Here Is Why The Condo Market Is In A Slump And Will It Get Any Better This Fall? | Reality Check

Summary

In this video, real estate expert Nadim discusses the current trends in Toronto's real estate market, focusing on the summer months of June, July, and August. He highlights a slowdown in sales, an increase in active listings, and falling prices, especially in the condo market, which has seen a significant drop in demand. Detached homes, however, have held steady due to limited supply. Nadim predicts market conditions may improve with future interest rate drops, advising potential buyers to act now before prices rise as the market heats up.

Takeaways

• 🏠 The Toronto real estate market saw a significant slowdown during the summer months of June, July, and August, with a drop in the number of sales and rising active listings.
• 📉 Average prices in Toronto decreased by 0.8% month-over-month, with the average home price in August being around $1.074 million.
• 📊 Active listings increased by 46% in August, reaching 22,600 listings, leading to 4.5 months of inventory in the market.
• 🏙️ Condos in downtown Toronto were hit hard, with 7 months of inventory available, leading to a significant price drop of about 8-9%, making it the largest decline seen in a while.
• 🏡 The detached home market in Toronto remained strong, with prices increasing by $50,000 due to a lack of supply, particularly in larger, family-friendly units.
• 📈 Buyers looking at the market should pay attention to months of inventory and average prices, as these metrics indicate whether it's a buyer's or seller's market. A market with under 3 months of inventory favors sellers, while over 4 months indicates a buyer's market.
• 📉 The expectation is that interest rates will drop further, improving market conditions and possibly absorbing more inventory as demand returns.
• 🏢 In regions like York, the condo market remained more stable compared to downtown Toronto, with prices holding steady due to fewer new builds and consistent demand.
• 💡 Investors are encouraged to consider larger units, as they are predicted to see greater value appreciation due to increasing demand and limited supply, while smaller units face oversupply and pricing pressure.
• 📅 The real estate market in Toronto is expected to improve slowly in the fall and winter of 2023, with potential growth and rate drops seen fully impacting the market by early 2025.

Q & A

What is the current state of the Toronto real estate market based on the August stats?

The Toronto real estate market has experienced a slowdown during the summer months, with sales down by 5% year-over-year and active listings up by 46%. The average price in August was $1.074 million, showing a slight decrease of about 0.8% month-over-month.

What does 'months of inventory' mean, and how does it affect the real estate market?

'Months of inventory' refers to the amount of time it would take to sell all available listings at the current sales rate. In August, the Toronto market had 4.5 months of inventory, which is increasing due to a buildup in active listings. Higher months of inventory typically indicate a buyer's market, while lower months suggest a seller's market.

How has the condo market in downtown Toronto been affected recently?

The condo market in downtown Toronto has been hit hard, with seven months of inventory reported in August. This is higher than during the COVID-19 period and is primarily due to a significant number of condo units coming onto the market after occupancy, which has led to lower demand and a decrease in prices.

What is the difference between the Toronto and Durham regions in terms of real estate market conditions?

While Toronto had five months of inventory in August, indicating a slow market, Durham had just over three months of inventory, suggesting a much more active market with less available supply. This highlights the regional differences in real estate conditions within the GTA.

What is driving the decline in condo prices in Toronto?

The decline in condo prices in Toronto, especially the 8-9% drop in August, is largely driven by an influx of newly available units after occupancies, particularly in the downtown core. This has increased supply significantly, outpacing demand and putting downward pressure on prices.

How are larger units, like detached homes and three-bedroom condos, performing compared to smaller units?

Larger units, such as detached homes and three-bedroom condos, are performing better in the current market. Their prices have remained steady or even increased, driven by limited supply and strong demand, especially among families. In contrast, smaller units like one-bedroom condos have faced price declines due to oversupply.

Why might it be a good time to buy a larger condo unit in Toronto?

Larger condo units in Toronto, especially those around 1,000 square feet or more, are becoming increasingly valuable due to growing demand and limited supply. As the population continues to grow, these family-friendly units are expected to appreciate at a higher rate compared to smaller, investor-driven units.

What factors should buyers consider when deciding whether to purchase now or wait for further rate drops?

Buyers should consider both current prices and the potential for future rate drops. If they wait too long for rates to fall below 4%, the market may heat up again, leading to higher prices. Purchasing now could allow buyers to lock in a good deal and take advantage of potential rate drops by the time their closing occurs.

What are the key indicators to watch when assessing the real estate market?

The two main indicators to watch are 'months of inventory' and 'average prices.' Months of inventory helps determine whether it's a buyer's or seller's market, while average prices provide insight into the overall trend in property values.

How might the real estate market change by early 2025, according to the video?

By early 2025, the market is expected to improve, particularly if there are more interest rate cuts. If rates drop further, the months of inventory could decrease as more buyers enter the market. February 2025 is anticipated to be a stronger time for sellers, with prices likely to start rising again.