Cautious Pessimism

September’s real estate results were down from the same month a year ago.  Transactions decreased by 49% from last September as prices slumped in the detached and semi-detached markets. With higher interest rates, (the Bank of Canada increased the prime rate from 2.45% to 5.45% since the beginning of 2022) and the expectation of higher interest rates to come, buyers that can afford properties are taking a cautious approach.  Meanwhile, the higher interest rates make it more difficult to meet the stress test moving some buyers to the sidelines.

It should come as no surprise that transactions are down given the interest rate increases.  I’m often asked about what it means “that the market dropped by 40-50%”.  My answer is that the 40-50% is transaction volume and like any statistic, it’s important to look at it from a broader perspective.  The following chart shows that 2021 YTD Sep had record number of transactions of ~34,000.  2022’s YTD Sep ~23,000 transactions is less than the 5-year average but in line with those of 2018-2020.  So what this means is that the market this year has been slower compared to 2021 but not that far off from previous years.

In terms of where the market is heading, I pay more attention to the Months of Inventory (MOI) and Sales to New Listing Ratio (SNLR).  The MOI is 3.1 which is high compared to previous years.  The last time it was this high was in April 2020 when the pandemic began.  The SNLR of 38% means there are relatively fewer sales compared to new listings which means we are in a Buyer’s market.

Given these metrics, I expect Toronto’s real estate market to remain sluggish until at least the middle of 2023.  This is bad news for home owners that are seeing home values drop.  I like to look at the bright side because amidst a backdrop of war in Europe, inflationary pressures, stock market stumbles, Torontonians have free speech, the right to worship openly, clean air and water, there’s still much to be thankful for.

Shen Shoots the Breeze:

October is that time of year to prepare for the winter season. Here’s my list of what I need to get done before winter arrives:

  1. Get a quote for winter tires before the first snowfall. We usually get quotes from Steelcase TiresWheels Direct and Costco.
  2. Plant spring bulbs. I was advised also to use bloodmeal and hen manure fertilizer and cover the bulbs with patio stones to prevent garden critters from digging them up. Make sure to remove the stones before the spring thaw.
  3. Drain garden hoses and pipes so they don’t freeze.
  4. Clean out eaves troughs from leaves/debris
  5. Put away all garden décor, ie, statues and solar lights
  6. Pack up garden cushions
  7. Have routine maintenance done on the furnace
  8. Prepare for snow removal. I plan to fire up the snow blower before the big one hits.
  9. Pull out winter seasonal wear and back up summer clothes.
  10. I’m not going to do this just yet, but some neighbours are already planning to put up their holiday lights before it gets too cold outside.

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