That’s the question on everybody’s mind – buyers, sellers, agents, and a host of economists and columnists who are scrambling to figure out why the real estate market isn’t on vacation.
Historically, the market drops off significantly in the month of July, both in terms of new listings, and in terms of sales.
But if the first week of July is any indication, we’re going to see a very intense month ahead, and this could even extend into August, which isn’t typically a great month to list and sell.
Is the market on steroids?
Our office meetings have officially been switched from Monday’s to Tuesday’s, which we do, every July & August.
The market participants – Realtors, buyers, and sellers, are all preparing for two slow months ahead, before the BOOM hits after Labour Day.
But you know what? I think this year is going to be different…
If I had to guess, I would say that we will see the number of Toronto home sales in July increase more than 20% over the same period in 2013, and perhaps August will follow the same trend.
If you hate numbers, then skip this part, but I don’t think the numbers paint much of a “buyers market” for July & August of 2014, after the first six months of the year that we had.
There were 10,180 sales in June of 2014, compared to 8,821 in June of 2013 – an increase of 15.4%.
New listings, if you’re wondering were up only 8.2% in that time period, which means if the increase in sales is almost doubling the increase in new listings, the market is going to be significantly “tighter.”
What I find interesting is that the increase in sales for the other months of the 2014 pale in comparison. Here is the 2013-to-2014 percentage change in monthly sales:
January: (-2.2%)
February: 2.1%
March: 7.2%
April: 1.8%
May: 11.4%
June: 15.4%
There were fewer sales in January of 2014 than January of 2013, and the increases in February and April were modest at best. That led up to an insane May and June, and thus a reason why I think the trend is going to continue.
As for new listings, I saw more of the same. Here is the 2013-to-2014 percentage change in monthly new listings:
January: (-16.6%)
February: (-1.0%)
March: 1.4%
April: (-4.5%)
May: (-0.8%)
June: 8.3%
4/6 months – new listings were down
5/6 months – total sales were up
It’s no wonder that the average house price has increased by almost 10%, year-over-year.
The market is tighter than ever, with demand massively outpacing supply.
What this points to, in my opinion, is an incredibly tight July/August market, where the buyers who didn’t pick up a property from January to June are still actively looking, and with the busy Fall market looming, they might pay big bucks for a house in the summer.
That used to be the trend – the summer is slow, and the fall is busy.
It meant that summer buyers were scared of the “big, bad” fall market, and often got very active in the summer. Still, many buyers did what much of the market does: take the summer off.
And despite the busy July we’re having so far, and the busy summer, I’m predicting, I still see a lot of agents, buyers, and sellers acting like this is the summer of 2012.
Last Thursday, I showed a couple of condos to clients from Calgary, who were in for three days to try and tie up a unit. They really liked a unit at Spire, and were contemplating an offer on the property.
On Thursday night, I sifted through new listings on MLS, and low and behold – another new unit for sale at Spire! It was like the first unit, except slightly larger in each room, and with more features they wanted, and with a better price per square foot.
I emailed them and said, “Meet me tomorrow morning at 10am at Spire,” but of course, kept the unit a secret. What can I say – I have a flair for dramatics!
They thought we were taking a second look at the unit they had seen on Thursday, but alas, we were seeing an even better unit, which they loved, and purchased that afternoon.
That day, of course, was Friday.
Friday is the day of rest for much of the business world.
Friday is the day of liquid lunches for many of the guys in marketing and advertising.
Friday is the day of 120-minute meetings in food courts across the downtown core.
Friday is the day of golf and drinking for many Realtors, and to be perfectly honest, I knew that this listing coming out on a Friday was a gift from the real estate Gods.
Very few realtors would see it online, and thus very few would email it to their clients. We know that it takes 24 hours for a new listing to appear on www.realtor.ca, so seeing it at 10am on Friday was like seeing it 4-5 days before the rest of the world.
Sure enough, my clients had bought the unit before virtually anybody else had seen it online, let alone been able to book a showing.
If your Realtor was golfing last Friday, and saw the listing on Monday, and emailed it to you on Tuesday, asking if you could see it on Thursday – then you’re six days behind.
