Prices are down for real!
For the past 3 to 4 months, we all know that sales volume was down some 40%.
And prices have been falling somewhat, but if you compare them with the prices one year ago, they are still up.
This time, in the July Market Watch Report, average prices for detached homes were down even when you compared them with one year ago.
Prices are down 7.3% in the 416 area and 1.9% in the 905 area.
In terms of condos, average prices are still slightly higher than a year ago.
4.3% in the 416 area and 11.9% in the 905 area.
Remember we looked at all the graphs in our last market update video, we saw more dramatic ups and downs in the 905 area.
And the 416 area has been much more stable.
Now that we’re seeing a real price drop in the 416 area, we are officially entering a market downturn.
Like I always say, the market goes up and down, up and down, it’s very normal.
Of course, it would be ideal if we can predict how long the downturn is going to last.
The real answer is nobody knows.
But my personal prediction is that it won’t last for more than 12 months based on the demand that we are seeing in the rental market.
Here’s yet another article on the rental market, from the Financial Post.
“Prices are falling but rents are rising in Canada’s paradoxical housing market”
“An unintended consequence of falling prices is the increased pressure on rental housing”
We have already talked about how hot the rental market has been and how investors are terminating their resale listings and are renting their units instead.
If you haven’t watched those videos, you can catch them at the links below.
What I do want to share with you is an interesting behaviour described in the article.
When the market was very hot, everyone wanted to buy.
Potential buyers got very frustrated because they kept losing in bidding wars and prices kept going up.
Eventually they got so discouraged that they stepped to the sidelines.
They thought to themselves, let’s wait for prices to drop.
We would buy when prices are down.
Now that prices are really coming down, the exact moment that these potential buyers have been waiting for.
What do they do now?
They actually completely exit the market.
They are so worried about acquiring an asset that’s going to lose its value.
People would prefer to rent instead, they think it’s the safer option and that adds further pressure to the rental market.
Does this sound familiar to you?
It’s a very popular mentality that the average population has.
It’s just like how in the stock market, people thought to themselves, when the price reaches this particular point, they would sell.
But when the price does get to the point, they become greedy, they want more and they don’t sell.
It’s when the price comes way down, then they panic and they sell.
That’s exactly why most people lose money in the stock market.
Going back to the Toronto real estate market, now that we’re entering the downturn, the next few months will be an excellent time to acquire more assets.
But it’s not a suitable strategy for everyone.
It’s only for a small group of people who think from a different perspective, who see downturn as an opportunity.
You see, this is exactly why 20% of the population owns 80% of the wealth.
I’m sure when we look back later on, we would wish that we had bought more today.
If you’re ready to act, you can schedule a call with me at the link below.