It’s been a long, slow summer in the real estate market, and with the calendar now turned to September, we can come out of our solemn slumber, and get back to work.
I’ve been waiting for this day like a child waiting for Christmas, and now that it’s here, I want to discuss my expectations for the next three months, and perhaps be so bold as to make a few predictions as well.
Whether you’re a buyer, seller, home inspector, or painter – you’re about to get very, very busy…
It almost doesn’t seem fair, does it?
Words like “Fall,” and “September” are appearing before your very eyes, and yet it feels like just yesterday that we were marvelling at a day in early June without rain, and figuring that the long-awaited summer was here!
We got royally screwed this year when it comes to the weather, and specifically the changing of the seasons.
It was a miserable winter, and the spring was essentially an extension of winter anyways.
If you go back four months from today – on May 2nd, the high was 12-degrees. The high. Twelve. MAY!
But alas, here we are, in the month of September, and the summer is gone. The calendar tells us we have another 19 days, but nobody really considers September to be summer.
On a personal level, I have as much love as I have hate for the end of summer and the beginning of fall. Fall means NFL football is back, but it marks the end of my golf playing days until next May. It means Saturday nights enjoying a glass of wine on my terrace are all but over, however it means I’ll most likely be working seven-day weeks again until the end of November.
And that’s not a bad thing, FYI. I honestly get bored in the summer when the market is slow, and I’m excited to get back to work this fall!
So having said that, what do I expect to see this fall?
Where is the real estate market headed?
I’m not one for predictions, since people rarely remember, and nobody ever goes back and says “I was wrong,” when they surely go back and say “TOLD YOU SO, I was right,” but there are a handful of points I want to discuss, and while I’m at it, I should probably throw my opinion in as well:
Prices Will Rise
I know it sucks, but it’s just the reality of the Toronto market.
In 2013, the average price of a Toronto home in the months of February through June, respectively, was $510,580, $519,879, $526,335, $542,174, and $531,374, for an average of $526,068.
In 2013, the average price of a Toronto home in the months of September through November, respectively, was $533,797, $539,058, $538,881, for an average of $537,245.
Sure, that’s only a modest 2% increase from spring to fall, but it’s an increase nonetheless, and if I were to take “central Toronto,” or “detached houses,” rather than the overall average for the GTA, I think the increase would be even more pronounced.
The average price of Toronto home WILL rise in the fall of 2014, of that, I have no doubt.
We Will See “Offer Dates” On Condos
Through the spring market, I basically refused to show a condo if there was a “hold back” on offers, ie. a set date to review offers, like we see with houses.
That’s not to say that I didn’t inform my buyer-clients of a property that suited their needs if and when it came on the market, but rather it wasn’t something I suggested we go see right away.
Nine times out of ten, the seller of a condo who insists on a hold-back on offers is somebody who has been reading all the media coverage of the “red hot” Toronto housing market, sees houses selling for over-asking and in bidding wars, and fails to distinguish between “house” and “condo.”
It’s those people, and their unrealistic expectations, that I want nothing to do with. I’d say more than HALF of the listings I saw for condos with a hold-back on offers ended up RAISING their prices after the “offer date” had passed, and again – that’s something I want nothing to do with.
I understand if the listing is a brick-and-beam penthouse the Candy Factory Lofts, overlooking Trinity Bellwoods Park with a gorgeous terrace. But when it’s some cookie-cutter 1-bedroom condo, worth about $350,000, there’s just no reason for it.
That is, perhaps, until the Fall of 2014.
As much as it pains me to say this, I think that we’re going to see a lot more “offer dates” on condos in the downtown core in the Fall of 2014, and much of it will be warranted.
The toughest condo market I ever worked in was in 2009 when every condo in the core had an offer date, and it was insane to see a simple unit at Mozo or The Hudson end up with five offers.
But with the condo market the way it is, and with inventory for quality condos at a low-point, it won’t surprise me to see a lot more listings for condos come with set offer dates.
It’ll be our job, as agents, to weed out the listings that have no business holding back offers, and advise our clients accordingly.
Mortgage Rates Will Remain Low
Back in June, Stephen Poloz suggested that Canada will move towards an “interest neutral” strategy when it comes to the benchmark lending rate.
