Last week I was working on a blog post on the top 5 reasons Toronto's real estate market isn't going to crash in 2016 when I got a call from the CBC asking for an interview on the exact same topic. Rather than repeat an already great article on this subject, I thought I would follow up with one additional thought on Toronto's real estate market leading in to 2016.
Most buyers’ biggest fear is that they're going to buy a home at the peak of the market only to find their home worth 20-30% less a month later.
While rapid price declines are common in the stock market, they're far less common in the real estate market. Real estate markets have a significant amount of momentum behind them which makes sudden price changes very rare.
Where stock markets can change direction as quickly as a race car travelling at very high speeds, the real estate market changes direction as quickly as a cargo ship trying to do a u-turn.
Well before prices fall we typically begin to see a decline in the demand for homes. As sales begin to decline the inventory of homes available for sale gradually begins to rise. This is followed by a rise in the number of days it takes the average home to sell and finally if inventory rises enough house prices eventually begin to fall.
Toronto's real estate market does not only show no signs of a slow-down in momentum, its momentum actually picked up in 2015. Sales rose 9% while new listings only increased by 3% making the market even more competitive in 2015 than it was the previous year.
This is not to say that Toronto’s real estate market is not going to slow down in 2016. Any number of factors could cause our market to cool this year – with the ripple effects of a potential slow down in China’s economy appearing to be among the biggest. But even if the market does begin to lose steam in 2016 – don’t expect prices to fall this year. It will take some time for Toronto’s real estate market to do a complete u-turn.
John Pasalis is the President and Broker of Realosophy Realty Inc. Brokerage in Toronto. A leader in real estate analytics and pro-consumer advice, Realosophy helps clients buy or sell a home the right way. Email John