Why Do People Predict A Market Crash?
Sunday Nov 06th, 2022
If you’ve ever looked into real estate, there’s a good chance that you’ve read some pretty wild headlines, most of these either predicting a crash in the GTA’s real estate market or announcing that it’s hanging on by a loose thread. We can tell you with absolute certainty that the market isn’t in any danger, but where do these headlines come from? Why are there so many “experts” predicting the impending downfall of the real estate industry? There are several answers to that question, but within the last few years especially, these are some of the core reasons that lead people to the misconception that the real estate market is in danger.
The Global Pandemic Effect
Needless to say, the COVID-19 pandemic had an effect on just about every industry. Jobs were lost, travel was restricted, and for a lot of people, less than ideal financial situations were becoming a bit more commonplace. We’re fortunate enough to see that the impact that the pandemic had on the world isn’t still being seen on a daily basis, but many industries are still dealing with the aftermath.
In real estate, the pandemic created an eighteen month long period where buyers were in a frenzy. It wasn’t surprising for anyone listing to have upwards of thirty offers lined up for it, and prices were continuing to soar. Additionally, this created a historically low level of inventory within the market. Unsurprisingly, the headlines around this time spelled doom and gloom for the industry, but that really only looked at one side of the coin. While it was true that buyers were having a really rough time in the market, it was a paradise for sellers in the GTA, and very few of them would say that the market was crashing.
The Market’s Correction
Combating the effects of the pandemic, changes needed to be made. If you own a home, you likely know all about the recent interest rate hikes. We have had six (6) so far to date in 2022. While it’s easy to view these increases as a sign that the market is in bad health, when you look at the bigger picture, these actions play their part in evening out the market for everyone. With increased rates, many buyers became a bit more hesitant to purchase properties, giving the market time to develop a larger amount of inventory. The active number of listings has seen the greatest change, up 68% compared to the same month last year. At the end of October, there were over 13,000 homes available for sale, there were only 7,750 at this same time last year. Even better, the average price of these homes is around $1,061,995, a significant price drop in September compared to a few months ago. The residential real estate market continues to adjust, however, prices seem to have hit a consistent threshold where the average sale price of all home types in October is almost equal to September's average price( $1,089,428 and $1,086,762 respectively).
Much like when we were facing a seller’s market, the opinion of the state of real estate is going to change depending on who you ask. When sellers aren’t able to list at the same price as during the pandemic’s peak, their opinion is bound to be less favourable. At the same time, higher interest rates may have someone skeptical about whether or not now is a good time to purchase property. If you’re looking to invest diving in even with the higher interest can be well worth the cost. In Canada, The average rent for 1 bedroom apartment in Toronto as per Zumper.com is $2,200. This is a 19% increase compared to the previous year and the pricing for two, three, and four bedroom rentals have also increased a minimum of 20%-40% depending on the micro-market you are looking in. If you’re looking to make a profit through real estate, now is the time to do it.
An Outsider’s Perspective
For the doom and gloom clickbait articles about the real estate market can be for anyone looking for useful information and guidance, it isn’t impossible to see where they come from. From an outsider’s point of view, the market can appear sporadic, constantly shifting in different directions that might seem unfavourable if you aren’t looking at it from every point of view. The numbers are always there, but if you don’t know what they mean, it’ll be impossible to make an accurate prediction. For this reason, we always stress the importance of looking back at the real estate market’s history, giving you a slightly better idea of what to expect. Like an ocean, the waves flow in different directions at times, but it never dries up.
The truth is, no one can predict the future with absolute certainty. If you’re looking for an honest perspective about its current health, speak with the professionals who work with the numbers daily, selling property, and helping others to make investments for their future.
Remember, It’s never about timing the market. It’s about your time IN the market.