To our dear clients, friends, and family,
We can’t believe it’s already August—where did this year go? We’re excited to announce that our market is showing signs of mild improvement, even during this traditionally quiet time of year. This month, we have some good news regarding the impacts of our recent rate drops, along with insights into how these changes will affect prices across all price cohorts.
We’re fortunate that every year we have family visit from South Africa. We always insist they come in July and August because those are our “quiet” months, however, this year July was busier than expected. This has a lot to do with our back-to-back rate drops, and the anticipation of rates coming down another .5% before the end of the year.
Interest rate shifts take years to fully impact a market, but some immediate effects are already being felt. There is an immediate psychological impact on buyers, especially those who are on the cusp of qualifying for a mortgage by just a few hundred dollars each month.
MIt’s these “entry-level” buyers who are going to jump-start our market because they are the ones most impacted when the market begins to appreciate again. If you own your home, you’re already hedged into the market, and rising prices won’t significantly affect your next move since your home is appreciating too. However, for first-time buyers, any price gains could mean the difference between qualifying for their first home or not. We believe many of these sidelined buyers will take the plunge in the coming months to avoid potentially being priced out of the market in spring 2025.
Rentals are losing their luster as an investment. Rent has slowly dropped over the past two years from its peak in 2022, and at the same time, the backlog of tenant/landlord disputes at the LTB board has not resolved itself. In fact, more and more tenants are catching on to the possibility of asking their landlords for large lump sums of cash in situations where the landlord needs the tenant to vacate the home. Currently, to own a cashflow-positive condo, landlords need to keep around 35% equity in the property to breakeven after mortgage payments, maintenance, taxes, insurance, and utilities. That’s a lot more than the traditional 20% downpayment that would carry an investment property five or so years ago.
Pair this with our updated capital gains inclusion tax, and we think many investors will sell their investment properties and reinvest in a new primary residence. All summer, we’ve seen strong demand for luxury homes in the suburbs. It’s not unusual for desirable homes above $2m to get between 3-9 offers. And this is a trend we see continuing as investors are able to resell investment properties and unlock their equity.
Market Stats:
All Home Types:
Sales: 5,391 (up 3.3% year-over-year)
New Listings: 16,296 (up 18.5% year-over-year)
Relists: 31.9% (up from 23.7% year-over-year). Relists represent the number of properties taken off the market and re-listed as “New Listings.” We’ve added this metric because it’s the highest it’s been all year.
Active Listings: 23,877 (up 55.4% year-over-year)
Months of Inventory: 4.43 months
Detached:
Sales: 2,446 (up 2.8% year-over-year)
Average Sale Price: $1,425,927 ($1,330 less than July 2023)
New Listings: 6,997 (up 16% year-over-year)
Active Listings: 10,083 (up 55.7% year-over-year)
Months of Inventory: 2.86
Condos:
Sales: 1,482 (down 1.15% year-over-year)
Average Sale Price: $718,698 (down 0.23% year-over-year)
New Listings: 5,311 (up 22.5% year-over-year)
Active Listings: 8,879 (up 63.9% year-over-year)
Months of Inventory: 5.99
Earlier in this newsletter, we mentioned that the interest rate impacts are already being felt. That’s because our market is bucking the usual trend of sales slowing down between June and July. This past month, we saw a drop in the number of sales by 15% month-over-month: That is low! Last year, we saw a drop of 41.5% for the same period. In 2022, the drop was 31.9%. In 2021, it was 18.3%.
With high levels of inventory, many buyers are sitting on the sidelines hoping for further price drops. However, it’s important to look to last October, when we saw record inventory build up. We hit 19,533, as we were entering a quiet time in the market, and that had many of us worried about what would happen to sale prices. However, by December active listings dropped down to 10,371.
We don’t believe it’s possible to time the absolute bottom or absolute top of any market, and most buyers share our sentiment. I think that’s why we’re saw more buyers entering the market in July than seasonally expected. If rates continue to trend down, and as inventory levels drop near the end of the year, buyers will be pressed to jump into the market. And that jump will unlock equity for condo owners to move up the property ladder, influencing prices in higher price cohorts as well.
This has been a really interesting year for real estate. We personally think September and October will bring a flurry of activity as more buyers see the silver-lining in this market.
Warmest regards,
Christo and Janette
