When I moved to Toronto, it was an exciting and fun city to reside in. Much like today, it was cosmopolitan, affluent and less traffic (the good old days). I was inspired by the architecture, ambition, and entrepreneurial spirit all around me.
Interest rates were higher back then (12-13%). People held the belief, as they did in recent months, that the good times would never end. Real estate would continue to rise and was a 'get rich quick' plan. It stoked a market of fear and greed, with no shortage of speculators.
Like a match in a dry hay field, the market inflated artificially, ignited by low inventory. Everyone wanted in on the market.
And then, suddenly, the economic engine hiccupped. The market came to a screeching halt. Consumer spending slowed. A recession loomed. Suddenly, the lust to buy was replaced by hesitation and 'fence sitting'.
It was weeks, not months, before the 1989 real estate correction commenced.
I recall every group was at odds with the other. Sellers stubbornly held their price. The renter mob chanting for the market to crash. Pre-home construction investors helplessly watched their untouchable investment while the markets shifted. The 1989 market did not start to recover until 1996. I obtained my license to sell not long afterwards.
With my real estate career now in its 25th year, I look back at the five slowdowns that I have witnessed, four as a licensed broker, and the subsequent recoveries.
Here are three things I'm keeping an eye on:
Money has been dirt cheap to borrow over the past few years.
Since the real estate market powers a large portion of our economy, lower rates has certainly been an incentive for Canadians to buy, especially during the uncertainty of Covid shutdowns. Nobody could have predicted the activity we witnessed, no matter how long in the industry. Many respected economists even got it wrong.
Banks were thinking ahead and since the 2017 correction, buyers began to go through a rigid stress test while pre-qualifying for a mortgage, in the event interest rates rose.
This year, according to Stats Canada, the ratio of household debt to disposable income hit a record level. The household credit market debt rose to a staggering 186.2. This means there was $1.86 in credit market debt for every dollar of household disposable income.
The brakes had to be pumped eventually to slow down this trend. However, money is still relatively cheap, even with the hikes.
The press thrives on negativity and toxic headlines to sell advertising. Reporters often quote random individuals in our industry, likely selected because their inexperience or business (or lack of) fits the reporter's narrative. I find most of what I read misinformation and one-sided.
There is positive and negative in every situation. It is important to always remember that.
From the front lines, we are not seeing much of what is being reported, except for buyer traffic and offers. Properties are taking longer to sell but they are selling. The 905/705/519 activity has calmed down after the mass exodus ceased when lockdown restrictions started lifting. The only thing that could temporarily change this is another shutdown.
I often hear misinformation from those who believe everything they read or hear without factchecking.
It's easy to be drawn into believing misinformation, cynicism, and other people's fears. If you want reliable information, ask a busy agent. In fact, ask a few. Inform yourself.
A favorite saying of mine is: “If you're not in the ring also getting your ass kicked, I'm not interested in your feedback”.
As a professional, my mindset is focused on facts, research, and experience - not on emotion or fear. Some days, I'll be the first to admit that it takes a lot to keep yourself positive and motivated for these fights in uncertain markets. I do it for my Sellers because they trust me and that means a great deal to me. I’m not intimidated and have no problem giving tough love when required. I have the battle wounds to show for it.
Speaking of what I see daily, there is now opportunity for buyers to negotiate with sellers. We are moving into a balanced market, something we haven't seen for a while with the historical shortage of inventory. Statistically, there is still a shortage, which I believe is keeping the markets buoyant. Newer agents may misconstrue what’s happening as the sky falling. They haven’t lived the struggle yet. That’s why experience and tenure come in handy when hiring an agent now.
Another factor to consider is that markets have been slow the past few summers. People are Covid-tired. Now that restrictions have lifted, most don't want to deal with anything except to travel and to enjoy their summer. This summer is no exception. Sorry naysayers - that does not qualify as the bottom falling out.
A FINAL NOTE
Real estate never stops. People will always need to sell and buy. Admittedly, there are circumstances that many of us have not faced before happening in the world that are out of our control. Turn on your TV or social media and prepare to be bombarded with everything wrong under the sun. Positivity starts with one person and has a ripple effect. On that note, I will leave you with a positive message:
Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world – Franklin Roosevelt
If you are looking for strong, experienced representation during these transitioning markets, contact me today at www.janicewilliams.ca or click the button for a confidential consultation.