Oh, we all wish we could look into the real estate crystal ball, or the financial crystal ball for that matter.
While I’m not going to claim that I can accurately predict the appreciation on real estate for each year, 2010 – 2015, I will go out on a (short) limb and make a few predictions about the market in general as it pertains to the Fall.
Summer is almost over, folks!
Some of these predictions will seem like no-brainers, and others might seem far fetched.
Call it my “informed, rational insight,” or call it my “gut feeling” if you want…
The Market Explodes on September 7th
Traditionally, the market explodes the day after the conclusion of Labour Day long weekend.
I don’t see why this year should be any different.
There hasn’t been a lot of new listings to speak of through July and August, and that includes both houses and condos, and all areas of TREB.
Personally, I have been telling my sellers to wait until after Labour Day. It’s the old chicken-and-egg phenomenon that I always speak to; the buyers aren’t looking because there’s no product, and the sellers won’t list because the buyers aren’t looking!
I predict that in C01 and C08, there will be over 100 new listings on each and every day of the week of September 7th. For the record – there were 63 on Monday – what is typically one of the busier days of the week.
Inventory, Check!
This goes along with the point above, but clearly inventory will increase substantially.
There will be far more new listings in September than there were in July and August, but I’m also going to predict that there will be more active listings in September of 2010 than there were in 2009 or 2008.
There simply has to be.
I have a weekly dialogue with many of my buyers that basically says, “Hey (blank), it was another slow week for new listings and nothing new of significant interest has hit the market. We’ll keep our fingers crossed, and rest assured if anything comes out, you’ll have it in your inbox as soon as I see it on my screen!”
It gets tiresome; more-so for the buyers.
There’s just nothing out there right now, and the active listings are the same junk that has been kicking around for months.
I’m predicting an increase in inventory right across the board – even for leases, which often peak in August, as September 1st is one of the most popular calendar dates for starting a new lease.
Long Fall Market
Many people think that the “Fall Market” only lasts through September and October, but I beg to differ.
I’ve done a lot of deals in the month of December; some of them even in multiple offer situations.
I don’t think that two months, busy as they are, will be able to satisfy the buyers and sellers as they interact in the purchase and sale of real estate.
I think that November could be just as busy as October, and I’m willing to bet that sales in December will beat at least three of the last five years. We’ve had a couple of very busy months of December recently, but I think this December could be near the top.
Pre-Construction Slows To A Crawl
How could it not?
There are just too many new projects being launched, and developers aren’t offering any incentives!
Remember when X2 was launched earlier this year? That was the peak of insanity! People were sleeping on the street overnight to be the first in line!
I’ve said it before a thousand times: prices for pre-construction should be significantly lower than that of resale, or else what’s the point of waiting three years to take possession?
I think new condo sales are going to slow, and it may not have as much to do with the new HST as you think.
Disaster!
Developers have been getting away with way too much for way too long.
The pre-construction industry is like the Wild Wild West, with very few rules and way too much leeway for builders to do as they see fit.
I’m in touch with every single “horror story” that goes on, but I don’t think the public has any idea.
I write about it on my blog when I can, but there are far too many shennanigans to keep track of.
Sooner or later, there has to be a breaking point. Could that be this fall?
Could we see a major event come down the pipe and be broadcast on CBC’s The National or perhaps written about on the front cover of the Globe & Mail?
Positive real estate articles are usually feature pieces on a certain building, neighbourhood, or human interest story.
Negative real estate articles are usually about Realtors making too much money, or the impending market correction that has been predicted in twelve of the last nine years…
But we never see any investigative journalism about the BS that developers put naive buyers through! Isn’t it about time?
I think sooner or later, there will be a major, major issue with a new development, and it’ll garner serious media attention. Then, the lax rules that govern developers will be exposed, and the public will cry for more accountability!
More Buildings With Cool Names!
It’s real estate suicide to not have a cool name for your condo these days!
The era of calling your building “220 Victor Street” are long over.
Nowadays, you’ve got to come up with something like “Gaga on the Grange” or “Ke$ha Kondominium.”
Zen and Zed are already spoken for, but I think Zep is still available.
With all the sex that goes into marketing to rich 20-30-somethings these days, why not just have male and female strippers at the launch party for “Jersey Shore By The Shore” when they debut down by the Waterfront?
How about “Mystery Condos” where you have no idea whether or not the developer will actually finish your condo by the time he hands you the keys and refers to the iron-clad agreement that says you’re in breach of contract if you threaten not to close until you’ve got what you paid for? That sounds awesome! So mysterious!
Hindsight
I don’t want to sound like every other real estate agent in the city, but I think prices are going to modestly increase in September.
The summer is typically slow, and this summer was the slowest in recent memory.
Prices have dropped since the “peak” in March/April, and we’ve all been made aware.
But I think that a healthy fall market will help prices to rise ever-so-slightly, and all many buyers will kick themselves for not seeking out a deal in the summer.
Hindsight sucks.
Stagnant Growth into 2011
While I do think that a flurry of buying activity will push prices up modestly, I don’t see us ending 2010 on much of an uptick.
The market has been very hot for very long, and we all knew that eventually, we’d stop seeing such rapid appreciation. While I don’t think we’re going to see a massive drop in prices, I don’t see much of an increase either.
Call it a wash as far as 2010 is concerned, as I think a modest September gain will offset a slightly larger April to August drop, and we’ll end the year with a flat market.
IanC
at 8:29 am
It’s not exactly the cover of a national newspaper, or the lead story of the evening news, but CBC’s Marketplace TV Program (not to be confused with CP24’s developer’s love-in “Hot Property”) did a bit of digging into the deck stacked on the developer’s side (January 2008).
