14 Mar Market Notes: The effect of COVID-19 on Toronto Real Estate
I have been closely monitoring the sale prices of freehold homes downtown, along with the amount of interest they are receiving on offer night. Particularly, how each successive drop in the stock market this week affected the sale prices as the week went on. While interest waned later in the week, on the whole buyers were still very aggressive and likely overaggressive in many instances considering the unknowns moving forward.
Why?
It’s well known that the Toronto real estate market started 2020 off red hot. The popular theory to why is that people who are ready to purchase now are fearful of not being able to afford a home in the near future. Otherwise known as the fear of missing out. Prior to recent events, the real Toronto estate market was set to rise dramatically. This is a spillover effect from appreciation picking up in the Fall of last year, which is also correlated with the rapid growth of the stock market during the same period. With a generally optimistic view of the economy, low-interest rates and no inventory to buy, and you have a recipe for a red-hot market.
Heading into last week and the beginning of this week, buyer and investor optimism didn’t fade. It may have also been hard for some to halt their own momentum. Buyers who spent last week (and previous weeks) viewing and researching properties that were accepting offers this week, stuck to their plan. After all, real estate is a long term investment that typically isn’t as susceptible to stock market volatility or a black swan event.
Looking at it now, maybe it shouldn’t be so surprising that the ‘serious money’ stayed in the market this week. Freehold properties, especially family ready homes, have been regularly receiving 10+ offers. There just haven’t been many options and a purchaser may feel the oil rout and fallout from COVID-19 may stabilize by the time they close and need to pay for the property. A proposition that seems riskier as each day’s news cycle passes.
Unfortunately, the outlook isn’t about to get any clearer. COVID-19 is now top of mind and viewing stranger’s homes isn’t exactly prudent social distancing. Also, next week is March Break, which is generally slower for new listings as the kids are home from school. This year March Break will be extended for two weeks and many people are now working from home. Listing your home for sale could be very inconvenient.
Expect a delay to the start of the spring market. Much of the freehold Inventory will now be made up of homes that have yet to sell, vacant properties in need of repair, estate sales or possibly homes/condos previously used as AirBnbs (AirBnbs rentals are down and the new rules will soon be enforced). For the few brave enough to chart these unknown waters, inventory will continue to be tight for the next couple of weeks, but opportunities may still exist for buyers and sellers. I will continue to update you as the market unfolds.
Recommendation for Buyers: Be patient. Be flexible. Look for opportunities, but don’t expect prices to suddenly drop. Confirm your income is secure. If you are looking for a variable rate mortgage, lock in your rate now as banks are starting to tighten their variable rate discount.
Recommendation for Sellers: This is currently a seller’s market and interest rates are falling, stay the course and tweak timing and strategy as needed. Look for a quick closing if possible. If the buyer or yourself prefers a long closing, request a larger deposit.
Click here to see all sold properties downtown this week
Please contact me with any questions or concerns. Take care.
-Nick