I tell this story not to brag about having no life and working too much, but rather to demonstrate how fast-paced the real estate market can be, and how you can leave no stone unturned in your search (or your clients’ search) for their dream home.
You just can’t sleep on this market, and there will NOT be a vacation from the real estate market this summer.
Yesterday, I met with two teachers who have the summer off, and want to use the time to find a new home before the busy school year starts up again in September.
Historically, I would have told them, “You have to wait until September when the market picks up again,” but I think that this summer is going to be different.
There are still going to be spring buyers who put their searches on hold until the fall. “Life happens,” and if you’re planning family vacations to Europe in August, you’re probably not going to be active in the summer.
But for those that do remain diligent, I think there are great months ahead where we’re going to see more listings than usual.
I can’t suggest that the summer will give us any “deals,” based on the numbers up to this point. But we didn’t see any “deals” in the spring, so why should we expect things to change? I think a lot of buyers, who waited patiently for new listings, and dealt with frustrating multiple offer situations, will relish the opportunity to be active in the would-be slower summer months.
Whether you’re my client, or a complete stranger – my advice to you is to be active.
This summer, don’t expect that the market is on pause, because it’s not.
Don’t put any less effort into your housing search in July and August than you did in April and May.
The Toronto market is way too competitive to hit the snooze button. Had I been out golfing on Friday, and then gone to a cottage on Saturday & Sunday, my Calgary clients would have missed out on the condo they plan to live in for the rest of their lives.
You have to be exceptionally diligent in this market, and just because the calendar says “July” doesn’t mean the real estate market agrees.
Otherwise, you’ll find yourself right back in the hot fall market in September, where things will be just as hot as they were in the spring…
Joe Q.
at 9:51 am
I find the guava.ca “indicators” page provides an excellent visual summary of changes in the Toronto housing market over the last 10 years. Hopefully others do too.
http://guava.ca/indicators.html
FroJo
at 10:08 am
Thank you for the link. It’s very well done indeed!
Kyle
at 10:06 am
The tightness in this market is structural and only gets tighter every year. Demand for houses in the core keeps growing, and they aren’t building anymore SFHs. It just keeps becoming more and more of a sellers’ market. Not long ago, it used to be sellers had to be ready for the Spring market and God forbid they hadn’t sold by the Summer, now-a-days there is so much demand for SFH, a seller could probably hold a successful bidding war at 7 pm on Christmas Eve if he wanted to. Kudos to buyers who were aggressive and found their homes in the Spring, surely they had to listen to lots of garbage flack about how they over-paid, or how they were actually the “losers” of the bidding war.
http://www.theglobeandmail.com/report-on-business/economy/housing/local-real-estate-boards-give-a-hint-of-a-surging-housing-market/article19521323/
Long Time Realtor
at 2:22 pm
I wonder how long it will take for the likes of Garth Turner, Ben Rabidoux, Dave Madani, Rob Carrick et. al., to finally man-up and say: “Man, was I wrong?
Apparently, eating crow year after year has no affect on some people.
Kyle
at 3:01 pm
They’ll never admit to being wrong, never! Those guys are just selling ideology and religion. Anyone with half a brain cell has already written off anything they have to say. They know their remaining followers don’t care if they’re wrong, it’s now just about stoking their followers hopes that one day the ship that they missed will come back to port.
ScottyP
at 11:08 am
They’ll never admit they were wrong… but should there be a small bump in the road, say, seven years from now, they’ll be the first to say “see! I was right!”
Joe Q.
at 3:22 pm
I find it interesting that people lump Ben Rabidoux, who provides quantitative analysis of economic data, and Rob Carrick, who is a personal finance columnist for a major newspaper, in the same category as Garth Turner, who is a largely substanceless blogger that endlessly repeats the same five or six posts ad nauseam, and to whom Kyle’s “religion” analogy clearly applies.
To me, the writings of Garth Turner and the writings of guys like Brad Lamb are two sides of the same coin. IMO.
