Suddenly there's a pause in the Vaughan real estate market. The question on everyone's mind is of course...how long will it last? Is this a good time to buy?
Are we in a Seller's market, a buyer's market or a balanced market?
First of all we need to define some terms. As we all know, the real estate market in Vaughan has been a "super seller's market" (yes I made up this term, but it's late at night and that's all I can come up with). What does that mean? One way to measure the status of the market is to look at how much inventory is currently available. We can take the total number of listings in a given month and divide it by the number of sales. This gives us a month's worth of inventory. For example when inventory is at 2 months, that means that if no other home was listed for sale in Vaughan, it would take 2 months to deplete the inventory. Now that we understand this, we can define the status of the market into;
- A buyer's market (when there's more than 6 months of inventory)
- A balanced market (when there's between 3 and 6 months of inventory)
- A seller's market (when there's less than 3 months of inventory)
- as an added classification I added a super seller's market when inventory falls below a month
What's happened in the past?
Now that we defined the status of the market, let take a look at what's been happening. Record low inventory combined with record low interest rates have put Vaughan in a super seller's market over the past few months. Most homes sold well over asking with bidding wars. At the peak of the market it was not uncommon for a Vaughan home to have in excess of 20 offers. A market like this cannot be sustained. It's a rare event that can only happen once every 25 years (ok...I made up this number...but my point is that it's a rare event). On April 20, the provincial government of Ontario introduced the Fair Housing Plan to try and cool off the market. Although I don' think that any of its 16 measures are responsible for cooling off the market, it did have an effect on the mindset of the buyer. All of a sudden, listings were reporting less showings. This psychology of the buyer wanting to wait and see what happens combined with the usual increase in inventory that comes in the spring, has definitely had an effect of cooling the market. Many listings with offer dates set up to create bidding wars didn't materialize into a bidding war. Does this mean we're heading into a buyer's market?
To figure this out, let's use history to give us some perspective. If we look at the graph, we can see that since 2009 (when I started tracking this info), there have only been two time periods when we were in a balanced market. The first period started around the introduction of the HST on new homes in July of 2010. The second started with the introduction of new mortgage rules to make it harder to qualify in July of 2012.
If we look at sales figures from the introduction of the HST, we can see the balanced market lasted from June to Sept, 2010...4 months. The effect on the average price of a home in Vaughan was moderate but we can see how the average days on market (DOM) increased from the previous months. This would have been a great time to buy. Buyers would have had quite a bit of variety to choose from, and most importantly chances are they'd be the only offer on the property.
If we look at sales figures from the introduction of the new mortgage rules, we can see it lasted from August '12 to Feb '13...7 months. This time we can definitely see an effect on the price going down for a few months, but then picking right back up after the balanced market heated up again.
How did this affect Vaughan home prices?
Here's a chart to show the average price of a home in Vaughan to give you perspective. The two blue sections are the same time periods noted above.
So recent history shows us these periods of a balanced market lasted only 4-7 months. Even if we look at the more famous slowdown (not in graph above) at the end of 2008 to beginning of 2009 due to the US subprime crash and it's far reaching effect, it only lasted 4-5 months in the GTA.
So what does this mean to today's buyer?
What will happen to the Vaughan real estate market?
Let me first start by saying that this is merely my opinion (albeit an educated one). As of the writing of this piece (May 10, 2017) we have data up to the end of April, so the question is; what happens after that? It's my prediction that we're about to head into another balanced market (not a buyer's market) for the next few months. My gut feeling is that it'll heat back up after the summer as we head into the fall market, but it may last even less. So there's an opportunity here for buyers to capitalize on this market. Don't expect a crash, don't keep on holding off thinking that prices will come down substantially. Get into the market. You'll most likely be able to buy a home with conditions on your offers again at a fair price and it won't be bidding war after bidding war. And most importantly, the price (and equity) in your home will continue to rise as the GTA continues to catch up to other world-class cities.
Want to check out what's for sale in Vaughan? Start your SuperSearch.