Few (ok, no one) toasted the arrival of 2020 on January 1st imagining what life and the world would look like 6 months later. But here we are. A global pandemic, civil liberties and black rights protests, economic upheaval and masks on our faces when we leave our homes. But I for one like to look at how far we’ve come and the road forward though, rather than the one behind us.
It’s due time for another real estate market update.
For Context: Real Estate Pre-Pandemic, 2020
Before the pandemic hit, Toronto was experiencing one of the lowest levels of real estate offerings in years in the central and downtown areas. The total months of Toronto Real Estate inventory (length of time it would take to completely sell off all available homes for sale) hit its lowest level since 2007 in February. As such, demand was high, sold prices were higher and it was very common to see offer nights with double-digit offering-buyers at the table. The suburb areas that had trended down y/o/y after the 2017 boom, were starting to tick upwards too.
While the stock market began its slide the week before the pandemic & state of emergency was announced, the Toronto real estate market was delayed by a couple weeks. It wasn’t until Canadians were told under no certain terms to stay home did we start to see the ripple effect.
For Context: Toronto Real Estate In Late March/April, 2020
April was the first full month of post-pandemic-announcement released data from the Toronto Real Estate Board. That data showed an approx 63-70% drop in sales, a 14% decrease in freeholds and a 8% decrease in condos. But home prices can not be measured on a macro level simply because real estate activity is neighbourhood by neighbourhood and type by type. The semi-detached and townhome sectors for example, had year over year gains. The segment of the market under and around a million performed quite well. Condos with outdoors space or lots of light are selling better than dark units. In a nutshell, some segments of the market dropped while others held fine.
Toronto Real Estate In May, 2020
Sales activity and showing activity increased in May compared with April, according to figures from the Toronto Regional Real Estate Board. But it remained less than half of what TREB saw a year ago. In-person showings were up 95% from April according to Broker Bay, a showing booking platform that takes over a large segment of the market. May 2020 sales increased by 55.2 per cent compared to April 2020, however the MLS® Home Price Index Composite Benchmark price reported was virtually unchanged in May 2020 compared to April 2020. Both from my own experience helping clients buy and sell last month, and notes from other agents, no clear trend to suggest the market has gone up or down. Some neighbourhoods, E01 (South and North Riverdale) for example, still was selling at high numbers with multiple offer nights. RBC now saying however: “We expect price support to erode gradually in the months ahead.”
News That Affects The Market For June, 2020
CMHC put out news this past week making it harder for people to qualify for mortgages, effective July 1st. As of now, these guidelines just pertain to high ratio mortgages. There are 3 changes, 2 of which are of concern to the average buyer: (1) The first change is that there will be tighter ratios for qualifying. For example, if you are approved today for a mortgage of $600,000, come July 1st, you will only be approved for a mortgage of $550,000. (2) The second change is with regards to credit scores. Today you need a minimum credit score of 600 to get approved for an insured mortgage. Come July 1st, one borrower has to have a score of at least 680.What does all this mean? Qualifying for a mortgage on a purchase under $1,000,000 with less than 20% down has become more difficult with the CMHC.
Urbanation says we are neither a buyers market or a sellers market, which I agree. As to your big question – is now a good time to sell or a good time to buy? One of the biggest things that is contingent on home prices, just like stock market activity, is when restrictions will (1) relax further and (2) lift entirely. And for that reason, I routinely engage with my clients on their predictions and compare with what I’ve heard. I believe the unpredictability window lies until the end of 2021 (which was the consensus in an Urbanation Market Expectations Survey; also when experts say we might have a vaccine).
Short Term Outlook For Toronto Home Prices
The short term outcome of home prices is difficult to predict since there’s so many differing opinions. For example, three Canadian banks have predicted different outcomes in the past month:
- CIBC: CIBC Forecasting Canadian Home Prices to Drop 5-10% Relative to 2019 Levels
- TD: TD Now Forecasting Toronto Home Prices to Increase By 7.8% in 2020
- RBC: Home Sales in Canada Could Drop as Much as 30% This Year
The CMHC on the other hand forecasts decline in average house prices of nine per cent to 18 per cent over next 12 months
How Transacting Sales Has Changed
A number of things have happened since then to give us and our clients the confidence to transact and close sales as we move forward. We are now business as usual, but in the boundaries to which we can work:
- Most agents who transact any kind of volume were almost primarily digital before Covid hit. So electronic signatures, client zoom meetings, 3D tours and FT walkthroughs have been seamless. There are less in-person showings today.
- Real estate closings with lawyers have moved online with wire transfers, electronic signing and keys left in a lockbox at escrow
- When conducting an in-person showing, we provide mask/gloves PPE for our clients; showings are limited to 1 small party at a time; waivers are given and signed in advance. Please note that there are still a large number of condos that refuse entry to non-residents, thus site unseen purchasers or conditions are becoming more common.
- Real estate vendors – photographers, home inspectors, movers, appraisers – are given access to properties alone and also given waivers to sign.
- As weeks progress, it’s become increasingly clear that the Land Registry Office will stay open; closings are happening without issue for the most part
- Lenders are being increasingly cautious as to who they lend to so pre-qualification with a great mortgage broker or banker is essential
- Movers are still deemed essential.
Have questions about your property’s value right now and if it is a good or opportune time to buy or sell? Please contact me directly to discuss further: firstname.lastname@example.org