| Buying

Have they? This is an easy question to answer: Yes! Toronto houses have become more affordable despite the norm for real estate: prices always rise. We’ve seen prices drop close to 20% in some areas, making now a great time to buy. Although you might feel antsy because of rising interest rates, this makes buying even more urgent. Let’s discuss why.

But Interest Rates are Rising!

Exactly. Interest rates are expected to increase once more before the year’s end. That’s why there is a sense of urgency to buy before this happens. Right now, we’re in a rare moment of opportunity for buyers to get in while the going’s good. You can buy while prices are seeing unusual drops, with fair amounts of inventory to keep you in a better position to negotiate, and while interest rates are still reasonable. For example, we saw sales drop 48.7% in September, and active listings rise by 13.8% year-over-year. Because we’ve seen such a deficit in inventory, this is good news for buyers. And because of the increase in interest rates, there are fewer buyers, hence the drop in sales, and hence why, if you buy now, you have the upper hand in a market where sellers are no longer in the driver’s seat. 

Looking for more Toronto real estate market insights with these blogs here:

Good Old SNLR

The SNLR is the sales-to-new-listings ratio. It’s a significant number because it tells us how much inventory is available. A healthy SNLR sits between 40% and 60%. In September, it was lovely at 45%, and lower than August’s 53%. That number sounded good in August, considering what we were seeing earlier in the year when we hit dangerous levels teetering around 70% — a clear sellers’ market. The higher the ratio, the better for sellers, and the lower the ratio, the better for buyers. So, buyers can feel a lot safer in this market because it is more balanced. There’s been a steady drop in SNLR, and you want to get in on the market while this ratio remains healthy. 

The Price Also Rises

Just like the sun, real estate prices also rise. There’s just no getting around it. To help explain this, let’s first look at why they dropped. People went into panic mode as interest rates began to rise. As a result, fewer buyers reduced demand, which in turn reduced prices. However, when it comes to real estate, decreases are temporary. We’ve already seen increases begin in September, with a 2.9% rise in overall prices from August. But remember, we want to consider not just month-over-month numbers, but also year-over-year. For overall prices, there was still a drop of 2.6% from September 2021. Here’s a breakdown of housing prices for September 2022 to give you the full picture:

  • Detached houses: Down 3.8% month-over-month to $1.59 million and 10.9% year-over-year. 
  • Semi-detached houses: Up 7.4% to $1.21 million month-over-month and down 7.2% year-over-year. 
  • Attached houses: Up 8.4% to $1.19 million month-over-month, and 3.9% year-over-year.
  • Townhouse-style condos: Up 1.6% month-over-month to $831,798 and down 0.6% year-over-year.
  • Apartment-style condos: Up 4.4% to $769,058 month-over-month and up 3.3% year-over-year.

Keep up with the Toronto real estate market by reading our latest market update blogs here.

Although prices are already on the rise in some categories, you still have a chance to buy at reasonable prices while they’re down and before interest rates go up again. Year-over-year is important here as it tells you where you’re seeing meaningful decreases. Prices will rise; if you buy now, you’ll see equity build in your home. If you’re in no rush to sell YOUR NEW PROPERTY any time soon, purchasing now helps you reach that sweet spot of equity sooner. If you wait, well then you missed out on the lower price opportunity. 

Sweet Spot for Investors

Speaking of sweet spots, investors can find their perfect investment property now as well. With prices still lower than they’ve been in a while, interest rates about to go up, and rent soaring, you can buy with less competition and less worry of a crazy bidding war. You’ll see your property increase in value because you got in at the perfect time, and also have tenants to cover your costs so everything coming your way is sweet, sweet equity.

History Tells the Story

Looking back 10 years, we’ve seen a 93.8% increase in the average sale price for Toronto homes. For example, if you bought your detached house in 2012, your average gain is $803,763. Semi-detached? $605,752. Townhouse-style condos? $454,376. Apartment condos? $210,652. Your home does and will increase in value. 

As a buyer, you can choose to keep sitting on the fence, but it will cost you, even if it’s just for a few months. Despite current interest rates, prices are already starting to rise, so you can still take advantage of needing a lower down payment and a mortgage you can afford to carry without being house poor. But it would help if you were sure, so get your mortgage pre-approved now. You’ll lock in at a lower interest rate and, in most cases, have three to six months to shop around. Considering prices will likely continue to rise, it’s a safer bet to buy now if approved than to wait for the market to “bottom out.” We can’t tell you when and how much that bottom will be, so acting now makes sense. Also, not to bring up the “C” word (COVID), but we’re finally looking at what should be a normal seasonal trend, which means seeing things pick up inventory-wise.  

We’ve been tracking the Toronto real estate market for a while now. Check out this blog looking at the past 10 years of Toronto real estate right here.

Rounding It All Up

When we consider year-over-year declines, we’ve only seen this level of decrease twice in the past three decades: The 21% decline in 1989 and then the 31% drop in 1990.  We also saw a bit of a “deer in the headlights” kind of freeze in 2017, which didn’t last long enough to be too scary. Right now, it feels more like the 2017 scenario than the late 1980s and early 1990s. It took years to recover from that decline, and what we’re seeing now is more of a softening and balancing than a crash. That makes it a better time to buy, whether you’re looking for a Toronto home at a reasonable price before interest rates rise or investment with an affordable price while you can gain from rent on the uptick. 

When you want in on the Toronto real estate market, The Christine Cowern Team is ready to help. Give us a call at 416.291.7372 or email us at hello@christinecowern.com. We’d love to work with you!