Episode 112: Rural areas (bergs) feeling some pain while urban areas and some burbs continue to thrive

Throughout most of my life, I haven’t been responsible with money. I didn’t put a penny away for savings and went into debt. So, when I pulled my life together, real estate allowed me to play catch up. I bought whatever I could whenever I could.

Many buyers are unwilling to make serious compromises to get into the market. I would have loved to be in the Leslieville area or the beaches when first looking in 2005. But, that wasn’t possible, so I bought a condo at Bayview and Sheppard. That’s all I could afford.

Six years later, I could afford my dream loft in Leslieville. You can get whatever you want, but sometimes you have to baby step your way there.

Now that I have my daughter, I’ve been a little more responsible by taking advantage of the RESP programs and other things for her. I even bought her a condo a few months ago (she’s only six, but I can’t wait to give her those keys). So hopefully, we can get her started miles ahead of where my parents did and where I did.

Real estate does that. I should rephrase. Toronto real estate does that. Our market has proven to be resilient. Some investors look for cash flow. I look for value and long-term predictability. Markets outside of our urban communities are too volatile. As much as I’d love to pocket a few grand a month from rentals, I’d rather have my costs covered by a tenant and know that when/if I ever need to sell, the process will be a relatively predictable one.

Look at the “bergs” I referenced in week 107’s update. During this down cycle, we’re not going to see the traditional suburbs take a hit; we’re going to see the Bergs take a hit. The more rural communities are further out than the suburbs. The communities that only got attention because they were a cheaper option than the booming suburbs.

If the market you’re considering buying in isn’t built around some serious employment, tourism, entertainment and transit, you will have a less predictable future. I’ll sacrifice cash flow all day long for security.

Anyway, how’s the market right now, and what does it all mean to you?

The market is attractive right now. Some homes are flying off the shelves, and others are sitting for longer than expected.

If you’re a seller right now, you’re not guaranteed a new record-breaking sale. But, record-breaking sales are still happening, like a semi on Garden Ave. near Roncy that sold for $3.3mm and dozens of other top-shelf properties that buyers couldn’t resist.

Q4 and Q1 in Toronto were the best times in the history of Toronto real estate to be a seller. Each sale set a record—week over week, day over day, month over month gains. I urged you to get to market then. URGED YOU! But, some still argued that the spring market would be better. We don’t have a crystal ball or anything, but we do.

What’s the buzzword during those boom times? “This isn’t sustainable” well, duh! Of course, those gains were going to come to an end.

Predictably condo listings are now up 109% from February (635 to 1300 units for sale)? That’s still just over one month of inventory. Grossly undersupplied still. This is why we continue to see multiple offers on quality units.

House supply is also up 71.7% since February. Again, months of inventory is just over a month. Grossly undersupplied. This is why choice homes are getting intense attention and selling for big numbers.

You may have even been unlucky enough to see the post below that showed these similar townhomes sell for $400K apart. One sold in February (remember, historically low supply) and the other just a few days ago.

Sharers of this info are neglecting to consider the big picture. In the image below, you can see that all of the sales in the area are relatively similar in price and appropriate according to the condition of the homes. The picture above doesn’t acknowledge that this was an anomaly.

It’s also in the Bergs (referenced above), which we know isn’t all that stable, to begin with.

It’s not a “gotcha” moment by a real estate bear; it’s out of context fear-mongering. You’re going to see a lot of this. You’re going to hear a lot of “but I know a guy who_______” insert triggering market indicator in the blank.

So, we have interest rates climbing now. I discussed this in last week’s report, and we also ran a webinar on the topic last week. You could respond to this email if you didn’t receive a copy of the replay.

The last increase of 0.5% was the most significant in over 20 years.

The subsequent increase could also be a 0.5% increase. You’re going to see “largest increases ever” type headlines all over the place.

Please keep in mind that it’s still incredibly inexpensive to borrow. Especially a variable rate mortgage. But, also understand that rates will be higher by the end of 2022. The bank of Canada rate currently sits at 1%. After the next hike, we may be at 1.5%. There are four more announcements after that. Could we have four more 0.5% hikes?

