COVID-19 Impact on Real Estate - April 20, 2020
Update provided to clients on April 20, 2020
Figure 1
Real Estate Showings in Ontario
Source: OREA, COVID-19 and Realtors: What You Need To Know
Real estate sales in Toronto have declined as the number of cases of COVID 19 has climbed (Figure 2).
Figure 2
Real Estate Sales in Toronto Compared to Ontario Cases of COVID-19
Source: OREA, COVID-19 and Realtors: What You Need To Know
In the first week of April 2020, the number of homes sold in the GTA declined by 76% VYA and the number of condos sold declined by 80% VYA (Figure 3).
Figure 3
Real Estate Sales Versus Year Ago
Source: OREA, COVID-19 and Realtors: What You Need To Know
As sales slow, prices are expected to drop in the short term. In the release of March results, TRREB commented “As we move through the spring, it is possible that we may see a moderation in price growth if market conditions soften due to a combination of slower sales and an uptick in listings.”
According to RBC Senior Economist Robert Hogue, “We expect price support to wear down in the weeks ahead. Still we see a low risk of a collapse at this point.”
Royal LePage CEO, Phil Soper, agrees that long term price declines are not a given, saying “Home price declines occur when the market experiences sustained low sales volume while inventory builds. Currently, the inventory of homes for sale in this country is very low, matching low sales volumes as people respect government mandates to stay at home.”
According to CEO, Phil Soper, “From our experience with past recessions and real estate downturns, we are not expecting significant year-over-year price changes in 2020. It is easy to mistakenly equate a handful of transactions at lower prices to a reset in the value of the nation’s housing stock. Distressed sales that occur during an economic crisis are a poor proxy for real estate value.”
The reality is that this situation was not about a lack of economic confidence – the market was robust up until mid-March. The pandemic has paused nearly all activity of any kind, but once that pause is lifted life will resume. With the measures the government is taking to shore up the economy, things will bounce back.
The Royal LePage 2020 Home Price Forecast offers two scenarios for the GTA. If business activity resumes by the end of Q2, the GTA may see a year-over-year increase of 1.5% to its aggregate home price in 2020, increasing to $861,100. If business activity resumes later in the year, the GTA could see a decrease of 0.5% year-over-year in aggregate home price to $844,200.
Since then, much work has been done to allow realtors to live stream virtual open houses through those platforms. We are now able to live stream on REALTOR.ca and royallepage.ca using Facebook, Instagram, YouTube or Zoom.
For an example of what a live stream open house is like, take a look at what one of my colleagues in Oakville did last week. Link is here.
https://stephhebbrealestate.blogspot.com/2020/04/financial-help-for-homeowners-during.html
If you missed the last update, you can view it here:
https://stephhebbrealestate.blogspot.com/2020/04/covid-19-impact-of-real-estate.html
That’s it for this update. Please let me know if you have any questions or feedback at Stephanie.hebb@royallepage.ca.
Stay home and stay healthy.
Steph
More reading:
https://www.thestar.com/business/2020/04/10/they-bought-a-new-home-but-cant-sell-their-old-one-and-in-some-cases-have-lost-their-income-the-devastating-impact-covid-19-is-having-on-toronto-homebuyers.html?fbclid=IwAR368vP2SqOFZDHezCqA3Banfbx6jnC3kmxr1JPXqkmmChGY2R9Tja2Eky4
https://www.livabl.com/2020/04/low-risk-toronto-home-prices-collapsing-covid19.html?fbclid=IwAR0yCxcemvTeC7rSar4QFHSouFUVbPx3_buoHXGMALlrANUdftZ-64_HyCw
https://www.theglobeandmail.com/real-estate/toronto/article-for-home-buyers-backing-out-during-covid-19-crisis-is-not-an-option/?fbclid=IwAR3ibDeGrkDi2XKnLZjVcKDHuw3yolVi69SuGNtHWT7ScEUC2Xd13RGDUgY
https://www.mortgagebrokernews.ca/news/canadian-home-prices-to-weather-the-worst-of-the-pandemic-328721.aspx
Real Estate Market Overview
Over the past couple of weeks the real estate market in the GTA has taken a hit. In the following chart (Figure 1), you can see that showings dropped off dramatically when Ontario declared a State of Emergency on March 17.Figure 1
Real Estate Showings in Ontario
Real estate sales in Toronto have declined as the number of cases of COVID 19 has climbed (Figure 2).
