is also when sellers are more negotiable as listings in this market usually have a different motivation for a sale (relocoation, purchase of another property etc.).
The typical pattern of listing and shopping in months other than the dead of winter are coming back now that we are in a more balanced market.
The Spring Market
I’m predicting a rush of activity this spring. As per my comments about seasonality, people who have been thinking of selling (but didn’t have to before) will be bringing their homes out on the market which will be a nice boost for inventory.
There is a pent up demand of buyers…those who were looking back the in fall but wanted to wait and see, either because of their own circumstances or to see the market drop a bit before they jumped in.
Plus, there is a new influx of buyers who are waking up to the opportunities out there.
I personally just bought a home that had been on the market for 70 days and got it for nearly a $100,000 under its original list price.
Final Preductions on the Market…
My final answer? It depends.
This is not a scapegoat answer, it’s the truth. It depends where you are looking and what you are looking for.
Thinking of Selling?
If you are thinking of selling, CALL ME NOW. I have so many buyers (and other agents) who are looking but the low inventory of listings on the market is limiting their search.
I am literally in the process of contacting clients to ask them if they want to sell, knowing their house is perfect for someone who is searching.
There are also a lot of sellers dipping their toes in the water to test things out so keep in mind that the perfect home may not even be on MLS. I have a lot of clients who are listing their homes exclusively first before going on the market formally.
Thinking of Buying?
To wrap up the most common question for buyers, “Should I wait for the market to drop more before I buy?”. If you know when the market will drop more, then by all means let me know when you think that is happening and we can find a home.
Sure, there is a possibility that prices may drop more but you may find yourself looking at higher interest rates in tandem. You may also find yourself in competition with other buyers.
My biggest testimonial to my view that there is great value right now is the fact that we recently sold our house and bought our next family home, plus we are about to buy another.
Thinking of doing both?
As I said in a previous blog, now is a great time to trade up as it costs you less in a down turning market than the peak market of the past.
Call me today so we can talk specifics and figure out the timing that works best for you.
MARKET REPORT SNAPSHOTS:
“Nationally, average house prices are forecast to dip by 3.0 per cent from last year to $295,000, while transactions are projected to fall to 416,000 (–3.5 %) unit sales in 2009. In spite of this cooling trend on a national level, price and activity gains are anticipated in some provinces.”
“By year-end 2009, unit sales should match 2008 levels, while average price is forecast to fall another two per cent to $293,000.”
Canadian Housing and Mortgage Corporation
“Existing home sales, as measured by the Multiple Listing Service (MLS®)1, are expected to decline 14.6 per cent during 2009 to 370,500 units. In 2010 the level of MLS® sales is expected to increase by 9.3 per cent to 405,000 units. The average MLS® price is also expected to decrease over the course of 2009. Average prices are forecast to be $287,900 for 2009, a decline of 5.2 per cent, while 2010 will see little change from 2009 average prices.”
Canadian Real Estate Association
Prices are forecast to stabilize in 2010, with annual price increases of one per cent or less in five provinces. The weighted national MLS® average price is forecast to decline 6.4 per cent in 2009, and hold steady in 2010.
Realtor.ca (formerly MLS.ca)
“The beginnings of a Canadian economic recession and a dramatic downturn in consumer confidence late last year means that the housing market is facing significant headwinds in 2009,” said CREA Chief Economist Gregory Klump. “Sales activity dropped sharply and price declines accelerated in the fourth quarter of 2008. The consensus economic forecast calls for an economic rebound in the second half of 2009, so an improvement in housing market trends is likely to wait until next year.”
Toronto Real Estate Board
“It should be noted that the GTA housing market has followed the broader economic slowdown, but was not a cause of the downturn. Home prices remained affordable throughout the new millennium. The average family can still qualify for a mortgage on the average priced home. This remains the case today. Given that we are not facing an early-1990s-style affordability crisis, the rebound in the housing market will likely be quick once economic recovery takes hold.”