Now that the Greater Toronto Area’s (GTA) resale and new home markets are showing some signs of cooling, people are starting to wonder if it’s a buyer’s market, or whether it will be soon.
First of all, why do people think the market is cooling?
There are a few reasons; there was nearly a 35% drop in sales in the resale market in August 2017, which followed a 40% drop in July. In the new home market, there were only 137 new low-rise sales in July, which is a significant year-over-year drop.
But, just because the market shows signs of slowing down doesn’t mean it’s a buyer’s market. Here are five signs to watch out for:
1) More supply than demand
New home supply hit a record low this summer, falling to 7,801 units. Listings in the resale market showed some signs of heating up, but dropped 6.7% in August.
Generally, you want about six months of inventory for it to be a buyer’s market. That means inventory would last for six months if nothing new was brought to market and people continued buying at the average monthly rate.
When there’s more supply than demand, then as a buyer you have more negotiating power, which is why it’s a sign of a buyer’s market. We’re not seeing this happen in the GTA yet.
2) Listings up for longer
This is difficult to determine in the new home market because it easy enough for builders to not release lots if there are signs that the demand isn’t there. But, in the resale market, as soon as you see listings up for weeks and months, then it may be a buyer’s market.
3) Lower pricing
This one applies to both the new home and resale market. Builders price their inventory accordingly and sellers work with their real estate agents to determine the value of their home and property.
There are some areas of the GTA where prices have stagnated or dropped year-over-year, but there are still markets where prices are up by double digit growth. For example, a new condo unit in the GTA is still 40% more expensive this year than it was last year around the same time (July), according to the Building Industry and Land Development Association (BILD).
4) Fewer sales
It’s pretty safe to say that this is happening. We’re seeing it in the resale market and the new low-rise market.
We can’t say the same about the new condo market though. From the beginning of the year to the end of July, there were nearly 31,000 new home sales, and 80% of them were in the condo market. The demand for condo living is strong! Also, 2017 is on track to be a record year for new home sales.
5) More details and ads
In a buyer’s market, sellers and builders will try harder to get your attention. More details about new communities will be shared and you’ll see more ads popping up either while you’re online or travelling around your neighbourhood or city.
Real estate agents will work harder to get potential buyers into the home with creative ads, flashy for sale signs, and they’ll likely recommend some curb appeal maintenance.
We get a sense of this starting to happen, but not enough to declare it a buyer’s market.
Overall, we think it’s safe to say that it’s not a full blown buyer’s market quite yet, but it’s not a seller’s market either. Does that make the market balanced? Maybe! And maybe it’s for the best.