Real Estate Trends in the Midst of the Pandemic

Bidding wars, sold over Asking Price, and multiple offers are all terms that we’ve been hearing more of over the last couple of months or so, even in the midst of a Global Pandemic. What exactly is happening? Why is it happening? Is this the new normal or will this end soon? Which leads us to the ultimate question: Is the “bubble” going to burst (i.e. market crash)? My simple answer is, no.

Today’s GTA Real Estate Market (more specifically freehold) has been in the Seller’s Market Territory for a while now. There simply aren’t enough properties for sale to satisfy the demand of the many buyers out there searching. Economic 101: Supply vs. Demand.

The main reason is that Interest Rates have been at record low levels and are likely to remain low for a few years given the much needed post-COVID economic recovery.

Another reason is that most people today think of real estate as a commodity, a way to make money and build wealth in contrast to the traditional thinking of simply buying a home to raise a family. In a CIBC survey of homeowners, 25% said they were considering buying another property as an investment. When it comes to trading commodities, almost no one wants to lose money!

But what about when the 6-month Mortgage Deferral period ends in September? And what about all
the Unemployment and the end of CERB payments? 

According to the big six chartered banks, about 14% of all residential mortgages applied for the deferral but out of these, approximately 90% were still employed. It is also important to note that 85% of those requesting deferrals have good or higher credit scores (680+) so the potential for default is much lower.

Unemployment rate rose from 5.6% pre-COVID to about 13.7% in May. But many have stopped applying for CERB as restrictions are easing up and most are returning to work. Expectations are that we’ll end up around 8.5% unemployment rate, which is near recessionary. However, this whole economic impact wasn’t all caused by natural economics; it was forced on the natural economic cycles. This is why this will be all temporary and we may see a bit of “cooling”, but definitely no bubbles or crashes.

In summary, I concur that the GTA’s housing market will still be strong early fall, slowing a bit in terms of sales in late fall moving into winter 2021, but we don’t expect a significant drop neither in sales or prices. Longer term, we have every reason to believe the market will be healthy; and this is how real estate is thought of, Long Term!