Not likely, but I guess anything is possible.

Before COVID, the spread between variable and fixed was narrow. But, as rates dropped, variables became super cheap. So, by the end of 2022, we’ll see that spread thin where variable rates will be relatively close to fixed rates.

I’m still a variable rate borrower through and through, and most of you should be. For me, it’s more than just the rate. It’s the terms. I can break a variable-rate mortgage with minimal fees while breaking a fixed-rate mortgage could cost tens of thousands.

Flexibility is critical for me and should be for most of you, especially if you’re young.

So far, none of the measures taken by the provincial and federal governments have solved a damn thing. But, you know what didn’t happen? The 35% down payment requirement didn’t happen; rent control is still not in newer builds, and development charges are increasing, making entry-level condos even more expensive.

You can talk about these short-term market changes until you’re blue in the face, but when you’re ready to retire, your Toronto property will give you access to a much more comfortable retirement.

Last week another realtor told me that they thought my updates were terrible because I say real estate always goes up. I asked that person if they knew how to read. Does my message come across that way to you? Just in case it does, please allow me a moment to clarify.

Real estate doesn’t “always go up.” As we’ve seen in previous moments, Toronto real estate has ebbed and flowed, but it’s always come back. As long as you’re a long-term thinker, you will win no matter when you buy.

Have a terrific Tuesday, everyone!

Have a question about something you’ve seen another realtor post? Ask! I guarantee you there will be more to the story.

Have a wonderful day, and don’t forget to share this. We have over 42,000 subscribers, and the list keeps growing.
Thank you for that!

Don’t forget to follow us on Instagram and Facebook. We post some real-time stats on our channels you don’t want to
miss. You can also catch up on my 2022 real estate forecast post here.

And, please find me on Twitter as I’ve been more active there these days.

That’s all for today; thanks so much for your energy and attention. If you want some clarity on the market and your
specific situation, please DM, comment below or email Ara@thespringteam.ca.

Urban Markets: Downtown & Surrounding Areas
House Average Price: $1,854,827
House Median Price: $1,610,111
455 Active Listings
66 Firm Sales This Week
Months of Inventory (MoI) ~ 1.072
Average Days on Market ~ 11.15 DoM

Condo Average Price: $896,818
Condo Median Price: $790,000
1308 Active Listings
124 Firm Sales This Week
MoI ~ 1.12
Average Days on Market (DOM) ~ 12

Urban North: Rosedale, Deer Park, Moore Park, Forest Hill, & Lawrence Park
House Average Price: $3,536,929
House Median Price: $3,075,000
114 Active Listings
14 Firm Sales This Week
Months of Inventory (MoI) ~ 1.47
Average Days on Market ~ 10.21 DoM

Condo Average Price: $1,150,300
Condo Median Price: $782,500
190 Active Listings
10 Firm Sales This Week
MoI ~ 1.76
Average Days on Market ~ 7

Leaside, Davisville, Yonge & Eglinton
House Average Price: $2,206,400
House Median Price: $2,050,000
36 Active Listings
5 Firm Sales This Week
Months of Inventory (MoI) ~ 1.07
Average Days on Market ~ 7 DoM

Condo Average Price: $863,409
Condo Median Price: $800,000
129 Active Listings
11 Firm Sales This Week
MoI ~ 1.18
Average Days on Market ~ 12 DoM

Birch Cliff
House Average Price: $1,436,875
House Median Price: $1,259,000
21 Active Listings
8 Firm Sales This Week
Months of Inventory (MoI) ~ 0.98
Average Days on Market ~ 9.4 DoM

Kingston Rd Corridor to Highland Creek
House Average Price: $1,384,306
House Median Price: $1,187,500
87 Active Listings
18 Firm Sales This Week
Months of Inventory (MoI) ~ 1.10
Average Days on Market ~ 9.4 DoM

Condo Average Price: $714,583
Condo Median Price: $760,000
38 Active Listings
6 Firm Sales This Week
MoI ~ 0.63
Average Days on Market ~ 8.63 DoM

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