As we are seeing in the media, every day there are new cases of the coronavirus (COVID-19) and associated deaths linked to it. And I think that things are going to get worse before they get better. China has been in a quarantine, and other countries are starting to follow suit. But is it too little too late? As of today March 5th 2020 there has been 2 new cases announced just today making a total of 22 in Ontario to date. And I don’t see it slowing down any time soon unfortunately.
I think it is too early right now to have any definitive answers and or statistics as it relates to the coronavirus and the real estate market in Toronto and GTA. We are heading into the spring season, which is the busiest time of the year when the majority of people decide to buy or sell their homes.
Here are February’s real estate market stats:
Total residential transactions are up 45.6% @ 7256 over this time last year
Average selling price is up 16.7% @ $910,290 over this time last year
Sales-to-New Listings Ratio is down 7% @ 51% over this time last year
Day on market is down 36.1% @ 23 over this time last year
As you can see the market is showing no signs of slowing down whatsoever. Home values are up, days on the market are down and inventory is down. There aren’t enough homes to supply all the buyers at the moment hence why the large run up in prices. In short, the demand is higher than the supply of homes.
As the coronavirus cases increase, people are going to not want to be out of their homes as much. This will mean potential home buyers might delay purchasing their new homes, or selling their existing homes until the virus outbreak subsides. This might cause current homes on the market to not get a lot of showings as people will be weary of visiting public places, or a home for sale where there could be 10-50 families that have visited already potentially spreading their germs. This is a very psychological issue that can’t be predicted accurately. I myself are not worried about contracting the coronavirus, I will live, but I am very worried if my four year old daughter does or my older parents do as they can potentially die from it. That is a scary thing to think about right?
Bank of Canada rate cut
The Bank of Canada had lowered the interest rate yesterday by 50 basis points. Canada decided to follow the US Federal Reserve and match their cut. This is a very large tell that we are expecting a declining economy and major problems in the horizon. When the banks slash their interest rates, it is a kind of a Band-Aid to help keep the economy afloat. This usually helps in the short term but depending on how bad this coronavirus outbreak goes on for, might not be enough and we will see another recession. China is our largest importer of goods, our Iphones are made there, our clothes, most electronics and many medications and drugs just to name a few. This supply is getting cut as workers in China are not allowed to go to work, so businesses are at a standstill and are not making revenue.
This rate cut will enable many people to be able to get the mortgage financing they might have not been able to before. And people that have variable rate mortgages will be paying less each month. This will cause even more buyers coming into the real estate market and causing even more demand for homes. People are always looking for a deal, even if the world around them is burning to the ground. Half a percent on a mortgage adds up to thousands maybe tens of thousands of dollars in savings. This is very enticing to people and will subset the risk of the coronavirus.
I recently watched a podcast with Joe Rogan. He had a guest by the name of Michael Osterholm who is an internationally recognized expert in infectious disease epidemiology. He is Regents Professor, McKnight Presidential Endowed Chair in Public Health, the director of the Center for Infectious Disease Research and Policy (CIDRAP). He had conservatively predicted that this pandemic will be 10 to 15 times worse than the seasonal flu, there will be around 48 million hospitalizations, 96 million cases of coronavirus occuring, and over 480,000 deaths. From my research looking up opinions of the top experts in the feild, they are all in consensus that it is just the beginning.
I predict in the short term the real estate market in Toronto and GTA might have some minor signs of slowing down. We might see the real negative aspects of this coronavirus spill into the real estate market maybe 3-8 months in the future, how bad will it be? I think it’s only a guessing game at this point.
Stay safe everybody.
Century 21 Heritage Group