08 Jun Is the momentum of the market downtown finally starting to slow?
Is the momentum of the market downtown finally starting to slow?
Anecdotally, this week I am starting to see slightly more price changes, less aggressive bids on offer night and more anxious realtors. While early, I am optimistic in finding better value for my clients moving into summer.
If you have been looking to buy a house or condo downtown this spring you will know just how competitive it has been. For the last five months prices have been steadily increasing as buyers returned to the market, confident that the worst is over. Home owners have also been cautious about selling in a dip and unsure about what they would buy. This has kept inventory low, creating a competitive market which has contributed to the rising prices.
Looking at May’s sales numbers which were released earlier this week, the upward trend has stayed intact. The biggest jump in prices came from the detached home sector, where the average price increased 5.2% month-over-month. Semi-detached homes rose in value, as did condos ever so slightly. Only townhouses decreased.
These latest figures are important because they illustrate well where I believe the market is heading. I believe detached and semi-detached homes will continue to outperform townhouses and specifically condos moving forward. This opinion may be slightly contrarian right now, as the condo market has appeared unstoppable and it is the most affordable segment. However, the condo market has risen significantly over the past year and is primarily driven by first time buyers. First-time buyers are the most exposed to rising interest rates and although they are willing to take on more risk, the average price of a condo downtown ($602,804) is now out of reach for many. As the 905 has been slower to rebound, it makes sense for some first-time buyers to consider bargain hunting outside of the 416 or continue renting.
The freehold market, specifically the detached home segment, suffered the brunt of the effect from the non-resident sales tax. Pricing of freehold homes became more attractive this spring and many have taken the opportunity to move from a condo to a house. The 5.2% bump in detached homes values in May was the biggest month-over-month gain for the segment all year and may be an indication speculators are coming back to the market. Having said that, I believe move-up buyers are driving much of the gains in freehold housing downtown and I suggest that their budget flexibility accrued from equity in their condo is allowing them to be more aggressive.