Figure 2
Real Estate Sales in Toronto Compared to Ontario Cases of COVID-19
Source: OREA, COVID-19 and Realtors: What You Need To Know
In the first week of April 2020, the number of homes sold in the GTA declined by 76% VYA and the number of condos sold declined by 80% VYA (Figure 3).
Figure 3
Real Estate Sales Versus Year Ago
Source: OREA, COVID-19 and Realtors: What You Need To Know
As sales slow, prices are expected to drop in the short term. In the release of March results, TRREB commented “As we move through the spring, it is possible that we may see a moderation in price growth if market conditions soften due to a combination of slower sales and an uptick in listings.”
According to RBC Senior Economist Robert Hogue, “We expect price support to wear down in the weeks ahead. Still we see a low risk of a collapse at this point.”
Royal LePage CEO, Phil Soper, agrees that long term price declines are not a given, saying “Home price declines occur when the market experiences sustained low sales volume while inventory builds. Currently, the inventory of homes for sale in this country is very low, matching low sales volumes as people respect government mandates to stay at home.”
Real Estate Market Outlook
This week, Royal LePage released our 2020 Home Price Forecast. Similar to predictions from other economists, our forecast is that home prices will show remarkable resilience despite the pandemic.According to CEO, Phil Soper, “From our experience with past recessions and real estate downturns, we are not expecting significant year-over-year price changes in 2020. It is easy to mistakenly equate a handful of transactions at lower prices to a reset in the value of the nation’s housing stock. Distressed sales that occur during an economic crisis are a poor proxy for real estate value.”
The reality is that this situation was not about a lack of economic confidence – the market was robust up until mid-March. The pandemic has paused nearly all activity of any kind, but once that pause is lifted life will resume. With the measures the government is taking to shore up the economy, things will bounce back.
The Royal LePage 2020 Home Price Forecast offers two scenarios for the GTA. If business activity resumes by the end of Q2, the GTA may see a year-over-year increase of 1.5% to its aggregate home price in 2020, increasing to $861,100. If business activity resumes later in the year, the GTA could see a decrease of 0.5% year-over-year in aggregate home price to $844,200.
Selling a Home During COVID-19
On April 3 the Ontario government declared real estate an essential service but specifically banned the practice of holding open houses. Real estate boards and real estate brokerages responded by removing information about open houses from listings.Since then, much work has been done to allow realtors to live stream virtual open houses through those platforms. We are now able to live stream on REALTOR.ca and royallepage.ca using Facebook, Instagram, YouTube or Zoom.
For an example of what a live stream open house is like, take a look at what one of my colleagues in Oakville did last week. Link is here.
Help for Homeowners
Over the past couple of weeks, new government programs have been introduced and other programs expanded to provide as much help to Canadians as possible. I covered this topic in a recent post to my blog. Please click below for the link.https://stephhebbrealestate.blogspot.com/2020/04/financial-help-for-homeowners-during.html
If you missed the last update, you can view it here:
https://stephhebbrealestate.blogspot.com/2020/04/covid-19-impact-of-real-estate.html
That’s it for this update. Please let me know if you have any questions or feedback at Stephanie.hebb@royallepage.ca.
Stay home and stay healthy.
Steph
More reading:
https://www.thestar.com/business/2020/04/10/they-bought-a-new-home-but-cant-sell-their-old-one-and-in-some-cases-have-lost-their-income-the-devastating-impact-covid-19-is-having-on-toronto-homebuyers.html?fbclid=IwAR368vP2SqOFZDHezCqA3Banfbx6jnC3kmxr1JPXqkmmChGY2R9Tja2Eky4
https://www.livabl.com/2020/04/low-risk-toronto-home-prices-collapsing-covid19.html?fbclid=IwAR0yCxcemvTeC7rSar4QFHSouFUVbPx3_buoHXGMALlrANUdftZ-64_HyCw
https://www.theglobeandmail.com/real-estate/toronto/article-for-home-buyers-backing-out-during-covid-19-crisis-is-not-an-option/?fbclid=IwAR3ibDeGrkDi2XKnLZjVcKDHuw3yolVi69SuGNtHWT7ScEUC2Xd13RGDUgY
https://www.mortgagebrokernews.ca/news/canadian-home-prices-to-weather-the-worst-of-the-pandemic-328721.aspx
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