Breaking down the first half of both years and highlighting two very different paths. Could they both be leading to similar results in the Durham Real Estate Market?

2017 vs. 2018 (Part 1)

Predicting future performance in the Real Estate market is nearly impossible. There are so many moving pieces and changing factors involved which are all subject to change with less than a days notice. However, analyzing and understanding the Real Estate market is certainly possible and it WILL lead to making a more informed decision. In my opinion, an informed decision will lead you to the greatest opportunity of realizing profits when buying and selling Real Estate.

The Real Estate market has gained a lot of attention over the past few years in Canada, as we’ve witnessed record-breaking numbers, insane bidding wars, instantaneous shifts in Supply & Demand and thousands of articles written by every news agency possible.  Everywhere you go nowadays, you’ll likely find somebody engaging in a conversation regarding Real Estate.  Don’t get me wrong, there has always been great interest in what is widely considered a solid investment, but this intensity that surrounds it is something new. However, as prices have stabilized, the intensity of conversations and the subjects in which to discuss have started to deteriorate.

Thankfully there is at least one topic still to be discussed and that is comparing the first 6 months of 2017 to the first half of 2018. Of course, the big question is always Price but it’s important to look at the other factors affecting the market such as; Interest rates, Politics & Policy. Lets take a look….

Interest Rates

Housing prices and Interest rates historically have a negative correlation. Simply put, when the cost of borrowing money increases people often tend to borrow less. The first half of both years have been extremely different when it comes to the Bank of Canada’s lending rate as demonstrated by the chart below.

Bank of Canada Interest Rates

To put this increase into perspective, here is a hypothetical scenario of a buyer trying to get into the market. Let’s say a buyer is qualified to purchase a home of $500,000 with a downpayment of 20% ($100,000). The typical interest rate being offered at most major banks in June 2017 was 2.49%. That buyer should expect a monthly mortgage payment of $1790.  (Of course there are more variables to address, but let’s keep it simple.) That same buyer looking at that same house in June 2018 would now expect to pay a monthly mortgage payment of $1943 based on the current average rates. That’s $153 more per month for the same house.

The fact that housing prices are nearly the same even with an increase of 0.75% to the BoC’s Interest rate can be seen as a positive for homeowners who have not lost equity & for the BoC who will use this data as proof that our economy can withstand more potential future rate increases. It is, however, a negative for future first time buyers as the cost of housing could potentially go up and also isn’t great for homeowners who’s mortgage will be up for renewal.

Politics & Policy

Politics and policies are a macro effect that impacts all types of markets around the world including our local Real Estate market. Each individual change or decision can have different influences on the market, some are seen as positives for Real Estate and some carry negative effects. Stability in politics and policy is widely viewed as the best ecosystem for Real Estate. Since January 2017 there has been tons of change. Let’s highlight some of those major changes:

  • The Fair Housing Plan was introduced April 20th, 2017 by the Liberal Government of Ontario. Some of the major changes included the Non-Resident Speculation Tax (NRST) and expanded rent controls.
  • The “Stress Test” was implemented in October 2017 which requires borrowers with uninsured mortgages to qualify at a 2% higher interest rate than the rate actually offered to them by the lender.
  • Minimum Wage increased in Ontario to $14/hour as of January 2018.
  • Currently renegotiating NAFTA.
  • Trade wars have sparked all across the globe in some of the largest economies. The United States has so far specifically targeted Canadian steel and aluminum with up to 25% tariffs and our federal government has imposed retaliatory tariffs on many different American goods. The threat of auto tariffs is currently looming.
  • Ontario’s provincial government has changed hands as of June 28th, 2018. This was a major shift in politics as the former Liberal government holds such a small amount of seats that they have lost official party status and the Conservatives are now the new majority government with lots of promises of change.

Average Sales Price

As of July 1st 2018, Durham’s average home sale price has decreased only 0.7% Year-Over-Year (Y.O.Y). This is quite impressive considering as of April 1st, 2018 the Y.O.Y average price was down 16.5%. Another positive note is that this years market has been much more consistent and stable and as prices move forward over the next couple of month’s we will likely start to see Y.O.Y gains.

Let’s take it one step further and look at the Y.O.Y numbers for the different communities in Durham.

Clarington Real Estate Stats 2018

So far this year Clarington has been a winner, coming ahead with its June Y.O.Y numbers in three housing types. Last year Clarington reached record highs until the end of April where prices began a decline that lasted until September 2017. This year we have seen prices increase slightly since January 2018 and in a much more stable way, without any major highs or lows.

Oshawa Real Estate Stats 2018

It has also been a strong year for Oshawa as subtle gains have been realized over the first half of 2018. These boring looking numbers for 2018 have resulted in Detached and Semi-Detached housing prices above last years as of July 1st, 2018. Townhouses are not far behind last year’s numbers and could quite easily surpass last year’s numbers within the next month.

Whitby Real Estate Stats 2018

In comparison to Oshawa and Clarington, the average prices in Whitby have been lackluster so far in 2018. This could be a result of the new mandatory stress-test combined with increased interest rates. Higher priced homes are becoming continually harder to qualify for. Because average prices are much higher in Whitby compared to Clarington and Oshawa, this market will take somewhat longer to catch up. A good sign is that Detached home prices have increased since January 2018.

Ajax Real Estate Stats 2018

It’s been a sluggish last couple of months for Detached and Semi-Detached homes in Ajax. Townhouses really picked up steam in June surpassing 2017 prices easily. Quickly looking ahead, prices for Detached and Semis in July 2017 really took a beating. It’s very likely we will see prices remain stable as they have been and surpass the Y.O.Y numbers by the end of next month.

Pickering Real Estate Stats 2018

Quite honestly, Pickering has rebounded really well. Although it falls into that part of Durham that contains some of the highest priced homes, it truly wasn’t affected as much by interest rate increases and policy changes. Of course, reaching some of those peak values from April 2017 won’t be an easy feat in the near future. Healthy growth should remain the goal going forward.

Final Thoughts...

In conclusion, the market is ever changing. There are no certainties and the factors that move the market are just about endless. The 2018 market has shown steady and healthy growth in comparison to the roller coaster year of 2017. The Y.O.Y numbers are starting to look more promising with each passing month. Buyer confidence is regaining as sales numbers continue to pick up. Interest rates are increasing. A new provincial government will surely make changes and decisions bound to impact the market in some way.

The only way to try and stay ahead of the market is to continue gaining knowledge in Real Estate, analyze the stats, research trends, follow the news and always ask questions.