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Toronto Market Update – January 2022

Toronto Market Update – January 2022

3200 Homes for sale in the GTA

That’s the headline that is dominating the real estate world as we enter 2022. Inventory is LOW. LOW low. Like, lower than Lil Jon in 2002, low. 

By comparison, in December of last year, there were 7900 homes available. The year before, that number was 7400. This is a tale seemingly as old as time. We certainly feel like we’ve been telling you the same thing each month for the last few years. Toronto has an inventory problem, and a 59% drop in active listings from last year sounds pretty scary. At the rate homes were selling, that was only two weeks of inventory in the GTA.

But, don’t go hitting the alarm bells just yet. You know we love to make sense of sensational headlines here at SO&Co. And we want to make sure you’re armed with all the information you need to make sound real estate decisions.

There’s a seasonal factor at play here. People don’t want to sell their homes in December. They’re busy with the holidays and with family. Most people moving in December are doing it because they HAVE to. With the pandemic still ongoing, and remote work becoming more and more feasible–and commonplace, it’s not all that surprising that fewer people are being forced to relocate.

We’re confident that as we come into spring we’ll see more homes come to the market. Will the extra inventory be enough to help take the pressure off of pricing? Probably not as much as we would like, but the situation shouldn’t seem as dire. 

 

 

Prices skyrocket 17% across the GTA

Admittedly, another scary headline. Along with those record low inventory levels, came an astonishing 17% price increase in the GTA. In fact, the average price of a home just hit $1,157,849 for the first time–That’s a lot. But, let’s take a closer look at the numbers.

You may be relieved to find out that the average price in Toronto is only up 7% over last year. Why? Because homes in the city were already expensive, and buying power isn’t limitless. The areas that are driving the double-digit price increases are out in the burbs where homes are still more affordable.

Remember last year when we told you that buyers were leaving the city in droves to find more space? That’s catching up with us. Brampton saw a 24% jump in average price. York Region saw a 21% increase. Oakville homes went up 19%. And Durham? A staggering 31% average price increase! But, none of this should be a surprise. It’s basic economics. As demand goes up and supply goes down, prices are forced upwards. In December, there were only 106 active listings in Brampton; and Durham only had 9 days of available inventory. Talk about pressure!

So, how does this end? Our housing dilemma is two fold:

1- Those rock bottom interest rates we’ve enjoyed for the last few years are a double-edged sword. On one hand, it’s never been a better time to borrow money. Even with astonishing price tags on homes, low interest rates have meant that more than half of your first mortgage payment will go to your principal. That’s money right back in your pocket! On the other hand, it’s never been a better time to borrow money, so everyone is doing it. As long as super low interest rates are around, demand for housing will continue to push available inventory to its limit and we’ll continue to see prices increase.

2- There simply aren’t enough homes. This isn’t even just a Toronto problem–it’s a Canada problem. Our nation has the lowest rate of housing units per capita of any G7 country, and there’s a whole lot of government red tape in the way of meaningful development. The good news is, the feds seem to be ready to do something about it. For the first time in decades, the federal cabinet includes a housing minister and our PM has issued a mandate to ensure a more stable Canadian housing market. Obviously the problem won’t go away overnight, but at least someone is taking notice.

Our prediction? 2022 will look like 2017 2.0. We’ll probably see more price increases, but the current rate of growth isn’t sustainable. Likely, some levelling out is on the horizon. 

 

Let’s talk about Co-owning

So we know that prices are still going up and inventory levels aren’t hitting the targets we need them to, but knowing these things isn’t going to help you buy a place. It might be time to consider a creative solution to your housing conundrum. Let’s talk about co-owning.

If you’ve never heard of co-owning, you’re probably not alone. A co-ownership situation is when two or more people come together to purchase a home. There are two ways this can be done. Joint tenancy–similar to a couple purchasing together, is an agreement where all owners have an interest in the investment. If one owner passes away, their share goes to the other owner(s);  In a tenants-in-common agreement, each tenant owns a portion of the property, which, in the event of their passing, would become part of their estate. 

This solution is, admittedly, not without its challenges. But, it could be an excellent opportunity to propel you into a higher housing bracket that you may not have been able to consider on your own. If you think this might be a good option for you, be sure to work out all of the finer details ahead of time and get them in writing.

Want to read more about a real group of friends who entered into a co-ownership situation? Our own Danielle Demerino helped her clients do it a few years ago. You can read more about them on Toronto Life.

 

If you have any questions about your specific situation, or you want to nerd out on real estate news, reach out. We’re always here to talk.

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