Kyle
at 4:08 pm
This could just be the cynic in me. It’s actually possible that Garth and Carrick may not know they’re wrong, cause it’s very clear that they often are writing about things they don’t actually comprehend and are often quoting other people’s kool aid. So while Rabidoux and Madani may seem less fanatical, to me they are possibly even worse than Garth, because i think they actually know they’re wrong (or at least they should by training). However they continue to keep up the charade, because they know admitting they are wrong will cause them to lose their followers (and media coverage and pay cheque) faster than a Priest telling his congregation that he is an Atheist.
Joe Q.
at 8:24 pm
I think we are reading Carrick and Rabidoux very differently. (I don’t know enough about Madani to comment.)
To me, Carrick is a financial columnist. He is not a financial advisor. Part of his job is to write pieces that challenge the status quo or are a bit provocative. But overall, his writing is eminently sensible. He spends most of his time writing about budgeting for retirement, financing university education, how to pick a financial advisor, buying vs. leasing a car, low-cost index funds, etc. He also writes about the housing market, and while he clearly sees it as over-valued, and urges readers to consider renting in some circumstances, I don’t see the doom-and-gloom here that others see — unless those others equate unease about the housing market with “being wrong”.
As for Rabidoux, he is primarily an analysis guy, and not in the business of making predictions about the housing market. He writes about things like condo unit starts vs. population change, relative strength of different housing markets in Canada, mortgage lending terms, the CMHC, etc. Again, I fail to see the doom-and-gloom, unless being generally negative about real estate is “being wrong”.
jeff316
at 1:33 pm
Agreed on Carrick – his job is not to be right but to present perspectives, although anyone who was thinking of buying in Toronto in 2010 and listened to him has had some terrible luck.
I think the issue with some commenters isn’t about them “being wrong” but about the lack of introspection after a considerable run of being wrong. Many of these analysts tend to be dismissive of non-traditional metrics or non-quantifiable assertions – and rightfully so, as they should be – but are quick to resort to the latter when it backs their view, e.g. allegations of widespread mortgage fraud, foreign ownership, wonky CMHC policies, income misrepresentation, or just defaulting to the old blame-it-on-the-BOC-but-once-they-rise-I’ll-be-right game. You can’t have it both ways.
I’m not expert on any one real estate writer and am not a bull myself (though I find Rabidoux to be particularly negative), but I have to say that if I were in their position I’d be trying to quantify factors that can show why this has gone on so long, and move beyond the standard metrics that have for the time being proven unreliable. Which I’m sure they doing, just not publicly.
ScottyP
at 6:19 pm
“…if I were in their position I’d be trying to quantify factors that can show why this has gone on so long, and move beyond the standard metrics that have for the time being proven unreliable. Which I’m sure they doing, just not publicly.”
Couldn’t agree more with the first part of your statement. As for the second part (“Which I’m sure they [are] doing, just not publicly”)… if that is indeed the case, then these “experts” are doing their readers a vast disservice — especially considering how wrong they’ve been, and for so long.
As you said yourself, readers can forgive an expert for being wrong. But for experts to keep getting it wrong for years on end while refusing to rethink their position/metrics is, in my opinion, inexcusable.
Kyle
at 10:12 am
“As for Rabidoux, he is primarily an analysis guy, and not in the business of making predictions about the housing market.”
Sorry Joe Q. I disagree about Rabidoux, he is President of a firm called North Cove Advisors. If he isn’t supposed to be making predictions and providing advice then what is he selling? Unfortunately for those that follow him, the advice derived from his analysis isn’t worth squat, but fortunately for Mr Rabidoux the economics of being an Economist often favour selling a fictitious narrative than reliable predictions and advice. Here’s another perfect example of him shoveling more of that narrative, in exchange for more coverage: http://www.cbc.ca/news/business/how-the-housing-market-has-cooled-in-most-of-canada-1.2707753
So long as there are thousands of clicks and hundreds of comments that accompany articles like this, he’ll keep shoveling that narrative until his arms fall off. Again not because it is valuable or reliable, but because it pays his bills.
