Week 142: Massive layoffs are booming, does this signal a new market crash?

Another week of layoffs from major corporations around the world. But more importantly, here in Toronto. So far, the majority of layoffs are in the tech sector.

Are we in for a dot com crash-type crash experience?

It was tough to understand the valuations of some of these companies. Even the real estate brokerage called Properly laid off 71 employees across the country last week. How the hell did they even raise over $192 million since 2020, with 36 million being raised just this past August?

A basic “iBuyer” program that promised to buy the client’s home if it didn’t sell on the market. How does a company like that show value during two of the most booming real estate years Toronto has ever seen? Of course, homes were going to sell, but somehow they raised this cash, bloated their workforce and folded at the first sign of trouble.

Urban Markets: Downtown & Surrounding Areas
House Average Price: $1,471,057
House Median Price: $1,200,000
505 Active Listings
41 Firm Sales This Week
Months of Inventory (MoI) ~ 1.78 (up from 1.72 last month)
Average Days on Market ~ 14.85

Condo Average Price: $807,071
Condo Median Price: $685,000
1589 Active Listings
69 Firm Sales This Week
MoI ~ 2.25 (up from 2.15 last month)
Average Days on Market (DOM) ~ 23.07

These tech companies that try to “disrupt” the real estate industry keep making the same mistakes. They have this foolish idea that tech can replace humans in extremely emotional real estate transactions. But they can’t. Well, not until Artificial Intelligence becomes a thing. Most of what people call AI today isn’t that. You need the power of Quantum Computing for AI to truly replace humans; we’re just not there yet.

One major red flag as an investor today is a tech company trying to get into Real Estate and replace humans. It shows me that they don’t understand humanity and how humans make decisions.

Any real estate startup could have been successful in 2020-2022. Any single one. But they ALL folded at the first sign of the market turning.

Why? Because buyers and sellers turned to humans like me for guidance. They turned to the people they’ve known and trusted with their financial future and real estate portfolio for context and calm.

Urban North: Rosedale, Deer Park, Moore Park, Forest Hill, & Lawrence Park
House Average Price: $2,926,504
House Median Price: $2,722,500
148 Active Listings
10 Firm Sales This Week
MoI ~ 2.78 (up from 2.49 last month)
Average Days on Market ~ 13.4

Condo Average Price: $1,187,778
Condo Median Price: $974,888
218 Active Listings
5 Firm Sales This Week
MoI ~ 3.04 (up from 2.47 last month)
Average Days on Market ~ 22.8

The very market that could use a service like Properly’s is this one. Not the bull market we just came out of. Of course, they were successful then. But in a bear market, money is tight. The money they need to follow through on their guarantee to buy your home if it doesn’t sell. And now, there’s a very good chance it won’t sell. But there was zero risk in the last 24 months of bull market mayhem. Zero risk. Everyone looked like a hero, including Properly. But where are you now when the market needs you?

I’m still here helping calm and inform buyers and sellers.

Let’s wait for the next market boom for these “heroes” to resurface, but until then, The Spring Team and the other real estate professionals will keep working and making things happen for our clients.

So let’s talk about the market.

You can see once again that supply is holding firm. From now until Jan 1, there should be minimal movement in supply and buyer activity will dwindle as we hit Dec 7th’s rate announcement.

Leaside, Davisville, Yonge & Eglinton
House Average Price: $1,676,271
House Median Price: $1,410,000
38 Active Listings
5 Firm Sales This Week
MoI ~ 1.70 (up from 1.35)
Average Days on Market ~13.4

Condo Average Price: $717,600
Condo Median Price: $748,000
157 Active Listings
5 Firm Sales This Week
MoI ~ 2.49 (down from 2.61 last mth)
Average Days on Market ~ 35.5

Buyer activity should remain relatively low but stable if they announce a continuation of rate hikes into 2023. The real unknown right now is jobs.

I started to talk about this a few months ago, but I felt the issue’s importance as of last week’s post.

What should you be doing right now?

Existing homeowners should evaluate their current living and lifestyle to determine if a move-up is required. If you are in a position where you need more space, a bigger home, different community for school or work that is more expensive, now’s the time to make that move. They should be the only sellers on the market right now.

Buyers should look for shorter-term fixed rates as we will see some downward pressure on rates in 2023, but they’ll take a while to come down, so don’t lock in a 5+yr mortgage product now. I’d look at 2-3yr options so you can break and get into a lower-rate product when the market allows.

The one crazy thing is that buyers are all still being stress tested. Despite today’s high rates, every borrower is approved at around 8%. So if that doesn’t comfort you, then I don’t know what will.

Birch Cliff
House Average Price: $840,000
House Median Price: $840,000
22 Active Listings
1 Firm Sales This Week
Months of Inventory (MoI) ~ 0.93 (down from 1.36)
Average Days on Market ~ 6

I predict a change to the stress test in the following announcement. Regardless of what happens to rates, the change to the stress test will awaken some buyers and bring a little more activity to the market.

Looking at CMHC’s mortgage delinquency data Canada, and Toronto more specifically, mortgage defaults are at historical lows. Only 0.06 mortgages are delinquent, which is well under the Canadian average of 0.16%.

These are the latest numbers from August 2022, when the market had already turned. We may see this number tick up slightly as we get the numbers from Q3 and Q4 of 2022, but overall, I don’t expect a flood of bank sale properties, aka Power of Sales.

So those that are waiting for fire sales will likely be waiting for a long time while opportunistic investors are scooping up properties daily.

Kingston Rd Corridor to Highland Creek
House Average Price: $895,000
House Median Price: $890,000
66 Active Listings
5 Firm Sales This Week
Months of Inventory (MoI) ~ 1.45 (down from 1.56)
Average Days on Market ~ 11.2

Condo Average Price: $435,000
Condo Median Price: $435,000
68 Active Listings
2 Firm Sales This Week
MoI ~ 2.81 (up from 2.72)
Average Days on Market ~ 29.5

Speaking of which, I have an assignment already tenanted, and the asking price is under the original purchase price. Text or WhatsApp me for details (416-434-1511)

Anyway, buyers, make sure you’re holding back and not making out on your purchases today, as cash will be King in the coming year to take advantage of all kinds of great deals on luxury items people will be selling off. From cottages to Rolex watches, there’s currently a great discount on them, which should continue to slide.

But real estate in major hubs like Toronto that’s the last thing people are going to fire sale. If at all.

Any questions? The entire team and I are here to help. Email/comment/text/smoke signal, and we’ll get back to you.

Have a wonderful day, and I’ll see you next week. Don’t forget to subscribe to the blog so you get this in your inbox asap, and we’ll see you on Youtube!

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