Eric | Oct. 22, 2019
We have been talking about the divergent markets in Real Estate for a while now. Homes below the $600,000 price point are selling fast and in multiple offer scenarios while homes above $600,000 are moving a lot slower,and homes at the top end are not moving well at all. Lower priced homes are driving this market and from an overall standpoint the strength and volume of what’s happening there is dominating the averages. Confusion is created simply because lower priced homes have appreciated big time over the last 2 ½ years whereas higher priced homes have values that have moved sideways and in some cases fallen in value.
Prior to 2016, homes were not the money-making investments they are now expected to be – especially higher priced homes. If you bought a home, added your touch as most home buyers do, you would be looking at about 4-5 years before your home’s value was at a break-even point. Now, the expectation across the board is that when you get the keys for your home, it should be worth more than what you paid for it. That is just not the case right now. Let’s recall what a home is for: shelter. It is a shelter from a Canadian Climate that literally tries to kill you for 6 months of the year. We need a home to stay alive – more so than we need it to make us rich. Maybe the younger generation has it right: rent shelter to prevent death, spend money on whatever (Apple watches, metal straws, water bottles, Skip the Dishes delivery, Starbucks, beard gel, etc.) and find richness through zero responsibility….yeah right!
Everyone wants to own a home, even Hipsters and VSCO girls! Owning a home will always be a great long-term investment. Yes, we got lucky recently with being able to create wealth quickly via real estate. I think those quick appreciation days are behind us for now and we’ll see a return to a steady pace in the short term. I guess what I’m trying to say is: be cautious but don’t freak out 😊 Owning a home is still cool.
There were 811 Residential properties listed during the month, down 2.1%, while active listings at the end of the month stood at 775 which is a drop in supply of 21.7% vs September last year. At this point we have had less than 2 months of home supply for 3 years: Demand has been strong.
September Total Sales: 526 UP 17.7% vs September 2018
330 Single detached sales UP 20.4% vs September 2018
38 Condo sales DOWN 42% vs September 2018
125 Townhome sales UP 34.4% vs September 2018
33 Semi-detached sales UP 10% vs September 2018
Average single detached home price in September: $612,643 UP 7.1%
Average Apartment style condo price in September: $335,110 UP 3%
Average Townhouse price in September: $439,522 UP 16.3%
Average Semi-detached price in September: $459,588 UP 18.9%
The Median price of all homes sold moved up 12.6% to $510,000
Average Days on Market dropped by 3 days to 22 in September.
The apartment style condo market is currently being re-priced. The new price per square foot is close to $700 now. This is due to expiration of Development Charge credits and a corresponding increase in those charges along with increased costs to build (Land, Labour, Materials). There is an opportunity to pick up a resale unit that hasn’t caught up yet. Resale condos with a parking space at 600 sqft are priced at about $355,000. Those same units in the new buildings are priced closer to $420,000.
Buying a home under $500,000 is almost impossible. If you are looking for a home in this price range and are considering spending some money to update the home, it may make more sense to buy a more expensive home that is already updated. Higher priced homes are a better value right now.
Rent continues to rise, and there is a great tenant base out there. Especially around Google where they are building another 300,000 sq ft of office space for their expansion in Kitchener. Rents are slow to adjust because of rent increase rules, but as soon as a tenant moves out rent can be increased. There are rental properties that are priced based on their existing rental income and therefore are based on a suppressed CAP rate. These are good opportunities.
Mortgage rates are low. Very low. If you have a mortgage that is renewing in the next year or so, chat with your Lender. If you haven’t thought about it in a while, maybe see what’s out there. There is a lot of money to save if you shop around do some planning with your mortgage(s).