This is a wonderful time of year to look back at the past year and reflect on what happened throughout the past year and what tell tale signs positioned themselves to affect this period of the housing market. This is also the perfect time of the year to look ahead and try to prognosticate on what lies ahead for 2019 now that we’re 6 weeks into the New Year.
So let’s quickly look back a bit over 2018 and where we saw the market go. Last year was one of moderation speckled with a bit of normalcy and I use this term loosely as there hasn’t been a normal market for the last while.
It took quite a while for the real estate market to settle after the insanity that was the 2015 and 2016 markets. Low interest rates and easier mortgage approvals mixed with low supply, high demand and increasing population made for a recipe that spelled uncertainty and no one could have predicted the 32% increase in prices that came soon after 2016.
We started the year with some tightening on mortgage approvals as well as some rate increases over the course of 2018 and the significant gains that happened up until the Government’s Fair Housing Plan Announcement in April 2017 had pretty much been given back over the rest of that year and well into 2018’s Spring Market.
Sales and new listings were down over the year by 16% and 32% by 2016’s numbers. Prices drastically increased in 2018 for different property types like Condo’s, Condo towns, Townhomes and Semi-detached. Many Buyers found themselves grouped together in a specific price point ($400-$800K) thus leaving them vying to purchase the same kinds of properties. While the demand was still there it drove the prices up over the course of 2018.
We also saw the rental market go absolutely nuts because many were not getting approved for a mortgage and being forced to rent. This made the rents shoot up (11%) as many ex-buyers found themselves outbidding each other just to get a place to rent out until they figured out their next step.
We saw home prices recover in the second half of 2018 and even detached homes started to sell faster. Again when the luxury homes are not moving as fast as they were and the higher end detached also took longer to sell it drastically affected the overall numbers making detached homes appear to be in a free fall.
As an agent I also had a tougher time managing the expectations of some Sellers after the market correction as they were still wanting too high a price for their home, even though the data I provided wouldn’t back up their desired price they forged on and ended up not selling their property with a different agent. But hey, I won’t put my sign on a yard if it doesn’t make any sense to. It affects my overall statistics and reputation and I won’t sacrifice that for the sake of getting my sign on a yard.
We are now in a market that we can now compare recent sold data to a more stable and reasonably paced market of 2018. Many individuals think agents loved the markets in 2015-16 but I myself hated it, as did many other colleagues of mine.
I found we were constantly getting either outbid by a ridiculous price offered by another buyer or we couldn’t wave a condition so we’d lose out by not going firm (and exposed). It would take 5 times as long with a Buyer until we would prevail on getting a property. But at least they got a place, stayed protected by conditions and they didn’t pay an insane amount for their home. So I felt I protected my clients all the way through.
Now looking forward to 2019 there are a few things to consider with this current market, as we have to keep an eye on quite a few things that can affect our market. We have to watch what’s going on with our neighbours to the south of us and the trade disputes with China, we have Brexit, that issue that global oil prices are down and also the expected slowdown of the Gross Domestic Product (GDP).
But in Canada right now is seems to be like there will be relatively smooth sailing for this year ahead. We’re forecasted to see an increase in sales around 7.2% this year as well as prices are likely to go up an additional 4.2% or more as well. Unemployment is stable and hovering around the 6% mark, which is low as well as fantastic!
Now what I see so far for just being in the office an out in the field is that the market has already been active for the last few weeks. Properties that would normally take 30 days to sell have sold in a week and I strongly feel that with the lack of inventory out there we could start seeing multiple offers again - in some cases.
Where the government needs to focus some of their energy is solving the housing supply issue. I’ve been saying this now for years, that in Toronto they should be planning out to infill the parts of city with the older decrepit buildings and focus on making family sized units in newly built low-rise buildings. This would help with the “missing middle” housing that is lacking in Toronto and adding more supply to the market.
The current problem is we are not building homes and condos quick enough to keep up with the demand. The planning and approval of city development is backed up at the LPAT tribunal and another problem is that builders are also charging a premium now as well which is affecting the sales of new builds.
In my eyes, new builds are being sold at a forecasted price so when the home is finally built it will not have matured in price as much as it should have as you’ve already paid that to the builder. Secondly I don’t like new builds because there are so many unknowns. You don’t know what the house is like until it’s built, you could be subject to extra charges and levies, you have no idea who your neighbours will be or what your area will actually turn out like. I’d rather purchase in an already developed area, but that’s just me.
There’s a lot to consider when getting into the market but you have to remember this, it’s just that – a market. There will obviously be ups and downs but one thing I can whole-heartedly assure you of and that is the housing market always bounces back. Although there have been a few peaks and valleys over the past 100 years it has consistently increased over the years as well as being the only investment that you can live in.
For those thinking they will wait another year before making the leap, just think of the $2000+ you are currently paying in rent and the 4% increase they are forecasting for this year. If you’re buying an $800,000 home at some point, with the lost revenue spent on your rent and the property value increase - you are out $56,000 by waiting another year as well as losing another year of building equity by investing that money back in to your own property.
Food for thought anyway. Maybe you’re not able to do it this year, but I’d suggest meeting a financial planner and/or mortgage broker and seeing where you are at financially. You can at least walk away knowing what you’d have to fix (credit report) or what you’d have to have as a deposit as a down payment and you can go from there.
Prices can will likely go down at some point in the future but remember that whatever you are spending on rent houses will likely never drop in price to the point that you’ll make the money back you lost for renting until you got into the market. You’re not doing yourself any favours with this mentality. I say it because I care.
Thanks for reading and I’m here when you’re ready or if you have questions.