Cutting Through the Noise – Welcome to 2018

When I was a little boy, there were three shows I liked to watch every year at Christmas time: How the Grinch Stole Christmas, Rudolph the Red-Nosed Reindeer and A Charlie Brown Christmas. I don’t know if it was my affinity for the colour green because I was born on St. Patrick’s Day, his crooked smile or the way he transformed from evil to good, but The Grinch was my favourite. (Charlie Brown didn’t have enough excitement and I was afraid of the Abominable Snowman in Rudolph, if you must know.)

As with most kids’ shows, they weren’t just for entertainment – there were lessons to be learned. Some of those lessons are still with me after all these years! And, believe it or not, some of them even apply to today’s residential real estate market in central Toronto. I’m thinking of that point in The Grinch when, after he’s stolen all the Whos’ toys, he covers his ears to block out the Whos’ singing and complains about “all the noise, noise, noise….”. Bet you thought he was just irritated and not teaching a valuable real estate lesson. Not so. (Look carefully next time you watch The Grinch and you’ll see what I mean.)

What’s the lesson? Well, at this time of year it’s common for people to talk about what’s going to happen in the real estate market in 2018. I’m hearing about the stress test and interest rate increases and foreign buyers and on and on and on. Everyone’s entitled to their opinion, but to me this is all just distracting noise. There are really only two things on which to focus: supply and demand.

Supply remains scarce. There’s a fixed number of homes in Toronto and people seem to be staying in them longer than ever. Demand remains strong because people want to live here. Extraneous factors like the stress test won’t temper demand by that much. And when demand exceeds supply, what’s the result? A strong market with rising prices.

Here’s how I think things will play out, at least for the first half of the year:

After a tremendous start in 2017, the market went into a bit of a lull for the last 6-8 months of the year. Buyers became cautious, thinking: “I want to buy a house, but people are saying the market might crash. I’d love to take advantage of that and get a steal and I certainly don’t want to buy right before the market crashes so I’m going to put my plans on hold and see what happens with the market before I buy.” Sellers who didn’t need to sell also became cautious, thinking: “I’d like to sell, but only if I can get a great price. I’m in no rush so I’ll just wait until the market’s really strong and prices are really high and then I’ll list my home.”

So here we are in January at the start of the new year. Prices have come down somewhat since their peak in early 2017, but the market certainly hasn’t crashed. Historically speaking, prices remain extremely high. Buyers are still a little leery of what might happen, but less so than they were six months ago. The buyers who put their plans on hold last year still want to buy new homes. They’re coming back into the market. The buyers who’ve just recently decided to buy new homes are also coming into the market. That’s more buyers than usual. Sellers who put their plans on hold will start to list when the market heats up, which it looks poised to do.

The market already has a strong base. There are more buyers than sellers. I expect it to gain momentum as the weeks go by, like a snowball rolling down a hill, and be in full force for the spring market in April, May and June. Even if the year gets off to a slow start, I believe it’s only a matter of time before things pick up because of supply and demand. If you’re buying, you’re probably better off buying sooner rather than later. And if you’re selling, you might want to wait until the spring market.

Let’s face it – we live in a great city that’s attractive to a great many people. Companies like Amazon and Google are considering investing hundreds of millions of dollars in Toronto. That’s right. Amazon and Google. Hundreds of millions of dollars. Those investments could bring jobs, people and money to Toronto. They could also bring our fair city to the attention of millions of other people who might want to live here. Even if the proposed investments don’t come through, Toronto is receiving a lot of exposure on the world stage. That’ll spark demand, but supply will remain the same so we’re likely to be talking about demand exceeding supply for a long time to come.

If you know anyone who is interested in learning how the market works and would like to receive the kind of help that involves honest answers, straightforward advice, no pressure and being treated like family, please let me know the best way for me to connect with them because I’d like to offer them this kind of help. And as always, don’t be shy if you have any questions or comments about this post! Thanks for reading.

 

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