COVID-19 Impact on Real Estate - May 19, 2020
Provided to Clients on May 19, 2020
There were 2,975 sales in April 2020, down by 67% compared to April 2019.
Total GTA Residential Sales
The average selling price was $821,392, essentially flat at +0.1% versus year ago.
Average Selling Price
There were 6,174 new listings in April 2020, which is down by 64.1% year-over-year.
BMO Senior Economist Robert Kavcic's point of view is that as long as the number of listings declines, prices will remain stable: "New home listings are sharply declining alongside home sales which likely means that the deterioration in prices should be contained for now."
CIBC has issued a forecast that is less positive. CIBC economist Benjamin Tal expects there to be a "zig zag" market over the next several months. As the first wave of the virus peaks, the economy will open up and things will start to get back to normal, however there is expected to be (at least) a second wave that may require re-introducing the same stay-at-home protocols and will result in market volatility.
Tal says "Look for large swings in both demand and supply here. By 2021, as the economics of housing returns to fundamentals, we expect an array of factors to result in a weaker market with some downward pressure on prices...Overall, as the fog clears, we expect to see average prices 5-10% lower relative to 2019 levels, with high cost units in the high-rise segment of the market seeing the most notable price declines."
What all of this means is, if you're a buyer with stable income, this could be a great time to get a deal on a home that might otherwise be out of your price range. Mortgage rates are at a historic low and are expected to remain that way until 2022. If you're a seller, things are a bit more uncertain. As seen in the early part of the year, there is pent up demand for housing suggesting that buyers will head back to the market once it is safe to do so. I recommending waiting for now but making sure you're ready to list when things improve.
Accordingly, in a recent survey conducted by Point2Homes, 86% of realtors said they have noticed a significant drop in homebuyers interest.
The question is when homebuyers do become interested again, how will things have changed and what is the implication for selling a home?
I think the answer is that we will all have become more aware of our physical proximity to others. Some of the shifts we have made towards using technology, such as using online virtual tours and electronic documents and signatures will likely continue.
The traditional weekend open house will lose popularity in favour of real-time virtual open houses and individual scheduled showings.
The focus on physical distancing, disinfecting and making things contact-less as much as possible will also most likely continue.
That said, the fundamentals won't change. If you provide a good product (repair, de-clutter and stage the property as necessary), price it properly and market it effectively you will generate demand and be able to sell your home for top dollar. If you have any questions about how to sell during COVID-19, please feel free to email them to me. You can also refer to this post on my blog Selling a Home During The COVID-19 Pandemic.
Physical distancing and staying home as much as possible are still expected, and gathering with people outside of immediate family members is still prohibited.
May 8 - The emergency wage subsidy program is extended to the end of August to help employers keep employees on the payroll.
May 11 - The Large Employer Emergency Financing Facility (LEEFF) is announced. This support will provide bridge financing to Canada?s largest employers to help them avoid COVID-19 related bankruptcies and protect workers? jobs.
May 12 - Help for seniors, including a one-time payment of $300 and additional funding for community organizations that improve the quality of life for seniors, is announced.
May 13 - The federal government provided more information about the Regional Relief and Recovery Fund (RRRF) help for small businesses.
May 15 - Qualifying post-secondary students can begin applying for the Canada Emergency Student Benefit.
May 15 - A wage subsidy for medical researchers is announced.
Details for all of the above can be found here.
If you missed the last update, you can read it here.
That's it for now. Please let me know if you have any questions or feedback for me at Stephanie.hebb@royallepage.ca.
Stay home and stay healthy.
Steph
More reading:
https://economics.cibccm.com/economicsweb/cds?TYPE=EC_PDF&ID=10932
https://www.livabl.com/2020/05/mortgage-rates-historic-lows-2022.html
https://www.livabl.com/2020/05/falling-home-listings-keep-prices-stable-pandemic.html
https://www.realtor.ca/blog/postpage/13219/3195/canadian-home-sales-and-listings-post-record-declines-in-april-2020
https://trnto.com/toronto-real-estate-sales-down/
Real Estate Market Overview
As expected the impact of the COVID-19 pandemic is reflected in the April home sales figures for the GTA. Concerns about catching the virus and compliance with the physical distancing directive meant that fewer homes were listed and sold. The good news is that prices remained relatively intact without the significant drop one might expect, although some economists warn that the small number of sales make this number untrustworthy.There were 2,975 sales in April 2020, down by 67% compared to April 2019.
Total GTA Residential Sales
The average selling price was $821,392, essentially flat at +0.1% versus year ago.
Average Selling Price
There were 6,174 new listings in April 2020, which is down by 64.1% year-over-year.
Real Estate Market Outlook
In the last update I highlighted a forecast from TD that predicts a home price increase of 7.8% for 2020 despite the impact of the pandemic.BMO Senior Economist Robert Kavcic's point of view is that as long as the number of listings declines, prices will remain stable: "New home listings are sharply declining alongside home sales which likely means that the deterioration in prices should be contained for now."
