Since the summer of 2012, the media has been rife with speculation about the imminent collapse of the Toronto real estate market fueled by a decline in unit sales in the second half of 2012.
Maclean’s article “Inside the real estate crash of 2013” reverberated across the city and alarmed our residents. Another article characterized the 2012 fall market as “…a dramatic softening in sales and prices that started last spring and…… by December, was virtually dead.”
But, is this factual? We decided to analyze the statistics for the second half of 2012 in our local neighbourhoods (excluding condos) to see if the alarm the media is sounding is truth or sensationalism. Because the first half of every year has the highest sales activity, and 2011 and 2012 were both similarly hot markets during this time, we decided to compare apples with apples and use data comparing the second half of 2012 to the second half of 2011 to paint the true picture.
Once again our research suggests markets are local in nature and that unit sales were not down across the board. In fact, unit sales were actually up in Cedarvale, Forest Hill and Upper Forest Hill in the second half of 2012.
However, the number of houses that sold above the list price was, in some areas, significantly lower in the second half of 2012. Hillcrest Village, though, experienced the most modest decline going from 47% to 41% followed by Chaplin Estates falling from 63% to 44%. This is still a robust number of houses that sold above the list price.
Average days on the market did not fluctuate much between these two time periods, except in Regal Heights which included the sale of three houses that languished on the market at asking prices that did not reflect market value. In fact, houses in Cedarvale, Hillcrest Village and Forest Hill actually sold faster in the second half of 2012.
Contrary to what the media espouses, this data does not reflect a market on the “brink of collapse” in our neighbourhoods. The housing market cooled down, in the second half of 2012, as the federal government intended by implementing tighter rules to mortgage qualification. But many properties are still selling above the list price and within a few weeks of coming on the market. This data suggests a healthy and balanced market and not one in danger of falling off a cliff.
The unfortunate part about the media’s proclamation “the sky is falling” is that these periods of pause in the real estate market: the fall of 2008 during the US financial crisis, the fall of 2010 after expansion of the HST and the fall of 2012 after mortgage rule changes, present buying opportunities for those who don’t have the stomach to purchase a home in a bidding war environment.
Instead, the media scares you to death and influences you once again, to remain on the sidelines. Then, the market picks up, as it’s doing right now, and you have missed an opportunity to potentially purchase a house without competition from other buyers.
So far, statistics up to January 26, 2013 reveal that 28% of houses sold in C02-C04 fetched above the list price and sold on average within 25 days. One reporter’s alarming proclamation that in 2013 “days on the market turns into months-on Prozac” is not borne out by these statistics.
Many agents are reporting a significant increase in activity on the properties they listed this year. We can report that the market right now is more active than it was in the fall of 2012 and is definitely not crashing; instead it is healthy and balanced with many deals happening between sellers that are realistic and willing buyers that are level headed.
The moral of the story is not to drink the Kool-Aid being dished out by the media because it could amount to a lost opportunity for you. Instead, discuss your real estate objectives with your trusted REALTOR who is more in tune with what’s really happening, up to the minute in your specific neighbourhood, to get advice on what’s best for you.
We feel the market will continue this balanced pattern in 2013 because demand for housing in our neighbourhoods is strong.
We would love to have a conversation so please feel free to share your opinion at the end of the blog.