How’s COVID-19 Going to Impact the Real Estate Market?

Know this that I am here for you if you have any questions. As this whole situation continues to evolve, I remain committed to supporting you and keeping you informed.⁣ ⁣

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Special Market Report – March 12, 2020

In just a few short weeks, the coronavirus outbreak along with an abundance of misinformation has created a general feeling of public hysteria leaving some home buyers or home sellers with questions.

Should they take advantage of current conditions or wait it out to see what happens next?

There is no question, everyone is concerned seeing the global stock markets plummet.  The reason is simple, investors seek a safer asset amid additional fears that the coronavirus will disrupt global supply chains, tip the viability and economic performance of their stocks due to volatility of the number one client in the global market – China.  Also, add the substantial drop in oil prices on the world markets and we certainly have an unstable mixture in front of us.

The COVID-19 crisis is profoundly different than the 2008 financial crisis which was fundamentally triggered by the financial system, mortgage market and “Lack of Access to Capital”.  Here we have disruption in “Supply Chains” mainly coming out of China.

The global financial volatility associated with COVID-19 has shocked interest rates. Lower interest rates are arguably the most important indicator of higher real estate values; however, the interest rates aren’t alone in their decline. Over the last two weeks, there has been a similar disruption to the price of lumber, once again interruption in the supply and demand chain by China which is widely used in housing production as well as the price of oil, which is a key component in cost input for transportation of goods and ultimately real estate construction. The decline in interest rates, paired with the reduced cost of commodities and access to capital raises an important question.

Could this cause an unexpected boost for the real estate market?

We are confident that eventually everything will return to normal as we experienced in 2004 (SARS) and 2008 (financial crisis).  Travel restrictions will ease – Italy will not be locked down forever.   A vaccine or cure will be discovered by our great scientists and confidence will return to our world stock markets. We have already seen a bounce in the stock markets, but volatility will continue for the next few weeks. There will be hard times for some countries – Italy for one – BUT the lasting effect on Canada will be minor.

We also need to understand that the source of infection has been identified as a novel coronavirus, related to the same that caused outbreaks of Severe Acute Respiratory Syndrome (SARS) from 2002-2004 and Middle East Respiratory Syndrome (MERS) in 2012, there are vaccine and antibiotics for both outbreaks.  There are similarities in sequence and structure between the spikes of the two viruses. The researchers are currently working on a vaccine to isolate antibodies from people who have recovered from infection, such antibodies potentially can be used to treat new infections before a vaccine is available. The Canadian health system overall has done a great job in managing this health crisis.

Ontario real estate market heated up with a vengeance over the first two months of 2020. It’s no secret that market conditions in Ontario’s largest cities have been largely defined by a growing supply and demand gap while factors such as foreign and domestic investment have also contributed to the too hot to handle price growth.

As far as investors, they are looking for the calm in this storm.  Canadian residential real estate appears to be an attractive option specifically for single-family homes. Perhaps it’s safe to assume that a steady and healthy market with easier access to capital is on the horizon.

This global crisis will have an unintended constructive impact for what was already a robust real estate market, due to aggressive and coordinated fiscal and economic incentives such as a drop in interest rates. This health crisis will be handled and the long-term impact on our local real estate markets will be inconsequential.

Real estate is always a safe haven when matters of concern are at hand. Phones are ringing, driven by historical low interest rates and a confident “all will be well” within our Canadian health and financial markets. In the upcoming weeks and months, look for a small increase with foreign investors and end users.  Long term, real estate in Canada and specifically Ontario is a smart investment – nothing has happened to hamper that enthusiasm.

How’s The Market?

Well, in a nut-shell it’s so hot it’s on fire! 7,256 home sold in February, that’s 45.6% increase vs. 2019. Activities are up 61.8%, and average price is now $989.218.

Condos trading is up 24.8% with average price increased 18.6% to $666,358.

Buckle up, we’re in for a ride!⁣

February 2020 Market Update

Greater Toronto Area REALTORS® reported 7,256 residential transactions through TRREB’s MLS® System in February 2020, representing a 45.6 per cent increase compared to a 10-year sales low in February 2019. However, February 2020 sales were still below the 2017 record result. Year-over-year sales growth, for the GTA as a whole, was strongest for ground-oriented home types. After preliminary seasonal adjustment, February 2020 sales also exhibited positive momentum, up by 14.8 per cent compared to January 2020.

