Key points:
- Sales volume in Toronto is down, but interest is still high. Many buyers and sellers are trying to balance interest rates with current housing prices.
- Once interest rate hikes slow down and a “new normal” is established, consumer confidence should return to the market.
Here’s what’s happening in the Toronto real estate market
In this video, I chatted with Mark Savel, realtor at TorontoLivings, about the recently released Toronto Real Estate Board numbers. We discussed sales volume, interest rates, and what potential buyers and sellers should consider.
Mark Savel’s contact information:
Website: TorontoLivings
Phone number: (647) 291-6328
Don’t feel like watching? Find the full transcript below!
Chris: [00:00:00] The Toronto Real Estate Board recently released their December 2022 numbers, and in there, there is a massive headline. Sales volume is down 48% year over year from December 20 2021 to December 2022. To really understand exactly what this means for the Toronto real estate market through the month of January and throughout 2023, I want to have a conversation with my good friend and trusted realtor, Mark Savel. Mark Savel runs the website TorontoLivings dot com and is a great resource for all things Toronto real estate. Join me as we have an in depth discussion.
Toronto’s major drop in sales volume
Chris: [00:00:41] Mark, recent TREB numbers came out reporting December 2022 had 48% less sales than December 2021. That’s a huge drop. That’s attention grabbing. I’m wondering, you as a realtor, I mean, one thing is me as a mortgage broker reading the headline. The other thing is you as a realtor working day in, day out. So are you really seeing that drop in volume?
Mark: [00:01:05] Yeah, I think that’s absolutely accurate. You know, just take a drive through any neighbourhood and there’s far less for sale signs than you would have seen about a year ago. So just from literally the streets, you can see that there is just less activity out there. But that’s not really surprising to me. That’s more yeah, that kind of makes sense. And I think the driving factor behind it all is the interest rates. So with the sentiment of buyers being like, let’s wait and see where kind of the rates fall. Sellers know they’re not going to be getting these crazy numbers they were getting in the beginning of the year. And what I’ve coached a lot of my clients do is if they don’t sell, kind of take a backseat, wait, let’s see where things happen and maybe tackle it again in 2023.
Chris: [00:01:47] Right. Yeah. And it really is a question of interest rates. I think the way interest rates go, the way the real estate market is going to go. I know for myself personally, I’m talking to people fairly often who are interested in buying. There is interest there. I’m just curious on your end, if you’re seeing a lot of buyers, if you’re seeing a lot of sellers, is there kind of a growing pool of buyers and sellers that are just waiting in the wings? Are you seeing that?
Rental prices are impacting the market
Mark: [00:02:15] Yeah, for sure. And that’s the problem with these wide painted brush headlines is, is it’s just one side of the equation. And so any buyer who’s not had luck in the last year and a half, two years with how insane the market has been, they’re starting to see these opportunities. They’re starting to see people negotiating five, eight, even 10% below the list price. So as word gets out and as these deals start happening, oh, I grab this place for 50,000 under list, whatever the case is. Other people pick up on that and they start really looking at saying, you know, should we be kind of considering a bit further? Yes, rates are higher, but if we can get a really good deal on a place, is it worth it? And the secret sauce to that equation is really rentals. The rental rates have come up insanely high. It’s a little bit slower the last December, January, where we currently are, but especially from June to November, it was gangbuster. Rates really shot up. So if you’re looking at a condo, for example, you’re kind of on the fence if you want to invest in real estate. The higher rates do make it a little bit higher, rental rates do make it a little bit more attractive and help offset the higher interest rates.
Chris: [00:03:23] Right? That’s interesting. So there’s still demand, there’s still pressure on housing then. I mean, if we’re talking condo market for a second, there’s still pressure on the condo market because now with the higher rents, the math kind of it’s interesting because during COVID, all the renters disappeared. Nobody wanted rental properties. And it was, you know, landlords were cutting rent to keep people around. And now are people bidding on on rental units?
Mark: [00:03:50] Yeah. So last year very common. Currently where we are today, it’s not as insanely busy as it was, but bidding wars was very common, renting places sight unseen. I’ve had people offer representing the landlord, I’ve had tenants offer us six months, even a year up front cash, saying, you know, you have no monetary things to worry about. So there was some crazy things happening in the rental market, definitely. And I think that’s what’s going to be driving some people to kind of reconsider. Okay, yeah, the rates are really high, but if there’s some deals to be had and we can get good rent and the numbers make sense, that’s the conversation I’m having with a lot of people interested in getting back in in 2023.
Chris: [00:04:27] Right. And what about sellers? I mean, if you’re talking to sellers right now, are you seeing or advising that it’s better to wait out the market or because there’s a complete lack of supply as we see it right now, not a lot of listings. So is there an opportunity in that or is it better to kind of take a step back and wait and see until the herd mentality comes back to the market where you get multiple offers?