Joe Q.
at 8:29 pm
To sum up, I am happy reading comments from Rabidoux and Carrick. The former provides good, sometimes hard-to-find data, and reasonable commentary on it. The latter writes interesting and sensible columns. Garth Turner is a bombast who writes repetitive articles devoid of substance. He is in a different category altogether.
ScottyP
at 11:28 am
I always appreciate your thoughtful comments Joe Q., but have to respectfully disagree with regard to Carrick.
To me, Carrick is either a) lacking in enough RE expertise to justify him writing on the subject or b) knowledgeable enough to know better than to espouse what he has so often espoused on the subject.
I’m not sure which is the case, but either a) or b) is unacceptable for a columnist of his stature. Put another way, when he wrote the following two years ago, he was dead to me:
http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/whats-the-rush-first-time-buyers-nows-the-time-to-rent/article4493774/
Kyle
at 3:30 pm
I consider them all to be selling the same religion, Garth’s just much more radical and fundamentalist about it. Let’s face it, if Carrick, Rabidoux and Madani finally admitted they were wrong, a huge portion of their remaining following would turn their backs on them, and they would quickly be relegated to the obscurity they deserve.
jeff316
at 1:43 pm
The “losing the herd” argument is valid for the Garths of the world but not for the professional analysts.
The analysts aren’t about being right or wrong. They’re about the analysis of metrics for probable outcomes. The vast majority don’t care if they were right or wrong about something, as long as they can rationally explain why they asserted what they did, and why that assertion did/didnot come to pass.
That’s why they’re not admitting their forecasts and assertions have been off, because as of today they do not have a statistical model that explains why they were wrong. Professional analysts do not have the option of saying “Yeah, I really have no clue.”
FroJo
at 7:15 pm
I think both sides should admit. “Man, who could have predicted 6 straight years of quantitative easing and near zero interest rates and the policy choice worldwide of allowing rapid asset price escalation to maintain the free-money stimulus?”
Bulls and bears alike must admit the game is a lot bigger than they think they know (and if they think they know, then I don’t think they know). [<—- sorry couldn't resist that great DMX line]
Smoke 'em if you got 'em, as we used to say in the service.
Kyle
at 9:07 am
Not buying it, rates didn’t drop to near zero overnight, they gradually declined over those 6 years, plenty of time for anyone whose full time job it is to stay on top of these things, to reassess and adjust their forecasts.
I’ve been able to call it right, David’s been able to call it right, TREB, CREA and a whole bunch of other non-Economists have been able to call it right. So as far as i’m concerned there is absolutely no excuse for these so-called “experts” to be dead wrong, day in day out for 6 years. Any other job, being consistently wrong for well over half a decade gets you fired, but because there is a disenchanted segment of the population who clamour to their message, these guys instead get lots of media coverage and notoriety. Being a bear, even a big phony bear is their meal ticket, cause let’s face it, these guys aren’t famous for being anything else.
FroJo
at 11:30 am
Fair enough, Kyle. I guess I am saying that free money has stoked and amplified all of the perfectly valid factors that you and others have raised: limited land and SFH-building, location, immigration etc. And you’re right about doom and gloom selling papers (and clickbait)!
Let’s meet again on this same page if rates ever do change and see what happened.
ScottyP
at 11:20 am
I never know what I’m talking about, but three years ago even I was able to surmise that the BofC wasn’t going to be raising the prime for years to come, for reasons that were abundantly clear both then and now.
It’s more than a little annoying that a schmo like me can outguess the “experts”, all of whom are paid decent coin to not be dead wrong. It’s also annoying that the likes of Maclean’s, Toronto Life, etc. can keep recycling the same doom and gloom headlines/articles for over SIX YEARS in an effort to sell their tripe, and yet people keep eating that crap up.
People have ridiculously short memories. It’s what allows these bums to keep doing what they’re doing, ad nauseam.
David Fleming
at 1:18 pm
@ FroJo
Were you in the service? Finally, some insight into the man they call “Frosty!” 🙂
FroJo
at 10:55 am
LOL, only a stint in the Public Service. 😉