Vol. 5.20 | Are things still uncertain?

It’s been just over six weeks since the state of emergency was declared, and we now have a full month of housing data, and a few more weeks of watching the market to glean insight from.

Last week, Doug Ford unveiled a framework to reopen Ontario in three phases and although anecdotal, we’ve also noticed the city settling into its new norms. The tension felt a month ago has been replaced with cautious optimism and a clearer idea of how we can move forward. Many initiatives to support struggling local business have also popped up, including Take-out Wednesday (see our Instagram post below).

Over the last few days, we’ve noticed the city slowly come back to life. Sure, the exceptionally good weather may have played a role, but in general there have been more cars on the roads, and the city sounds more alive.

The end to self-isolation is in sight, so this may be your last opportunity to catch up on April’s most trending Netflix shows, “Too hot to handle” and “Love is blind”. We’ve likely watched at least one episode, so let’s not judge each other too harshly. Let’s just agree not to call each other “naughty little possums”.

The pandemic wreaked havoc in financial markets, but has yet to make a meaningful dent in Canada’s housing values. Financial markets were down as much as 30%, but have since made a remarkable v-shaped recovery, now down only 12% from all-time highs. It is too early to tell with complete certainty whether this rally will continue on the back of government stimulus, or is simply a dead cat bounce, but indicates that consumers and businesses are maintaining a cautious optimism.

Notably, Warren Buffet whose famous quote “Be fearful when everyone is greedy, and be greedy only when everyone is fearful”, revealed at his annual shareholder meeting over the weekend that he is yet to deploy his large sum of cash, as investment opportunities in large securities were still unattractive at March lows. More turbulence in the stock market may be insight as a result.

Despite the unprecedented nature of this pandemic, there is one thing we are certain of: The best opportunity to get into the market will be sometime between now and the next two years. Our long-term Toronto housing outlook is extremely bullish, and we’ve put together some incredible data which we will be presenting tomorrow during our online seminar.

 

MARKET UPDATE.

Average prices:  Average sales price across all property types, are down 2.5% year over year (YoY), and 10.7% month over month(MoM). However, this statistic is a bit misleading, as the high-end market represented a smaller amount of total sales, thereby skewing the numbers downward.

HPI: 
This calculation uses quantitative and qualitative characteristics of homes sold, like the number of bedrooms, and if the basement is finished or not. We really like using this statistic  because it provides a better measure of pricing for a given property type. If fewer multi-million dollar homes are sold, this dramatically decreases the average selling price. But that doesn’t necessarily mean that your home dropped in value. According to the benchmark, prices have increased by 10.4% year over year in Toronto among all property types. This tells a completely different story than the 2.5% drop in average sales price. Benchmark prices are up from $955,200 in March 2020, to $964,600 in April 2020.

Sales: The biggest headline in Toronto Real Estate is that total sales transactions are down 67.9% compared to April 2019, and down 62.6% from the previous month. This should come as no surprise given buyers are waiting on the sidelines due to market/financial uncertainty, and a desire to self-isolate.

Listings: New listings are down 61.3% (YoY), which is relatively inline with the decrease in sales. Months of inventory remains at lows of 1.6 months, meaning if no new homes are listed for sale in Toronto, it will take 1.6 months to go through the existing inventory.

Active Listings: Interestingly, active listings are down 35.3% (YoY), but up on a month to month basis by 2.8%. This is quite an anomaly, and likely a result of a severe increase in the number of listings in the first half of March 2020.

Our thoughts: April was soft across the board, and prices were likely impacted to an extent, by the lack of multiple offers. The decrease is not as significant as the average sales price indicates, due to almost non-existent luxury home sales. Moving forward, April will likely have represented the low in terms of new sales and new listings. Future of home prices is still unclear, but for now the market has been quite resilient.