LACKIE: Housing market shows little indication of cooling anytime soon

Date showed second-strongest October on record

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Another month down, more of the same.

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Or rather, more of the same elements continuing to drive an already challenging marketplace into the tightest market in decades, and one that shows little indication of cooling anytime soon.

October 2021 market data, released last week by Toronto Regional Real Estate Board, revealed last month to be the second-strongest October on record.

With an average sale price of $1,155,345, up nearly 20% from October of last year, only 11,740 new listings came to market, down 34.1% year-over-year.

So, to break that down to the simplest possible terms, we have just over two-thirds of the inventory as last year driving prices 20% higher over that same period.

People are quite literally fighting over the limited properties available to them, presumably taking advantage of the rock-bottom interest rates and borrowing heavily to do so.

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Limited supply coupled with strong demand and nearly-free money; and here we are.

  1. A real estate sign that reads

    LACKIE: Many first-time homebuyers need help from The Bank of Mom and Dad

  2. Real estate sales in Toronto aren't going down, despite the pandemic.

    LACKIE: Toronto real estate demand on the rise again after months of declining sales

  3. Real estate signs.

    LACKIE: Creative solutions needed to solve housing affordability dilemna

Here’s a perfect example: I am currently working with an upsizing young couple as they search for their family home in north Toronto. They have a great budget, bolstered by a super-strong result on the recent sale of their condo, and realistic expectations. And also, I assume, some family support. Pretty typical and a far cry from the worst case scenario these days.

After “browsing” since the summer to get their bearings in this wild marketplace, they are now ready to go and it’s almost impossible. The first house they were ready to make a move on sold on day one for $400,000 over list and $100,000 higher than a similar house around the corner that sold two weeks before. The next, a complete fixer-upper (and that’s being euphemistically kind) sold on offer night with eight other offers for a full $150,000 above a comparable house one street over that sold within days.

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It is brutal.

I have worked with first-time buyers in competitive marketplaces within the city since I started in real estate ten years ago, but this is a new level of impossible. At least back then the hot neighbourhoods like Leslieville, the Upper Beaches and the Junction may have been ultra-competitive, but there was also a steady stream of new listings to take a crack at. After the first few heartbreaks it simply became a numbers game — you throw your hat in the ring a bunch of times and eventually end up victorious.

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Now, this market is another situation entirely. We don’t have the volume. New listings are few and far between. Buyers are motivated and hold mortgage pre-approvals with record-low interest rates and expiry dates for a limited time only. Add to that the chatter about the when and how of a rate hike and the FOMO is real. People are willing to overpay because they’ve accepted that there’s an opportunity cost to get in now, and with interest rates at this level at least they’ll be paying down principal almost immediately.

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It is plainly evident that with each passing month, housing (un)affordability continues to be pushed way past the point anyone believes to be sustainable. In fact, that goalpost is a long way back. Short of a magic wand that makes houses appear or adds a second major Canadian business and financial centre to another city like Winnipeg, the forces of supply and demand will remain hopelessly imbalanced.

Between housing prices and inflation, it seems ever more apparent that the only tool left is for the Bank of Canada to step in and cool things down. Rate hikes back to pre-pandemic levels might not be pretty but it might be all that’s left.

@brynnlackie

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