Realtors warn prices could face a steep decline in the fall if the coronavirus pandemic has a delayed effect on the market
The housing market is hotter than the weather as Toronto home prices hit an all-time high in June.
The average sale price for a Toronto home rose to $930, 869, according to the Toronto Regional Real Estate Board’s (TRREB) June 2020 report.
That figure broke the record set in April 2017 when prices peaked at $920,791. Toronto hit that previous high before Canada introduced the stress test on mortgages to cool down the market and keep financial risk at bay.
Neither the stress test nor the COVID-19 pandemic appear to be wearing down the housing market.
The June high is an 11.9 per cent year-over-year increase. The same month also saw a drop in the unemployment rate to 12.3 per cent, down from May’s record high 13.7 per cent. The Canada Mortgage And Housing Corporation (CMHC) echoed the optimism, announcing that the seasonally adjusted annual rate of housing starts rose to 211,681 in June from 195,453 in May.
But if a late-June CMHC Housing Market Outlook is to be believed, COVID-19’s effect on the real estate market really hasn’t hit yet.
“It could come to a crashing halt,” says WE Realty broker Odeen Eccleston, heeding the CMHC’s warning about the market. Eccleston agrees with Re/Max Hallmark Realty’s Meray Mansour who previously told NOW that the effects from the pandemic will be felt if relief from the government and banks comes to an end.
Eccleston compares the current situation to a recession – when the economic impact cannot be calculated for at least six months after the inciting event.
“That’s when the effects sink in,” explains Eccleston, who along with Mansour, points to the six-month deferrals banks have offered clients affected by COVID-19. Those mortgages are due in September and October. Unless the banks extend the deferrals, there could be to a lot more supply on the market and house prices can crash.
The CMHC outlook estimated that house prices could fall as low as $825,000 in the fall and hit $739,000 in fall 2021. That’s a long way down from the current record high, which is being propped up by low supply.
Listings are down. There were only 14,001 properties for sale in June, down 28.8 per cent from the same time last year. That barely hurt sales.
The number of transactions (8,701) dipped a mere 1.4 per cent from June 2019, while jumping 89 per cent over May 2020 (84 per cent, seasonally adjusted). Selling prices also rose 7.8 per cent (9.8 per cent seasonally adjusted) from May to June 2020.
Semi-detached homes in the 416 saw the biggest price jump from June 2019. The average price was up 22 per cent to $1,287,832, compared to detached homes rose 14 per cent to $1,523,770. Semi-detached are the popular option since most buyers are priced out of the detached market.
Prices for town homes and condos only rose around six per cent.
For Eccleston, the current landscape recalls the pre-stress-test period when a listing would pop up and it would sell before she could show it to potential buyers.
She notices that, for now, COVID-19 has whet home buyer appetites. In the midst of dining and travel restrictions, buyers are spending on home comforts instead of leisure.
Houses with pools have been selling especially quickly during the pandemic (and heat wave), says Eccleston.
“It’s like, ‘I want to own something, where I can regulate when I open and close my pool!’”
But since the CMHC forecast is dangling the possibility of a harsh cool down, Eccleston advises sellers to offload their homes this summer – before the record high price tags become less appealing.