We are calling this a ‘Stale-Mate Market.’ What are the numbers telling us?
As we have ridden this wave of 7 consecutive interest rate hikes and a market that has moved from red-hot to cool, what have we seen, where have we landed, and what do we think is to come for 2023?
To sum it up, transactions are still down by about 40%. Meaning fewer properties are selling overall. Less, Buyers. Less, Sellers. Stale-Mate Market. One would assume that if the sales are down by 40%, it would crash the market, right? But Listings and Inventory are down too. Sellers are saying, “I don’t need to sell now. I can just rent out my house. I will hold off and ride this out.” Hence, the Stale- Mate. From the Listings that are selling, the good ones are still going at fair market value according to today’s calculations. The prime ones are still seeing multiple offers.
As a sidebar, if you are a Buyer, always buy the good inventory. You can bet that it may always do well, despite the market conditions. Get something good that checks all the boxes. Even if you have to pay fair market value or compete for it in a “cooled down” market climate. That has always been our rule when buying real estate. Get the ones with resale value. It holds it.
There have been a few sales here and there, where we have said, “oh wow, that sold for a good deal on the buy side.” Here and there, but not many. The good properties selling at fair market and the ones scooped for a good deal seem to be balancing out the average prices.
One point of interest to note is that seasonally when looking at the 10-year average, we expect average prices to come down month-over-month during the winter months (November, December, and January). Thus far, and for the first time, that doesn’t seem to be happening this year. Prices are holding steady and haven’t seasonally adjusted this year. Once again. Stable. Stale-Mate.
What are we hedging will happen with Toronto Real Estate for the 2023 year? We don’t think there is going to be this big correction. We follow and communicate with about 10% of Toronto’s Real Estate Agents who conduct the bulk of the business transactions (as they always have), and they seem to be seeing the same trends. Some feel the bottom is this winter (if you can find something to buy, inventory is pretty low). A few think we might see a small dip next year if there is another interest rate hike (which is questionable at the moment). And others think it may hold steady as it has.
Another item to note is that the Variable Rate has officially hit 6%. Banks are now offering extended amortizations for homeowners to continue to make their payments. Ultimately, they do not want default mortgages. The number of houses selling under 1M has taken off. And the luxury market in Toronto is doing well. Despite certain price points stalling in sales, it all seems to be balancing each other out.
My guess is that considering we have already seen seven consecutive interest rate hikes and prices hold steady, including during a time when they should be seasonally adjusting, it looks like Toronto real estate may be weathering these rate hikes. Our pipeline is slowly increasing with Sellers and Buyers looking to transact in the 2023 Spring Market. All signs for us that the market might get moving this Spring.
Any questions, feel free to reach out!