Understanding Home Pricing in Today’s Market

Posted on Posted in Condo, HELP!, Market Activity, Oakville, Townhouse, YTD

So, what’s happening with Real Estate prices?  Why does it seem some have dropped a lot, yet other homes sell quick for a good price?

Depending on where you look, and what you look at, there’s different levels of activity in the market, some areas and types of properties are selling well, others seem to sit on market a long time. Why is this?

Well, mainly, it’s property owner’s expectations of the market and if they’re paying attention to market indicators and listening to what information their Real Estate Professional is using to educate them. If you’re not in sync with the market, or not facing the reality of timing of your purchase vs. sale, you may not like or believe, what your professional is telling you. This could vary from pricing similar to last year, but the number of days to sell being longer (more the case with entry level properties) to price decreases in the 200-300 thousand dollar range in detached properties sales from areas that were heavily marketed to foreign investors in previous years, artificially driving up prices.

So let’s take a look at one tool provided by the Canadian Real Estate Associate (CREA) for looking at this. The MLS® Home Price Index (HPI).

This is a tool that takes data from various participating Real Estate Boards, and applies software to analyse what’s happening in the market. Participating boards locally, include the Toronto Real Estate Board (TREB) and the Oakville Milton District Real Estate Board. (OMDREB) This tool represents almost 60% of all Canadian Residential Resale activity based on a ten year average.

As an example of this tool, we can look at the Composite market activity for the GTA vs, the Oakville – Milton area.  In this graph you can see we are looking at multiple property types for each area, so not breaking down detached homes from townhomes or condo apartments.  What’s obvious in this plot is how the market started to accelerate at a rate much greater than previous years, especially as we came in to 2016, and then the crazy market of 2017, last year.

So what about 2018, what’s happening there?  Well, it looks like we’re settling in to pricing that is more appropriate for a predictable growth rate.     If you sold a property in 2016/2017 you did well!  If you bought in 2016 or before, you’re still in great shape, but if you bought in the height of 2017, it is going to take a couple of years to get back to that kind of pricing, especially with detached homes.

Here’s a look at just Oakville/Milton and what happened through 2017 there.    You can see the “swell” in pricing for Single Family Detached homes (red line) starting in 2016 where Townhomes (blue) and Condo Apartments (brown) felt the pressure of the market, but didn’t experience the same rate of increase, nor proportionally as high as fully detached homes.     Some of this is because Oakville was actively marketed to foreign buyers as a desirable area for investment and it was detached homes (detached land ownership) where most of this investment was going.

 

 

So let’s overlay the GTA on this plot of Oakville and see how that compares…

 

Single Family Detached Homes in the Greater Toronto Area on average are significantly more expensive than Oakville.  This makes sense as we’re including a lot of property in the core and some other well known good areas in the GTA to live.

Townhomes,  the average pricing in the Oakville-Milton areas are higher than Toronto!  Proportionally there’s significantly more new build townhomes in Oakville-Milton, and this is driving much of this business, just as there is proportionally (to the overall market) more..

Condo Apartment Sales.  Oakville-Milton is comparing well to the overall GTA pricing.  But one difference which is seen, Condo Apartments in the GTA have not dropped down as much as Oakville-Milton.  As a Real Estate Sales professional, I constantly and daily network with other professionals in our industry and this is something I’ve seen repeated over and over, the condo apartment market, especially in Toronto, is still pretty hot, and you can see the prices in 2018 are exceeding what what we saw in 2017!

 

What is to be learned from this?

Property type definitely impacts value as available buyers change depending on mortgage rate approvals, and where the buyers are coming from.    As it’s become harder to borrow larger amounts of money, we’ve pushed many buyers “down market” in to lower priced properties as well as considering different locations to live.   Combined with the foreign investment tax, this has taken away the pressure of sales, impacting the number of average days on market, as well as median price.     So for your property, if selling or buying, stories you hear in the market are correct, Depending On Where, What and When was Sold.

How do you truly know a property’s value?   Well even as professionals, we invest a lot of time and effort to truly understand value, and it’s a moving target.    And this is just ONE of many tools we access to look at value when doing market assessments.  Property specifics also play in to value.

 

There is value in leveraging knowledge, experience and access to multiple tools to combine this in to understanding real market value.  Listen to your Real Estate Sales Professional, because they’re happiest when you’re well informed and comfortable in your knowledge, so you can act in a confident manner when it’s time for that next sale.   They work hard to sort through thousands of sales transactions, use their years of training and experience to find you the information that brings you closest to understanding the market value, right at this moment.

Want to read up on this one tool used to understand the market?  visit CREA at https://www.crea.ca/housing-market-stats/mls-home-price-index/about-hpi/

But it’s ok to just let us do the work for you…  It’s what we’re here for.

Want to talk about the market?  Need specific info?  Want to know what the house around the corner sold for?  Please, feel free to contact me, I’m never too busy to assist!

Thank You!  I appreciate you taking the time out of your day, to read this.   James

 

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