February 24, 2023

A Herd of Buffalo - Issue 349

It’s the last Friday of February and I can’t believe how quickly the month has passed - unlike the speed of the local real estate market.

February has been a turbulent month; some days & weeks have been really slow, and then we get a weekend like last weekend where 10% of the available properties sell in a weekend. Go figure!

More on that in a moment.

I spent this past weekend attending the Keller Williams Family Reunion. This year over 10,000 KW agents and brokers gathered in Anaheim, California at our annual conference for 4 days of education, networking, and yes, even some fun.

A lot of information was shared about the state of the real estate industry and despite the size of the Canadian contingent (about 400 people), there was some very relevant Canadian content discussed and shared.

Let’s jump into this.

We all know sales are down significantly from 2022. When you look at the chart, you can see just how much of an outlier 2022 was. This year, we should be on track for 500,000 properties trading hands through the MLS® system in Canada. There have only been 6 years of higher sales since 1989!

The next two charts are the scary ones.

Annual average home prices have been trending over the 4% growth curve for the past 10 years. A 25% reduction in prices (if that holds up) will still have 2023 above the growth line.

What’s keeping prices where they are?

Check out the inventory slide just below that shows we’ll be in a balanced market which will only seem like a buyers market compared to the previous 2 years. We may have to re-define what a buyer’s market looks like, as this chart only shows 2 years in a true buyers market since 1989. The time period between ‘89 to ‘99 felt like a true buyers market. I can remember the length of time it would take to get homes sold and the amount of negotiating that we had to do to make deals come together.

Look at the GDP and Unemployment charts below showing pretty strong economic conditions. This “recession” is not like any others. Above average GDP and historically low unemployment are not ingredients that help drive home prices down.

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This actually sounds pretty rosy until you get to see what is truly driving the Canadian market that ironically had to come from an American perspective.

24% of the population of Canada resides in 2 areas, the GTA and GVA. That has a massive impact on the smaller markets like Guelph and the Waterloo region.

Pull that data out and our average price across the country is almost $120K!

The fear here is that if Toronto and Vancouver get the sniffles, the rest of the country could likely have full blown pneumonia!

Last, but certainly not least, is the world risk factors that are so far beyond our control and still pose a major risk to our market.

The Ukraine, China, and even the debt ceiling issue (a unique American problem for now - if it doesn’t escalate) will all impact our financial markets as well. Our challenge is we don’t have enough political clout to address the impact of any of these issues. We needed the Americans to get the Michaels out of China after all.

My takeaway and the comments from Gary Keller, who has over 40 years of experience, is that the Canadian market shouldn’t be impacted as much in this market as the American market might be. That said, we’re not in for a cake walk.

Like the Buffalo that faces a storm head-on in order to get through it quicker, we can either duck and hide from this market or stride into it looking for the opportunities.

I’ve got my boots on!

Enjoy the weekend.

Paul

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