Hindsight is 20/20

The first full work week of the New Decade has come and passed.  Now that the pace has picked up it is a good opportunity to take a look back and reflect.  As they say “hindsight is 20/20”.

Hindsight is 20/20. Taking a moment to reflect can explain a lot.

Believe it or not 2018 was a challenging market for both buyers and sellers in the Toronto market.  It’s important to start here because it will give us good insight as to what happened in 2019.  The newly introduced stress tests for mortgages meant that even if a buyer could afford a purchase at the current interest rates the Banks would only approve a loan if the buyer’s financials could withstand a much higher rate.  The main purposes of course were twofold:

  • reduce the risk of default on a mortgage in the event rates/buyer costs  increased
  • improve affordability as a result of reduced demand

Indeed many buyers were discouraged, especially first time buyers who either were not approved or feared they would not be approved.  Demand fell.  Existing homeowners who feared they would no longer qualify for a new mortgage stayed put instead of selling.  Supply fell.   This   put upward   pressure   on  the   prices  of  semi-detached  and  detached   homes.   The outcome was that a large portion of the would be semi-detached or detached home buyers who remained actively searching now looked at more affordable housing alternatives such as large condo units.  Demand shifted and condo prices surged 11% on average while detached home prices fell 8%, mostly due to a sharp drop in luxury home prices.


Enter 2019 and elevated prices on large condo units meant a smaller price differential between those units and single family homes.  This prompted buyers to again look at the most preferred home type.  Reduced lenders rates translated into more favorable stress test results giving previously discouraged or unqualified buyers more confidence and an opportunity to enter the market.  A strong regional economy and population growth in conjunction with reduced lenders rates fueled the real estate market.  Toronto is a large and growing city with a thriving economy but limited free land.  This has been a pillar in supporting price growth for single family homes, especially in a market where urban sprawl is discouraged and builders focus on condominiums which maximize use of space.  For this reason, if preference for single family homes remains, even with natural cyclicality in the market, demand for single family homes should be healthy and support prices.  That was the case in 2019 (as seen below) where the year over year prices (Dec 2019) for all home types with the exception of townhomes, saw healthy increases in average prices. 


So what does 2020 have in store?  Signs point to more of the same.  The market has adjusted from the previous regulatory moves and interest rates have settled.  A less rosy economic picture from a national standpoint indicates a strong likelihood that interest rates will either remain steady or fall.  This is good for buyers from both cost and mortgage approval viewpoints and there should be a greater selection of homes for buyers to choose from.   Sellers will benefit from strong demand and this will be reflected in fast sales at the best possible price.  Price growth should be moderate.

A Word of Caution

Average prices can be very generic as prices vary by neighbourhood, lot size, quality of finishes and other features/factors which aren’t accounted for in calculations.  This can be a recipe for disappointment as the resulting numbers can have the unintended effect of creating unrealistic expectations. A personal home evaluation and market comparison are the best ways to know what a home is truly worth.

Thanks for reading my first Blog! I hope you found it insightful. If you’d like to learn more about the current value of your home or are thinking of taking your first step onto the property ladder please reach out to me with any questions you may have. I’d love to hear from you!
Cheers until the next time!