December’s 3,117 sales ended 2022 with 75,140 homes sold at an average price of $1,189,850, compared to 2021’s average price of $1,095,333. While the average cost is up from a year ago, it does not tell the whole story. Prices have been adjusting downward since they rose by 25%-28% in last year’s February/March timeframe.
Two major factors come into play in the above statistics. One: as we entered 2022, a buying frenzy occurred. Buyers were convinced prices would continue to skyrocket and decided to get into the market regardless of price, so prices jumped over 25%, an increase that was not sustainable. Two: the commitment of the government to squash inflation by raising interest rates has not only eliminated some buyers from being able to qualify for financing. Still, it has also created a fear of the unknown, and some buyers have decided to sit back and see what happens, impacting demand and price growth.
Here is the reality of the market. Toronto’s economy continues to boom. However, we continue to have a housing shortage (our listing inventory is only at 8,692,) and rents have increased by 12%-15% as renters get into bidding wars to find housing accommodation. In addition, with an estimated 1.2 million new LEGAL immigrants (plus others seeking asylum) poised to come to Canada in the next three years, it doesn’t take much effort to see what will happen to home prices in the GTA.
Another major factor is psychology and interest rates. Over the last 15 years, we have had ultra-low interest rates. We have forgotten, or new buyers are unaware, that these low rates have been extraordinary. In the 1970s, mortgage rates fluctuated between 8%-12%, and people bought! In the 1980s, mortgage rates were between 14% - 23% (yes, people financed at 23%), and people bought! Between 1990 - 2008 interest rates were between 14% - 8%, and people bought! It takes time for buyers to adjust to a new reality. Buyers will change to the latest mortgage rates as they have adapted to the increases in house prices.
Significant opportunities exist in the real estate market. Whether upgrading your existing home, buying an investment property or even buying a preconstruction condo, now is an excellent time as others wait to see what happens. Give me a call, and let’s chat about the opportunities. If you know anyone with questions about the market, please call me, and I will be happy to reach out and help them.
Best wishes for a great 2023!
Your Friend in Real Estate
Steven Maislin, ABR, SRS, SRES, IRES, RENE, Broker
ABR: Accredited Buyer Representative
SRS: Seller Representative Specialist
SRES: Seniors Real Estate Specialist
IRES: International Real Estate Society
RENE: Real Estate Negotiation Expert