Take A Breath - It's Not That Bad

By: Lee Lander

Take A Breath - It's Not That Bad

Tags: Real Estate, East Gwillimbury Real Estate, Real Estate Market

It seems everyone is doing their best Chicken Little routine these days when commenting on the real estate market: “the sky is falling.” It doesn’t matter whether it’s the traditional news outlets, the online bulletin boards or chat rooms, or simply around the office water cooler, the consensus is that the market is crumbling into a disastrous pile of rubble.

Considering only the last 18 months or so then perhaps this analysis is not too far off. According to the Toronto Regional Real Estate Board’s MLS data, in July of this year the $1.160M average sale price in East Gwillimbury was the lowest it's been since January 2021, and a significant drop from the January 2022 record high point of $1.662M. Transaction activity has followed a similar path: 26 sales in July versus an all time EG record high of 130 sales in March of 2021.

The big problem with this relatively short term view is that real estate, for most people, is not a short term game. Data from the Canadian Association of Movers says that Canadians on average move 5-6 times over the course of their lifetime, that 28% of homeowners get the urge to move every 5 years, and that only 14% of homeowners look to move every year.

For the benefit of the above noted 28%, let’s consider how the current EG market might impact them based on when they bought 5 years ago...

In July of 2017 we had coincidently just come out of another period of crazy strong pricing and sales activity. Looking at the last half of 2017 there was an average of 24.5 sales per month between July and December. Pretty close to the same volume as in July this year. So the market activity seems to be pretty close to when they purchased.

Of course more importantly they would be concerned with how much their current home is worth when selling now. The average sale price in EG from July to December 2017 was just over $819K. Based on the recorded historical value of Canadian homes since the 1950’s we typically expect the annual increase to be about 5%. Therefore the homes our would-be sellers bought 5 years ago would be expected to have a value of $1.046M, over $100K under the actual average price for EG sales in July 2022.

So are these sellers going to realize the maximum pricing they could have at any time over the 5 years they owned? No. A few months ago would have netted them much bigger gains. But the math above suggests they can still sell in today’s market for more than we would have reasonably predicted 5 years ago.

Hardly a disastrous pile of rubble.

Of course, the volatility of the past 18 months is likely to have caused bigger problems for the 14% of homeowners who like to buy and sell frequently. But the vast majority of Canadian homeowners, the ones who do not make a habit out of buying and selling often, have not lost any real money from their pockets due to the changing market conditions.

What does this mean if you are in, or considering getting in, the market right now? Well first and foremost, the opportunity for bags of extra cash seems to have gone away for the time being. So if your motivation is nothing more than to take the money and run (some would say greed) then you’ve missed the boat and maybe want to wait a bit longer.

But if you’re considering a move for one of the more likely non-real estate related life events - family size increase or decrease, job relocation, or retirement, chances are you’re going to make out just fine.
For sure it’s easy to get caught up in the rhetoric, especially these days when social media seems to have created so many more experts on every topic imaginable, real estate included. But buying or selling your home is likely not a decision you’re taking lightly, so don’t simply rely on what you see, hear, or read in the headlines or other sources of noise.

Take some time to cut through the clutter and find out how things apply to your circumstances. You may find that the sky isn’t actually falling.

And maybe, just maybe, the Chicken Littles aren’t necessarily right.