Eric | Jul. 12, 2020
Pent up demand? Flight from larger cities? Movement from higher density living arrangements? A need for a more comfortable place to work from? Or, are things simply back to normal?
The June numbers are encouraging. I’m cautiously optimistic. But, there are reasons for the market’s quick snap back and those reasons may not be the start of a trend or a return to normal. The risks – the unknown risks to our economy, employment and Real Estate market – are lurking. Governments have acted like drug dealers pumping free steroids into the economy. Direct payments of money, credit, loan payment deferrals, expansion of balance sheets through bond and corporate debt purchases, and business loans with easy terms: all necessary steps to prevent economic fallout…but are these measures simply delaying the inevitable, or even worse, creating bubbles in equity markets and in real estate that will create an economic problem that will be exponentially worse. Credit and debt levels prior to C19 were already at all time highs. What happens when banks start asking for mortgage payments and Trudeau stops sending out CERB payments – And we don’t get back to pre-C19 employment? I haven’t seen one bank sale posted on MLS since March. I really wonder what will happen in the fall when the free drugs stop.
CMHC put out a 2020 Housing Market Outlook. They are anticipating a 9-18% average price decline from pre-C19 level. Hard to believe when we look at what the average price of a single-detached home just did in the last 12 months: jumped an average of $81,634. That means that the average home was appreciating by $6800 per month! We’ve seen home prices move up and up – could it be that prices drop 9-18%? In February of this year, the average price of a single detached home was $673,231 – this would be the average pre-C19 price. CMHC is saying we could see the average price drop from there a whopping $60,590 to $121,181. With demand as hot as it is and supply an issue we may not see this kind of a shock in KW, but it is realistic to think that Real Estate prices may cool.
Sales for June are up 57.6% compared to May and up 2.1% vs June of 2019.
413 Single Detached homes sold – up 1.7%
67 Condominiums sold – up 36.7%
134 Townhomes sold – down 15.7%
59 Semi-detached homes sold – up 31.1%
Overall 2020 year-to-date sales are down 15.6%.
We did see 920 listings hit MLS in June. But with just 1.4 month’s worth of home supply and the average days on market at 16, I think sales will still be down as some Buyers get discouraged, can’t find a suitable house, and get priced out of the market as prices continue to soar.
The average sale price of all Residential Real Estate jumped 12.8% compared to June last year. This is definitely the result of Buyers chasing the short supply of homes.
Average price of a single detached home: $698,736 – up 13.2%
Average price of an apartment condo: $372,392 – up 13.2%
Average price a townhouse: $457,851 – up 11.4%
Average price of a semi-detached home: $504,816 – up 17.3%
The uncertainty in the world about what happens next on a Virus front and on an economic front has it feeling like we could wake up tomorrow to a different world. However, I think we have come to realize that this is not the plague that will wipe us off the planet. While we cheer that we aren’t going extinct I think we should take a minute to reflect on the impacts of living with C19 and potential Viral threats in the future. Residential Real Estate – our homes – is set to become an even larger part of our lives as we continue to work remotely, children learn from home, and stay-cation in place of travel.