10.27.20 | Business

A Housing-Friendly Recession: Will it Last?
It has taken me a little longer than usual to provide my commentary on the TRREB September Housing Market Statistics. The reason for this delay is that I have never before felt more at odds with the eye-popping and rosy read a quick review of the numbers give.
Take for instance these numbers:
  • 42.3% increase in sales activity between September 2019 & September 2020
  • 14% increase in the Average Selling Price – September 2019 vs September 2020
  • -35.3% on Days on the Market for new listings


From a cursory glance at figures like this, one would assume that once again, the Toronto real estate market is HOT, HOT, HOT.
But, dig a little deeper and there are multiple factors affecting the residential real estate market and these numbers that are unique to the COVID-19 era we are now living in.
Counter the numbers above with the following points:
  • Yes, September 2020 sales were way up compared in September 2019. But much of this uptick can likely be attributed to pent-up buyer demand that was a residual of the Spring lockdown when real estate transactions virtually stopped entirely. This pent-up demand is now waning.
  • The Average Selling Price disguises the fact that there are now more higher-priced homes selling that your typical “average” priced homes. This is due to the fact that there are many dual-income households that have not been financially affected by the pandemic. In fact, these households are in better financial shape than ever before with greatly reduced expenses (think; no travel expenses, lower entertainment/dining-out expenses, shopping/consuming less). Now, these households are buying bigger/more expensive houses than ever before to satisfy their need for additional space (eg. home offices, kids playrooms, big backyards). So, a higher Average Selling Price is not happening for everyone, more for the lucky folks whose income has not taken a hit during the pandemic.
  • A decrease in Days on the Market again can be attributed to some extent due to the above 2 points and combined with lower interest rates/borrowing costs.

I would like to end off my commentary by quoting a research paper written by Benjamin Tal, Deputy Chief Economist at CIBC who has great insight into the housing market. Here is a link to the article –

The entire report is a worthy read and it ends off with a less-than-rosy prediction of what is to come in the months ahead for the residential real estate market:
What’s Next 

We doubt that the current level of activity is sustainable. The pace of economic growth will drop alongside temperatures. A second wave of the virus will have a negative impact on confidence and job security will start to erode, as the longer duration of the crisis will result in negative spin-offs that will start to impact sectors and jobs that so far have been unaffected by the virus. We, therefore, expect sales to stabilize at a level below their long-term potential, while home price inflation will moderate notably, and, in fact, might fall into negative territory as we approach the winter months. Consistent with the analysis above, we expect ground-oriented units to show comparably better performance than the highrise segment of the market.

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