Current Market Conditions and Fall Predictions

It’s been five months now since the government announced the ‘Fair Housing Plan’ and we have certainly seen changes in some markets. The reaction that followed the announcement was psychologically driven. Buyers through uncertainty thinking they were then purchasing close to the top of the market deciding to take a step back and also sellers seeing such price gains in previous months, close to 33%, deciding to cash out resulting in increase inventory.
This couples with a typical spring market sparked the beginning of the transition into slightly more balanced markets. I say markets because Toronto and the GTA is made up of number of localized sub markets.
As the past five months have come and gone some news headlines would give a reader the impression that the market dropped significantly and that it wasn’t doing so good. The market statistics and numbers that have been published are correct but they are too general and require further analysis. These statistics look at Toronto and the GTA as a whole and include all home types to establish a general year over year percent change average. The true accurate numbers are found in each individual area, and the supply and demand levels in those particular areas for each particular home type.
location, location, location comes to mind. And what makes a great location is economic fundamentals. Proximity to transit, commerce, schools, hospitals, entertainment, parks etc. Sought after area of the city of Toronto tend to hold their value. The fundamentals are in place so the demand remains strong. More desirable neighbourhoods tend to have less inventory which in turn drives up the price. With that also though, there is a point at which it become unaffordable for most and the number of qualified buyers is reduced resulting in a more moderate price growth.
Todays market sees most activity between $300,000 and $1,000,000 for all property types. The low rise market in Toronto due to supply and demand in general has pushed prices well above $1,000,000 in more sought after neighbourhoods resulting in more buyers shifting their attention to condos. The condo market has been seeing an increased in demand due to affordability so the condo market will continue to see further price growth going forward. Buyers are also most active at these price points considering properties sold for under one million allow for a downpayment less that 20% making it more affordable to get in to the market.
Currently we are experiencing a much healthier market. Five to six months of inventory is regarded as a balanced market. Inventory levels vary throughout the city, some areas are seeing closer to four months while other area are seeing closer to one or two months . Under five months indicates it’s still a sellers market but areas with closer to five months are becoming much more balanced markets. Three to four months of inventory is a healthy market because its close to balance but also just under allowing for more moderate growth and appreciation, keeping above inflation.
Heading into the fall market a further increase of inventory should be expected. This inventory would be your typical fall market but also properties being re-listed that did not sell during the spring/summer due to buyer uncertainty. The question is will those buyers come back into the market to buy up that inventory in the fall and if so this could lead to prices increase again.
At this point the dust has well settled after the announcement of the “Fair Housing Plan” so buyers & sellers have had time to process and adjust to the market. Since the announcements there has been two slight increases in mortgage interest rates. Increasing rates is a good idea to try and create a bit more stability in the market going forward. In general though the
increases are still relatively low. Bank of Canada Qualifying Rate is 4.84% and Prime Rate is 3.2%. These slight increases may not have too much of an impact or effects on buyers decisions or affordability.