What is Happening With the GTA Real Estate Market?
Tags: GTA REAL ESTATE MARKET UPDATE, TORONTO REAL ESTATE, VAUGHAN REAL ESTATE UPDATE, BEST VAUGHAN REALTOR, BEST TORONTO REALTOR
Two and a half years ago our personal, and professional lives drastically changed not only in Canada but across the world. Who would have expected that we would be in lockdown, working and studying from home? What was equally surprising was that most of us in real estate expected the market to crash in 2020 but as we are all aware the exact opposite happened.
Why did the real estate market go crazy? Three reasons: pent-up demand, low-interest rates, and during COVID families realized they needed more space which dramatically fueled the market. I was personally horrified by what I saw happening in the first 2 months of 2022. From January to February there was a super low supply of homes and condos for sale and buyers appeared to be super anxious to buy which resulted in aggressive bidding wars and the average sale price of homes in the GTA reached record highs of $1,334,544 which was a 27.7% increase in just 1 year and over 7% in just one month. This dramatic increase in demand and in prices just wasn’t sustainable.
So what is in store for the balance of the year? The market will most likely remain relatively cool but will continue to see price drops. Possibly but not the aggressive drops that we have experienced from March to July. 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 August 2022 the GTA average sale price was $1,079,500 and is still 0.9% higher than in July 2021. The media has communicated that we are going to see a 25% average price drop in 2022 – well that has already happened on average prices have already dropped 25% from the February unprecedented peak.
If we compare August 2022 to the pre-pandemic August 2019 when the average price was $792,611 prices are up 26.6% in the past 3 years. I believe that the bulk of the price drops has already happened as sellers that purchased in the first 3 months of the year have most likely already sold their properties and hence the panic selling has for the most part ended and so have the aggressive price drops. The steady decline in home prices finally stabilized in the Greater Toronto Area in August. In August we had the first month-over-month price increase since prices started falling earlier in the year and this is the first sign that the market may have started to stabilize.
So what happened to the market in August?
GTA August Market Update
Last month new listings were down -0.7% compared to August 2021 and the average sale price was up by 0.9% compared to August 2021. Month-over-month this is the first month that we have seen an average sale price increase of 2.1% compared to July 2022. Which is the first indication that the housing market may be starting to stabilize.
Homes are now taking longer to sell as buyers slow down their search and hence the number of days to sell is up by 37.2%% (22 days as opposed to 16 days) compared to 2021. The number of homes that sold in August 2022 is down by 34,2%% compared to August 2021. Much fewer homes are now selling in bidding wars and most homes are selling with conditions such as inspections and financing. Buyers are once again able to negotiate. Some sanity has once again returned to the real estate market.
Although we have experienced record interest rate increases this year compared to the record low rates over the past 2 years – interest rates are still relatively low compared to historical rates.
We Continue to Hear Rumblings of a Market Crash?
We continue to hear rumblings of a market crash and that real estate prices will continue to drastically drop. We have absolutely experienced drastic price decreases since the historical peak of February 2022. The September 7th rate increase of .75% will most likely result in a bit of a slowdown. Yes, interest rates have gone up but are still at historically low rates, and unemployment rates continue at an all-time low. Buyers are now sitting on the sidelines and waiting and hoping for a market crash. As a result, the rental market has aggressively tightened up and we are now experiencing bidding wars for rentals and rents are dramatically increasing.
In August we started to see buying activity pick up. Historically the real estate market slows down in July and August and comes the fall we experience a pick up in the market. Will the interest rate increase of September 7th result in a cooler fall market? In the short term no one really. However, the economic fundamentals do not point to a crash. Employment remains super high and GTA continues to attract businesses and immigrants from around the world. In know addition, due to the shortage of labour and building supplies, builders are not keeping up with building increased housing supply. For these reasons I do not believe that we are going to see a crash and the correction that we have experienced is actually a good thing as the insane price appreciation we experienced earlier in the year was not sustainable.
What to Expect For the Balance of 2022
We are currently experiencing a slowdown 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.
My projection is that the market will continue to remain slow for the balance of 2022 particularly if we continue to experience interest rate increases but I do not believe that we will continue to experience aggressive price drops. The challenge with buyers trying to time the market is that by the time the buyers realize the market has shifted it will be too late. The best time to buy is when you are ready and financially it makes sense given your personal circumstances.
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.
Buy or sell your home, recreational, or investment property with Sylvia Smith. She specializes in residential and recreational real estate within the Greater Toronto Area, Parry Sound, and Muskoka. Whether you are a first-time buyer, an investor or you are looking for a cottage property, Sylvia Smith provides a seamless experience and is committed to making your real estate dreams come true. Combining her passion for real estate, a tenacity for your interests, and providing integrity and client service sets her apart. Reach out if you have any questions or are thinking of buying and selling.