“Sales growth will be strong this year. TRREB’s forecast published in its Market Year in Review and Outlook Report on February 6, is calling for 97,000 sales in 2020. However, the annual pace of sales growth experienced in February will likely not be sustained throughout the year, because we will be making comparisons to much stronger sales results reported after the first quarter of 2019,” said Mr. Collins.

New listings amounted to 10,613 in February 2020, a 7.9 per cent increase compared to February 2019. This moderate annual growth rate was much smaller than that reported for sales, which means market conditions tightened considerably over the past year. “Sales growth well in excess of listings growth is once again the norm. This is because the temporary effects of the 2017 Ontario Fair Housing Plan and the OSFI mortgage stress test have largely worn off. However, while these policies were running their course, the well-publicized housing supply problem in the GTA continued unabated.

All levels of government have acknowledged the supply problem, but we need to very quickly move from policy briefs to shovels in the ground,” said TRREB CEO John DiMichele. As market conditions tightened over the past year, competition between buyers has clearly increased. This resulted in a further acceleration in year-over-year price growth in February. The MLS® Home Price Index Composite Benchmark was up by 10.2 per cent. The average selling price for all home types combined was up by 16.7 per cent to $910,290. Double-digit average price growth was experienced for most major market segments, including detached houses and condominium apartments.

“TRREB’s current average price forecast is for 10 per cent price growth to $900,000 in 2020. While this outlook represents a very robust pace of growth, it is possible that further tightening in the detached market segment could push the overall average selling price above TRREB’s baseline scenario. This could unfold if sales growth continues to outstrip new listing growth to the degree it has so far in 2020,” said Jason Mercer, TRREB’s Chief Market Analyst.

January 2020 Market Update

TRREB President Michael Collins announced that Greater Toronto Area REALTORS® reported 4,581 home sales through TRREB’s MLS® System in January 2020 – up by 15.4 per cent compared to January 2019. On a preliminary seasonally adjusted basis, sales were up by 4.8 per cent compared to December 2019.

“We started 2020 where 2019 left off, with very strong growth in the number of sales up against a continued dip in the number of new and available listings. Tighter market conditions compared to a year ago resulted in much stronger growth in average selling prices. Steady population growth, low unemployment and low borrowing costs continued to underpin substantial competition between buyers in all major market segments,” said Mr. Collins.

The MLS® HPI Composite Benchmark price was up by 8.7 per cent compared to January 2019 – the highest annual rate of growth for the Benchmark since October 2017. The condominium apartment market segment continued to lead the way in terms of MLS HPI® price growth, but all home types experienced price growth above seven per cent when considering the TRREB market area as a whole.

The average selling price in January was up by 12.3 per cent, driven by the detached and condominium apartment segments in the City of Toronto. “A key difference in the price growth story in January 2020 compared to January 2019 was in the low-rise market segments, particularly with regard to detached houses. A year seems to have made a big difference. It is clear that many buyers who were on the sidelines due to the OSFI stress test are moving back into the market, driving very strong year-over-year sales growth in the detached segment.

December 2019 Market Update

Toronto Real Estate Board President Michael Collins reported that December 2019 residential sales reported through TREB’s MLS® System by Greater Toronto Area REALTORS® were up by 17.4 per cent year-over-year to 4,399. Total sales for calendar year 2019 amounted to 87,825 – up by 12.6 per cent compared to the decade low 78,015 sales reported in 2018.

On an annual basis, 2019 sales were in line with the median annual sales result for the past decade. “We certainly saw a recovery in sales activity in 2019, particularly in the second half of the year. As anticipated, many home buyers who were initially on the sidelines moved back into the market place starting in the spring.

Buyer confidence was buoyed by a strong regional economy and declining contract mortgage rates over the course of the year,” said Mr. Collins. While sales were up in 2019, the number of new listings entered into TREB’s MLS® System was down by 2.4 per cent year-over-year. For the past decade, annual new listings have been largely in a holding pattern between 150,000 and 160,000, despite the upward trend in home prices over the same period. “Over the last ten years, TREB has been drawing attention to the housing supply issue in the GTA.

