Is it a Correction or Crash? June 2022 GTA Real Estate Market Update
Tags: GTA REAL ESTATE MARKET UPDATE, TORONTO REAL ESTATE, VAUGHAN REAL ESTATE UPDATE, BEST VAUGHAN REALTOR, BEST TORONTO REALTOR
In June we continued to experience an adjustment in the Greater Toronto Area (GTA). Increased interest rates have resulted in buyers slowing down their decision to purchase a home to assess the impact of interest rates on housing prices.
The first 3 months of 2022 were just not sustainable from January to March all properties sold in a matter of days in aggressive bidding wars. The increase in interest rates has cooled the market. We are hearing a lot of doom and gloom in the news that we are going to experience a real estate market crash. But will a crash actually happen? My opinion is that we are currently going through a market correction and we will not see a crash. The current market is however a great opportunity for buyers. As homes are taking longer to sell and buyers can take their time finding that perfect home and negotiate a bit on price and protect themselves with inspection and finance conditions.
Despite slower sales, the market remains tight enough that the average sale price is still higher than what it was last year at this time. In June 2022 the GTA average sale price was $1,146,254 and in June 2021 it was $1,088,991 prices are still up 5.3% compared to last year.
GTA June Market Update
Last month new listings were up 1% compared to June 2021 and the average sale price was up by 5.3% compared to June 2021. Homes are now taking longer to sell as buyers slow down their search and hence the number of days to sell is up by 15.4% (15 days as opposed to 13 days) compared to 2021. The number of homes that sold in June 2022 is down by 41.4% compared to June 2021.
Will We Experience a Market Crash?
We are hearing a lot of gloom and doom in the media and comments that there may be a market crash. Yes absolutely we have seen price drops since February of 2022 but the average price is still 5.3% stronger than this time in 2021. Yes, interest rates have gone up but are still at historically record low rates, and unemployment rates continue at an all-time low. Other than homeowners that bought in the peak of January to March and need to sell their current homes most homeowners are not in a position where they need to sell their homes. Should inventory start to tighten up again we will most likely see another shift in the market.
The GTA continues to grow because we attract businesses and people from all around the world. We are projecting to welcome 1.4 million immigrants to Canada over the next 3 years and it is projected that new construction will not be able to keep up with demand and this will continue to place pressure on demand and as a result prices.
If we look at the price trends across the GTA municipalities over the past 3 years we will see that prices are still substantially higher than they were in June 2020.
I believe what we are currently experiencing is a market adjustment or correction. We are currently in a more balanced market – where buyers can take their time to search for that perfect home and fewer and fewer homes are selling in a bidding war. For homeowners that may be considering selling – sure they may not get as much for their home now compared to January and February but their next home purchase will also not be as expensive and they do not have to worry about selling and not being able to buy their next home.
Below is a summary of prices over the last 2 years across the 4 GTA municipalities.
Durham has seen the strongest price appreciation of 44.3%, followed by Peel, York, and Toronto.
What is more interesting is that prices started to increase in 2019 prior to the onset of the pandemic. The onset of the pandemic in 2020 resulted in slowing down of the real estate market but we still experienced a 11.9% increase in average sale price.
With the continued increase in population and the strong job market and new construction not being able to keep up with demand I do not see a market crash happening any time soon.
What to Expect For the Balance of 2022
We are currently experiencing a slow down in sales activity due to two factors increased interest rates and increased inventory of homes that are currently for sale. Buyers are doing two things: trying to assess the impact of increased rates on their home buying ability, and there are also some buyers that are on the sidelines hoping for a market crash. In addition, many people have decided to travel after 2 years of restrictions hence buying a home for these buyers may not currently be a priority.
My projection is that the market will continue to remain slow through the summer months (which is what normally happens) but more so as families may prioritize family vacations after the last two years of restrictions rather than spending the summer months looking for a home. Once fall comes around I project that the market will start to pick up again.
If you are trying to get into the housing market now is a great time to get active in looking for that perfect home. Make sure that you are pre-approved and that your mortgage broker or financial institution has locked down the interest rate for 90 – 120 days and that you have a comfort level on what your budget is and what you can afford.
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