The link below includes a good written summary about condo purchase contracts, and near the top you can “click here to watch video”.
http://www.cbc.ca/marketplace/2008/01/09/condo_crunch/
I can’t believe how much larger they build the model suites compared to the paper plan! You tour through larger washrooms and your bedroom in the suite could be a few feet longer that your plan may state. You are lucky to get the plan measurements without them being shaved off here and there, or a bulkhead placed in an awkward place – or a good chuck of your closet becomes a bulkhead or dead space, less window, etc…).
David, you touched on this before, but it would be fun if readers submitted the before and after pictures of their suites. The before picture is the builder’s floor plan (the one your purchase from) – and the after picture is the actual picture of the unit! It could be from new buyers or resale buyers.
Marz
at 8:31 am
“There will be far more new listings in September than there were in July and August”
You see a huge increase of new listings in September, but you also think that prices will increase moderately?
If you have supply increasing and demand doesn’t, then general economics state that prices will go down.
And from your predictions, the “demand” is being spread out over a “long fall market”, which means that all the new listings in September will end up being sold for lower prices come December.
The only prediction you have that would increase demand of resale homes is that pre-construction will be exposed, thereby turning off buyers who wanted new homes. Is that going to be enough to offset the “far more new listings in September”?
Sorry, but I don’t see your Hindisght prediction coming into effect. Especially when most of your predictions point to the contrary.
Camila
at 4:01 pm
Marz, you missed the point.
Krupo
at 11:23 pm
Actually, there *was* a CBC show… oh never mind, IanC beat me to it. 😉
I was bemused by that couple who got a floorplan for their condo COMPLETELY unlike what they had paid for, and were given it a “take it or leave it” response. Sad.
Marz
at 8:18 am
What was the point? That there is no crystall ball? I got that part 😛
Kyle
at 8:33 am
@ Marz
I think you need to re-read the post without your, “Must debunk David” filter on. You’ve clearly missed the part where he explains it quite clearly:
“It’s the old chicken-and-egg phenomenon that I always speak to; the buyers aren’t looking because there’s no product, and the sellers won’t list because the buyers aren’t looking!”
His hypothesis is that When there is a supply of non-crap listings the demand will return.
Tom
at 9:11 pm
[i]The pre-construction industry is like the Wild Wild West, with very few rules and way too much leeway for builders to do as they see fit [/i]
No kidding. I think it is a reasonable guess things will pick up in September. It was a perfect storm of events this year that lead to this slowdown.
Marz
at 8:14 am
lol, I’m not a “David-hater” if that’s what you’re implying. I enjoy his blog. But thank you for clarifying.
Meh
at 11:25 am
Re: Kyle and Camilla.
Let’s explore that theory. There are no good houses for sale now, but quality ones will come on later. Right?
Isn’t a rule of real estate that at the right price, every house is a good buy? David alluded to that with his video at the townhouses on the 401.
So, there is absolutely no difference between a crap inventory and an overpriced inventory. Take a crap inventory and reduce it’s price and suddenly it’s a good inventory.
What are these non-crap listings that will come out? They will be higher quality houses right? Renoed etc? Will they be at the same price as a crap comparable that is currently on the market or more? If they come out at the same price, then that will push down the prices of everything comparable. If they come out priced higher, how are they different than the houses already on the market that are priced higher (which likely are renoed also), which you say are crap.
So the only way that the inventory becomes non-crap, is if prices go down.
Camila
at 10:36 pm
I am trying to make sense of what you did in that comment, I see that you pulled one quote from the article above and a general statement from a video, so that you could stack a pyramid of assumptions on the 2 unrelated assertions, and lead that whole train-wreck of thought to your epically erroneous conclusion.
‘Meh’, your ‘Theory Exploration’ is a major fail. You seem to me like the type of individual who is careless with his words and logic. And that in itself, is both a dangerous and a time consuming combination.
Geoff
at 7:45 am
Meh, as someone who has done the house hunting thing, I assure you – there’s a lot of crap out there.
Kyle
at 8:26 am
@ Meh
I referred to crap “listings” (i.e. not a good value proposition to any potential buyer), which is very different than saying crap “inventory”. I agree with you, if all the inventory that has been sitting since late spring reduced to a reasonable price, then they would no longer be crap “listings”
If you put yourself in the shoes of someone who was buying last month you would see exactly what i mean.
Sure there are lots of total listings, but once you strip out all the crap listings (ones you’ve already crossed off your list for being delusionally over-priced), you really don’t have much “real supply”. This lack of “real supply” has sidelined buyer demand over the summer. Once the “real supply” returns, so too will the buyers.
Kyle
at 8:31 am
Also @ Meh
When people go to list in the fall, they’re likely not using the 89 day old listing price as their benchmark, people usually look at what actually transacted recently to determine what price to list for.
Meh
at 11:10 am
Camilla, if you found a logical fallacy in my argument you would have pointed it out, but, you didn’t. Instead you decided to go personal, which is the white flag of surrender in any argument.
Anyway Kyle was able to understand it so I’ll speak to him.
Kyle and Geoff: I bought in June and have continued to follow the market since so I am well aware of the situation. In the end we are saying the same thing, but yours just hides the fact that prices need to come down by calling them ‘real supply’. Instead you could simply say ‘buyers will come back when prices come down’.
Kyle
at 12:31 pm
@ Meh
I am not hiding any facts by calling it “real supply”. Prices simply do not need to come down for buyers to come back. Fresh selection will bring them back. This has happened every year in the last 6.
And just like every fall in the past 6 years (except 2008 when the credit crisis hit), there will most likely be an increase in prices this fall over the summer that just past.