Increasingly, policy makers, research groups of varying scope and other interested parties have acknowledged that the lack of a diverse supply of ownership and rental housing continues to hamper housing affordability in the GTA. Taking 2019 as an example, we experienced a strong sales increase up against a decline in supply. Tighter market conditions translated into accelerating price growth. Expect further acceleration in 2020 if there is no relief on the supply front,” said Jason Mercer, TREB’s Chief Market Analyst.

The MLS® Home Price Index Composite Benchmark was up by 7.3 per cent on a year-over-year basis in December 2019. From June 2019 onward, the annual growth rate in the MLS® HPI Composite Benchmark accelerated. The average selling price in December 2019 was $837,788 – up almost 12 per cent year-over-year. For calendar year 2019, the average selling price was $819,319 – up by four per cent compared to $787,856 in 2018.

November 2019 Market Update

Toronto Real Estate Board President Michael Collins announced that Greater Toronto Area REALTORS® reported 7,090 sales through TREB’s MLS® System in November 2019 – a 14.2 per cent increase compared to November 2018.

On a GTA-wide basis, sales were up year-over-year for all major market segments. Annual sales growth in ground oriented home types, including detached houses, led the way. New listings entered into TREB’s MLS® System in November and the active listings count at the end of the month went in the opposite direction compared to last year, with new listings down 17.9 per cent year-over-year and active listings down 27.2 per cent.

“An increasing number of home buyers impacted by demand-side policies over the past three years, including the 2017 Ontario Fair Housing Plan and the OSFI mortgage stress test, have moved back into the market for ownership housing. Based on affordability and stricter mortgage qualification standards, many buyers may have likely adjusted their preferences, changing the type and/or location of home they ultimately chose to purchase,” said Mr. Collins.

As market conditions continued to tighten in November 2019, with increased sales up against an increasingly constrained supply of listings, the annual rate of price growth continued to accelerate. The MLS® Home Price Index Composite Benchmark increased by 6.8 per cent year-over-year. The average selling price increased by 7.1 per cent year-over-year to $843,637. Both the MLS® HPI and the average selling price for the TREB market area as a whole experienced the strongest annual rates of price growth for the year in November.

“Strong population growth in the GTA coupled with declining negotiated mortgage rates resulted in sales accounting for a greater share of listings in November and throughout the second half of 2019. Increased competition between buyers has resulted in an acceleration in price growth. Expect the rate of price growth to increase further if we see no relief on the listings supply front,” said Jason Mercer, TREB’s Chief Market Analyst.

October 2019 Market Update

Greater Toronto Area REALTORS® reported 8,491 residential sales through TREB’s MLS® System in October 2019. This result represented a 14 per cent increase compared to 7,448 sales reported in October 2018. GTA-wide, sales were up on a year-over-year basis for all major home types.

The trend of annual growth in sales versus annual decline in new listings continued in October 2019, with new listings down by 9.6 per cent compared to October 2018. The resulting tighter market conditions compared to a year ago resulted in positive annual rates of price growth across all major market segments, from a GTA-wide perspective.

The MLS® Home Price Index Composite Benchmark was up by 5.8 per cent on a year-over-year basis in October 2019 – the strongest annual rate of growth since December 2017. The average selling price for all home types combined was up by 5.5 per cent to $852,142, compared to $807,538 in October 2018.

“As market conditions in the GTA have steadily tightened throughout 2019, we have seen an acceleration in the annual rate of price growth. While the current pace of price growth remains moderate, we will likely see stronger price growth moving forward if sales growth continues to outpace listings growth, leading to more competition between home buyers,” said Jason Mercer, TREB’s Chief Market Analyst.

Ready…Set…ACTION!

It’s the beginning of our Fall market and agents are all heads down, busy working. I asked a few colleagues in the office … How’s the Market?

Special thanks to my colleagues for appearing on camera without notice.

If you are a home seller, there is no better time to price your home, make it show ready, and prepare it for sale for the Fall market. Contact me and let’s start the process today!

Thank you for watching and have a nice day. ⁣

How’s The Market?

Generally speaking, demand for housing is up, sales are up, prices are up, combined with low and steady mortgage rates, strong economic conditions, strong labour market and population growth … all indicators of a great Fall real estate market and into 2020. ⁣⁣