Just this past week, Poloz suggested that he may or may not follow the lead of the United States’ Federal Reserve if and when they raise interest rates.
Reading between the lines of those two suggestions by Mr. Poloz, I’d say that interest rates aren’t going up any time soon.
The current 5-year, fixed rate mortgage is between 2.89% and 2.99%, depending on the features of the mortgage.
Despite the fact that rates were as low as 2.49% in the past couple years (again depending on the features of the mortgage), today’s rates are still hysterically low compared to years prior, and perhaps, years ahead.
I don’t see the BOC raising rates for at least a year, and Mr. Poloz suggested at one point that it could take unit mid-2016 for us to see any increase.
As a result, that’s one less catalyst needed for a market reversal, and thus it gives more credibility to my prediction that prices will continue to rise, like it, or not…
Pre-Construction Condo Sales Will Cool
It was just a matter of time until people caught on that the Emperor isn’t actually wearing any clothes!
I believe that the situation with Centrium Condos might actually serve as the catalyst we pre-construction-bears have been waiting years for.
It’s sad that it took this long, and it took hundreds of buyers losing millions of dollars to shine a light on what an absolute farce the pre-construction condo industry has become. But then again, given the developer for this project had never built before, had no sales centre, no brochure, and no website, perhaps folks got exactly what they bargained for…
NDP MP Rosario Marchese was spearheading an initiative to bring about change in the condo industry by updating portions of the Condominium Act (1997), but he lost the spring election, and is no longer in office.
I really can’t speculate as to whether the Act is updated, whether the industry changes, or whether the folks involved with Centrium will get their money back, but I will make one bold prediction: pre-construction condo sales will cool.
They simply have to.
Enough prudent people have heard the story about Centrium, and it’s enough to give them at least a moment of hesitation before jumping into the fray and making an already-speculative investment. If that’s the best we can get – just a slight hesitation, then I’ll take it! For the last few years, nobody batted an eyelash at the idea of dumping $70,000 into an unbreakable contract with a developer for a to-be-determined condominium “investment.” Hopefully, some good will come from the Centrium debacle, and it’ll serve as a cautionary tale for would-be buyers.
People You Know Will Move Out Of Toronto
Overall, I’d say Toronto’s net migration is huge. That is, for every person that moves out of the city of Toronto, I’d say there have to be 2-3 moving in.
But we all have a friend, family member, or colleague, who will eventually seek greener pastures, and cheaper real estate, and move out of the city.
Recently, my clients sold their Toronto condo for $368,000, and bought a massive house out in Whitby for slightly more than that amount. They have more bedrooms than they know what to do with.
A long-time client purchased a $1.7M house in Old Oakville that would cost $3.5M in Rosedale.
We all know somebody that’s moved out of the city, and while many do it because they’ve found jobs in other areas of the Golden Horseshoe, I do have a client who moved out of the city and is going to commute every day!
For the most part, if you work in Toronto, you’re going to live here. Most folks don’t welcome a 90-minute commute, each way, every day, forever. But if you have a flexible job (ie. a teacher that asks to be transferred to Kingston, Ontario), you might love the idea of stretching your dollar further when it comes to your primary residence.
The Leafs Will Not Make The Playoffs
Okay, so this has nothing to do with real estate.
But this summer was a classic rearranging of the deck chairs on the Titanic, and the fact that highly-coveted President Tim Leiweke recently announced, 14 months into a 5-year contract, that he was stepping down from his position, clearly shows that Maple Leaf Sport & Entertainment is a disaster of a business.
The Leafs are miserable, but so too is the entire ownership group.
I’m not going to waste my time this winter watching the Leafs, and I laugh at the idea of actually paying money to go to a game in person, which I haven’t done in five years.
John Tory Will Win The Municipal Election
I think this prediction is based on equal parts of hope and fear.
Our city sits on the precipice of disaster, if Rob Ford prevails, and four more years of Toronto city council squabbling and in-fighting follows.
Toronto needs to move forward, or risk being trampled by its own population.
Did you know that New York City has 468 subway stations, and Toronto has 69?
Chew on that, for the next two days…