Adjusting to a New Market Reality
December’s 3,117 sales ended 2022 with a total of 75,140 homes sold at an average price of $1,189,850, compared to 2021’s average price of $1,095,333. While the average price is up from a year ago, it does not tell the whole story. In fact, prices have been adjusting downward since they rose by 25%-28% in last year’s February/March timeframe.
Two major factors come into play on the above statistics. One: as we entered 2022, a buying frenzy occurred. Buyers were convinced prices would continue to skyrocket and decided to get into the market regardless of price and so prices jumped over 25%, an increase which just was not sustainable. Two: the commitment of government to squash inflation by raising interest rates has not only eliminated some buyers from being able to qualify for financing but has also created a fear of the unknown and some buyers have decided to sit back and see what happens, both impacting demand and price growth.
Here is the reality of the market. Toronto’s economy continues to boom. We continue to have a housing shortage, (our listing inventory is only at 8,692,) and rents have increased by 12%-15% as renters get into bidding wars in an attempt to find housing accommodation. With an estimated 1.2 million immigrants poised to come to Canada in the next 3 years, it seems that home prices in the GTA will continue to hold their value.
Another major factor is one of psychology and interest rates. Over the last 15 years we have had ultra-low interest rates. We have forgotten or new buyers are not aware that these low rates have been extraordinary. In the 1970’s mortgage rates fluctuated between 8%-12% and people bought! In the 1980’s mortgage rates were between 14% – 23% (yes people financed at 23%) and people bought! Between 1990 – 2008 interest rates were between 14% – 8% and people bought! It takes time for buyers to adjust to a new reality. I believe buyers will adjust to the new mortgage rates as they have adjusted to the increases in house prices.
Great opportunities exist in the real estate market. Whether to upgrade your existing home, to buy an investment property or a condo, the next few months is a great time as others wait to see what happens. Give me a call and let’s chat about the opportunities that exist. If you know of anyone with questions about the market, please give me a call and I will be happy to reach out and help them.
Best wishes for a great 2023!
Your Friend in Real Estate,