The decision to buy or sell goes beyond interest rates
Mark: [00:04:54] Yeah. So I got like the two year rule and I think if you purchased in the last two years, you should really not be talking about selling right now, because you’re probably not going to see any type of gain and you could even take a loss. But there are some people who’ve had maybe a family home for 50, 60 years, and it just makes sense to cash out. And if the family can benefit from the sale and the kids or the grandkids can go in and buy condos of their own, now that the other prices are lower, it definitely makes sense to consider selling. So it’s an individual situation, as is always the case. But, you know, if you’ve got a lot of equity built up over ten, 15, 20 years and there’s an opportunity for you to do something more with that property. Yeah, that makes perfect sense to sell. If you are again, you’re in a place maybe you’re in a starter bungalow for ten years and you want to move up. This is a really good time to be trying to do a move up the ladder where you know you’re not going to cash out as much as you would have a year ago. But the next house you buy will be that much more affordable type thing. And if space is important, if you’re an expanding family, there’s more elements to consider than just dollar, right.
Chris: [00:05:56] Right. Yeah. And you know, it’s funny that you say that because I mean, I kind of echo that sentiment when people ask, is it a good time to buy? Is it a bad time to buy? You know, kind of looking at it as an investment point of view. But often, if if it’s for personal use, it’s lifestyle choice, it’s need at that time. And if it makes sense, I think the market conditions are a little bit irrelevant there. So because there’s the need and then the market, like all the ships in the harbour, when the tide goes up, all the ships go up. And when the tide goes out, all the ships go down. It’s all relative. Yeah. So I’m going to put you on the spot here. And it’s January 2023, start of a new year. Look inside your crystal ball and tell me, what do you expect this year to look like? What are you expecting as you look forward for for the next 12 months?
Mark: [00:06:51] Yeah, I actually dropped my crystal ball on the way to the office today.
Chris: [00:06:54] It shattered. It’s smashed.
Interest rates and consumer confidence
Mark: [00:06:56] Yeah. Yeah. I can’t pull it out for you, but I think instead of a crystal ball, I do have some wishes of what I would like to see happen in the market. And I think it’s all coming down to consumer confidence. The headlines are very motivational to help people make their decisions. And so if the Fed gave some indication, I do think that we will see one, probably two other rate increases at some point during the year. If the Fed indicated that, then that’s kind of it. This is where we want to stand. We’re comfortable with these rates. I think buyers are a lot more able to wrap their head around what the cost of buying is, because you, me, we’re all the same. We want to get the best price, the best deal, the best of everything. And so it’s a little nerve wracking when you’re like, well, you know, if rates are going to go up higher, are prices going to come down further? Let’s wait, let’s wait, let’s wait, let’s wait. And I don’t blame people for thinking like that, because when there’s that much uncertainty with what the government’s going to do, I know my crystal ball would have broken itself if I tried to predict rate hikes last year.
Chris: [00:07:55] 12 months ago, had you had we asked this question, I think we would have all got it wrong. Right. January 2022.
Mark: [00:08:02] And that unpredictability, I think, put a lot of people off from wanting to make these big type of purchases and feeling comfortable with where the market’s going to go and giving some type of predictions. So my advice to everybody is don’t look at 12 months at a time. Look quarter by quarter, think three months at a time. That’s definitely a little bit more manageable. And I think for the next three months, we’re probably going to see just a steady pace. I don’t expect massive price appreciation. I know a lot of the headlines are counteracted with immigration is coming in and all that stuff. And long term, that will help. But immediately I think it’s going to be a pretty ho hum three months not too insane as the warmer weather comes around. My hopes is that the government kind of does give some type of indication that rates will stabilize and that motivates a little bit more people out, gets more sellers to consider putting their properties on the market. But I think it’s got to start with the buyers. The buyers got to come out with more confidence and that’s going to make the listings, the sellers decide that they want to sell.
Chris: [00:08:58] Right, right, right. So we heard it here first. So really we’re looking for a flat market, not not further declines. And once a new normal is established with interest rates, confidence will come back to the market and we’ll start to pick up towards the end of the year.
Mark: [00:09:17] Yeah, and I mean, we’ve been doing this for a long time, like I’ve known you for, I don’t know, 15 years, a long time. Right. And so we were used to price appreciation at 5 to 8%. That was a home run year. 20% year over year is something we’ve kind of been spoiled with for the last couple of years. So even if it returns for the next half a decade to 5% appreciation, 8%, whatever, more single digit numbers like that was the norm. We’ve just been spoiled with a whole plethora of reasons why the market has gone haywire. So if it’s a return to that, I think that’s healthy for everyone, both sides of the spectrum. It will help with affordability, it’ll help with budgeting. So I’m all for less appreciation, less aggressive appreciation, a little bit more of a stable write up, I think is good for everyone.
Need more help or information?
Chris: [00:10:08] I appreciate that. Yeah, I think you’re on to something there. I echo that sentiment. Well, Mark, thank you so much for stopping by to give us your insights and comments. I really appreciate it. I always appreciate these conversations and enjoy them. If anybody would like to get in touch with Mark, I will include Mark’s contact information at the end of the video. Thanks so much again for stopping by.
Mark: [00:10:31] Awesome. Thanks. Happy New Year.
Chris: [00:10:33] Happy New Year.
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