Is the real estate market going to crash? From misleading to fear mongering the headlines would have you believe so!
I can’t tell you what is going to happen but I can tell you what is happening and what I think that means for the future and the real problem for the Toronto real estate market.
TRREB released the May Stats:
- Sales are down 53.7% but up 55.2% from April
- New listings are also down 53.1% which is why prices are stable
- Average price is up 3%
- The home price index (HPI) is up 9.4%
Average price is so much lower than the HPI because the sales of higher value homes ($2M+) has slowed. Recent (misleading) articles noted that the median price of condos is down 10% due to the same phenomena.
And in the economy:
- Immigration is forecast to be 65,710 in 2020 down from 115,000+
- Unemployment is up 13.7%
- Inflation is actually deflation at -0.2% April 2020
- There are 600,000+ mortgage deferrals and the CMHC is projecting that 20% of those will default in the next year
I think that “after” we get through the pandemic immigration will return and it could be stronger as Canada is probably an even more desirable place. Businesses and employment will recover and change. Governments will encourage people to spend and banks will relax lending standards (even as they tighten them now). Real Inflation will Increase which means savings and debt will decrease and the value of real assets like real estate will increase.
But more importantly what should you do about it? If you are in the market for a home, don’t wait, buy a home that you can afford. Reach out for a FREE no obligation 1-on-1 consultation if you have questions about buying and/or selling in this market. And yes for sellers there are still bidding wars!
Where should you invest in a time when real inflation is likely to skyrocket?
- Real returns on bonds are already low and may be negative
- The stock market is a volatile house of cards
- Private equity might make sense in the right industries
- Some will invest in gold and commodities as an inflation hedge
- I believe the real opportunity is in real estate as the value of debt plunges and the value of real assets skyrockets
The real problem is that this will continue to drive a wedge between the wealthy and the poor. The CMHC is changing the rules to keep first time buyers off of the property ladder: while well intentioned I think it is ill advised. When credit is freed up the wealthy will begin to borrow and invest at a time when real wages and savings stagnate or devalue. My advice? Buy and invest now in properties that make sense.
There are a number of opportunities ready and available, just reply and to this email or book a virtual coffee and we’ll start the discussion.