Over the last couple weeks a few of you have reached out asking about the market and what is happening on the ground, where its headed and how Covid-19 may impact it overall, so I thought it would be helpful to send along this email to give you an idea of what we are seeing week to week and how this might unfold going forward. Of course it’s very hard to predict what it will look like a couple months from now because of so many unknowns, will the stock market rebound? Will small business survive? How long with the lockdowns go for?
To try to do this Im looking at the daily and weekly activity of the market as well as taking into consideration how the Government will help, the mood of the market on the ground from how first time homebuyers, people upsizing and downsizing & investors are reacting as well as watching the overall supply vs demand of the market to help explain what is happening now and where it might be headed.
By watching the market trends weekly and as per data provided by Realosophy President John Pasalis (follow him on twitter for weekly updates here @JohnPasalis) we have seen that listings dropped this week by as much as 25% from last week, what we are seeing is Sellers that don’t need to sell are on the sidelines and so are Buyers that don’t need to buy. The most active segment of the market I have seen is buyers who have sold last month and now need to buy or sellers who need to sell now because they bought.
These two segments will eventually dry up once they buy or sell but this is whats keeping the current market still competitive, especially in Toronto core (Etobicoke to East York from Lakefront to Sheppard). We still see a few bidding wars on homes that are staged right, marketed right with the right pricing strategy, although that is slowing. Where we had 5-10 offers on similar homes last month we are seeing 2-3 now and some are starting to get no offers on offer night.
Basically we are already seeing signs of a slowdown this week, listing showings are way down on our listings, we no longer do Open Houses instead urging prospective buyers to look at our 3D tours before committing to a private showing, and although there is a small segment of buyers that are trying to stay active in the hopes of finding a “deal” most have stopped going out to look at homes.
The final segment thats somewhat active is the investor on the listing side. We do not have actual numbers as this stat is not tracked but I would guess from what Im seeing on the ground and speaking with other agents it’s a small segment trying to sell and get ahead of any slowdown by selling now. Most investors seem to be holding for now, especially if they have renters covering costs. Now, if this goes for months more and mom and pop investor is not getting their rents and can’t afford to postpone more than one or two months of rents from tenants that will most likely cause an influx of listing, especially in the condo sector as thats were most investors are, (see slide below from Realosophy.com regarding the percentage of Investors), so if there is a red flag for Toronto Real Estate thats where I think it could happen.
More data & charts on Central Toronto Condos can be found here.
Moving forward activity will continue to slow as we are on lockdown and my guess as well as many economists such as CIBS’s Benjamin Tal here is we will reach a freezing point. Sellers will not want to list as they do not want people in their homes and most buyers do not want to buy for the same reasons. If this happens the market would be at a stand still. It may affect values short term as the properties left listed (probably the people who bought and need to sell) will get lowball offers and sellers may feel forced to accept a lowball but for the most part we should not see a big decline if things return to normal in a couple months. The overall demand will still be there once things get back to normal and if anything we believe that once this is over there will be a flurry of activity given Canada and Toronto specifically seem to be in better position than what is happening in the States and Europe.
Finally there will be that segment that has been laid off, small business owners that will struggle and may change their plans of buying or possibly have to sell their home because of affordability issues but the government is doing everything possible to protect that sector by deferring taxes, allowing for business owners to borrow to pay rents by having them apply to Covid-19 Economic Response Plan and finally to help them add to that lenders who will allow those struggling the worst to defer mortgage payments up to 6 months. Some will still fall through the crack for sure but hopefully this helps most.
Ultimately if we rebound and solve this pandemic in the next 2 -3 months I expect to see us back to business in late summer/ early fall. I could of course be wrong and if this drags on to the end of the year a larger global crisis could happen but I am optimistic as we are seeing small signs that we will get ahead of this in the coming weeks and months.
Hope this helps explain where we are and how it might unfold.
Here are a couple interesting articles to read regarding this subject matter:
Toronto Home Prices in 2008 Financial Crisis vs. Corona Crisis (So Far)
https://www.movesmartly.com/articles/toronto-home-prices-in-2008-financial-crisis-vs.-corona-crisis-so-far
Mortgage Strategies for the Coronavirus Crisis
https://www.movesmartly.com/articles/mortgage-strategies-for-the-coronavirus-crisis
What You Need to Know About Coronavirus Deferred Mortgage Payment Program
https://www.movesmartly.com/articles/what-you-need-to-know-about-coronavirus-deferred-mortgage-payment-programs
