11.24.2022 | Market Reports

Why the Toronto Housing Market is Not as Dramatic as it Seems

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We’ve all seen the articles. There’s a housing crisis happening right now, home prices are tanking, and now is the absolute worst time in the history of the world to buy real estate. 

End of story? If that were the actual case, you’d see a lot more real estate agents dusting off their resumes and getting out of the business. But guess what? There’s a bit more to it than the crazy headlines we’re seeing every day. 

In this blog, we’re giving you the full story–backed by data. Let’s take a look at what’s really going on in the Toronto housing market right now. 

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Is Now a Good Time to Sell Your Home? 

Many experts, myself included, think that now is actually a great time to sell your home. Hear me out:

We saw home prices skyrocket during the pandemic, and then unbelievably they went even higher at the start of 2022. Sellers were riding high on this wave, which like most things was never built to last.

In the spring of 2022, the Bank of Canada began hiking interest rates and home prices fell off that proverbial cliff in March and April. But here’s the thing that no one is mentioning. The dip in prices is only from the peak of the market in February. It’s a false economy because the prices were so high, to begin with. 

There was a slight price dip in September of this year, which was the first time we saw a year-over-year price decrease in a while–and it was only about 3%. In October, there was another slight dip of 1% year-over-year, but there were about 49% fewer home sales! 

All in all, these numbers take us back to the prices and market activity we saw in the summer of 2021, which was still a very active market if you remember! 

The reality is that the price decreases are shrinking and inventory is remaining low. This is not the sign of a crash, but rather stabilization and flattening, which is what we wanted! It’s a good thing! 

Looking for more Toronto real estate market answers? Read these blogs next:

A Housing Crash is Not Coming 

The purpose of raising the interest rates was to stabilize the market and curb inflation, and guess what? It’s working! The market is flattening, inflation reports are looking more positive, and the intended effect of the rate increases is what’s currently happening. 

But I have two main reasons why a housing market crash is not going to happen. Here they are: 

  1. Inventory remains low. With less inventory to sell, demand continues to outweigh supply. 
  2. The condo market is outperforming the freehold market. With rental prices up 20% since the start of the year, many people who own investment properties are going to hold onto them for now.

Without an influx of listings flooding the market, there won’t be a subsequent crash.

Real estate is a cyclical industry and as rental prices continue to rise, we will see more potential buyers priced out of the market, and becoming renters. However, there will reach a point where the prices peak, and it will make more sense for those renters to become buyers. More on that in a sec.

It’s happened before and it will happen again! Read our blog about why a housing market crash is not coming here.

So What Do Should You Do? 

Personally, I believe that sellers planning to sell their homes in the coming year should move up their timelines and try to sell as soon as possible. We have a few interest rate increases likely coming down the pipeline, and it would make more sense to list and sell while rates are lower. 

When the rates go up again, it will mean fewer prospective buyers in the market. 

Is Buying a Home Right Now in Your Best Interest?

Even with interest rates on an upward trend, it’s still a good time to buy a home. And, owning a home actually helps you hedge against inflation. Unlike stocks and bonds, which lose value when inflation goes up, real estate maintains its value and even appreciates pretty steadily over time, regardless of market conditions. 

While it might be harder for first-time buyers to get into the market, move-up buyers are the ones who are really getting the best of both worlds. If you’re trading up to a bigger home, you are going to save money on your larger, more expensive home every time. 

For example, if prices are 18% down month-over-month, and you are selling your $600,000 condo to buy a $1 million home, you are going to see greater savings on the more expensive property. Anything you lose on the selling side, you will more than make up for on the buying side. 

Lower prices will also translate into more savings in other aspects of the purchase too. For example:

  • The purchase price is smaller. 
  • Your down payment is smaller. 
  • You pay less land transfer tax. 
  • If you have mortgage insurance, that fee will be lower too.

All these savings, even with rising interest rates? Yes!

Is there a Catch?

As long as you are comfortable with job security and plan to hold your property for at least 3-5 years, it actually makes a lot more sense to purchase now. 

Why 3-5 years? Read our blog post here to crunch the numbers on renting vs. buying in Toronto.

As rent prices continue to go up, buyers won’t be able to buy. They’ll get pushed into the rental market, which will cause the rental market to continue to go up. The reality is that buying a home is also a great way to protect yourself from rent increases. 

If you can, why not be your own landlord? The truth is that real estate is almost recession-proof. It’s a super safe investment, no matter what type of market we are in. 

Is the Toronto real estate market stressing you out? Never fear, I’m here! I’m always happy to help you out and talk through your options. If you’re thinking about buying or selling soon or you just have some questions, you can call or text me at 647-973-8392.

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