CIBC has issued a forecast that is less positive. CIBC economist Benjamin Tal expects there to be a "zig zag" market over the next several months. As the first wave of the virus peaks, the economy will open up and things will start to get back to normal, however there is expected to be (at least) a second wave that may require re-introducing the same stay-at-home protocols and will result in market volatility.
Tal says "Look for large swings in both demand and supply here. By 2021, as the economics of housing returns to fundamentals, we expect an array of factors to result in a weaker market with some downward pressure on prices...Overall, as the fog clears, we expect to see average prices 5-10% lower relative to 2019 levels, with high cost units in the high-rise segment of the market seeing the most notable price declines."
What all of this means is, if you're a buyer with stable income, this could be a great time to get a deal on a home that might otherwise be out of your price range. Mortgage rates are at a historic low and are expected to remain that way until 2022. If you're a seller, things are a bit more uncertain. As seen in the early part of the year, there is pent up demand for housing suggesting that buyers will head back to the market once it is safe to do so. I recommending waiting for now but making sure you're ready to list when things improve.
Selling a Home During COVID-19
Over the course of pulling this update together, I've noted the way various economists have characterized the housing market. "The housing market is frozen" said CIBC economist Benjamin Tal. "The housing market has, in unprecedented fashion, effectively shut down and closed for business," said Bank of Montreal economist Robert Kavcic. According to OREA (Ontario Real Estate Association) CEO, Tim Hudak, "We have asked realtors to advise their clients to put non-urgent real estate transactions off until the State of Emergency has been lifted..." So it's no surprise that, unless it is absolutely essential, most people aren't thinking about buying right now.Accordingly, in a recent survey conducted by Point2Homes, 86% of realtors said they have noticed a significant drop in homebuyers interest.
The question is when homebuyers do become interested again, how will things have changed and what is the implication for selling a home?
I think the answer is that we will all have become more aware of our physical proximity to others. Some of the shifts we have made towards using technology, such as using online virtual tours and electronic documents and signatures will likely continue.
The traditional weekend open house will lose popularity in favour of real-time virtual open houses and individual scheduled showings.
The focus on physical distancing, disinfecting and making things contact-less as much as possible will also most likely continue.
That said, the fundamentals won't change. If you provide a good product (repair, de-clutter and stage the property as necessary), price it properly and market it effectively you will generate demand and be able to sell your home for top dollar. If you have any questions about how to sell during COVID-19, please feel free to email them to me. You can also refer to this post on my blog Selling a Home During The COVID-19 Pandemic.
Help for Homeowners
Stage One of Reopening Ontario
Last Thursday, the Ontario government announced the first stage of reopening to take place, starting Tuesday. Retail stores with street entrances can begin to open along with car dealerships, pet services, household services and media businesses. Some medical services, such as scheduled surgeries and counseling will start up. Some individual sports activities such as rowing, racquet sports and track and field will resume. Construction projects will resume. Outdoor recreational facilities such as golf courses, marinas and private parks were allowed to open beginning on Friday to enable people to use those facilities over the May long weekend.Physical distancing and staying home as much as possible are still expected, and gathering with people outside of immediate family members is still prohibited.
Benefits Introduced or Revised Since the Last Update
May 7 - A wage top-up for low-income essential workers earning less than $2500/month is announced.May 8 - The emergency wage subsidy program is extended to the end of August to help employers keep employees on the payroll.
May 11 - The Large Employer Emergency Financing Facility (LEEFF) is announced. This support will provide bridge financing to Canada?s largest employers to help them avoid COVID-19 related bankruptcies and protect workers? jobs.
May 12 - Help for seniors, including a one-time payment of $300 and additional funding for community organizations that improve the quality of life for seniors, is announced.
May 13 - The federal government provided more information about the Regional Relief and Recovery Fund (RRRF) help for small businesses.
May 15 - Qualifying post-secondary students can begin applying for the Canada Emergency Student Benefit.
May 15 - A wage subsidy for medical researchers is announced.
Details for all of the above can be found here.
If you missed the last update, you can read it here.
That's it for now. Please let me know if you have any questions or feedback for me at Stephanie.hebb@royallepage.ca.
Stay home and stay healthy.
Steph
More reading:
https://economics.cibccm.com/economicsweb/cds?TYPE=EC_PDF&ID=10932
https://www.livabl.com/2020/05/mortgage-rates-historic-lows-2022.html
https://www.livabl.com/2020/05/falling-home-listings-keep-prices-stable-pandemic.html
https://www.realtor.ca/blog/postpage/13219/3195/canadian-home-sales-and-listings-post-record-declines-in-april-2020
https://trnto.com/toronto-real-estate-sales-down/
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