Moving Past the Real Estate Mirage
It’s been a roller coaster of a year in the GTA real estate market and for some buyers and sellers, making them feel like they’ve literally rode the Leviathan at Canada’s Wonderland, their heads spinning and stomachs queasy as they’ve watched home prices rise and plummet in dramatic fashion, in a matter of short months. And for many of them, it’s difficult to comprehend and accept what has taken place in the market. Home sales are certainly down in the past several months and the market seems to be more sluggish than what we’ve been accustomed to in recent years. But, it's important to look at the facts and go forward with a realistic perspective of what has taken place and where we go from here.
The Toronto Real Estate Board (TREB) reported that August sales were down 34.8% from the same month in 2016. What we have to keep in mind though is that August sales in 2016 were up 23.5% from the year before. And 2015 was no slouch of a year in the GTA because it was actually a record year, until it was eclipsed in 2016 with 113,000 plus homes being sold. Thus, when we compare 2017 numbers, let’s not forget we are comparing them to the hottest market on record, ever, in terms of volume sales on TREB.
Prices- let’s be honest, this is the only thing you and your neighbour truly care about! How much value has my home lost? Yes, prices have come down substantially since they skyrocketed in the winter. However, those prices were extremely short lived, we could call them a ‘momentary lapse of reason’ (for you rock n’ roll enthusiasts out there) or better yet, simply a ‘mirage’. How so you ask? Many of those homes did not close or at least did not close at those prices. Banks appraisals were coming up short forcing home owners to either make up the difference, attempt to re-negotiate, or simply walk away. For the average buyer, making up the difference just wasn’t (or isn’t) in the financial cards, thus attempting a re-negotiation was actually an honourable play considering the banks left them little choice. Many sellers found this acceptable realizing that a re-negotiated price might be the best it gets, rather than taking a chance at re-selling and going after the buyer for the difference. And other buyers simply walked away. The courts will likely be dealing with the aftermath of these imploded transactions for years.
In the end, we need to move on from the ‘make believe' winter prices. For sellers, it can be tough to do, but price expectations have to be in accordance with recent sales, not February sales, those just don’t count anymore. If you are on the market and stubbornly waiting for those prices to come back before accepting an offer, it’s likely to be tough treading. The market has balanced out, but prices are still up over last year. Homes are still selling for a good buck, so let's go forward with the confidence that if you own real estate and bought it before this past winter (or in the current market) you are doing just fine. And if you did buy in the peak, as long as you aren't a short term speculator, you should sleep soundly too.
By Michael DeAngelis