Don't Call It a Comeback!
Toronto condos did a full 180 to start 2021 and are back on the rise!
I miss music from back in the day. I guess "back in the day" means different things to different people but I honestly couldn't tell you what the most popular songs of today are. Maybe I'm getting old or maybe I'm just out of the loop (I am) but give me some old school 90's hip-hop, some 90's rock ballads, throw in some 90's freestyle, with some dancehall vibes for good measure, and I'd be a pretty happy guy.
I bet some people reading this right now don't even know who LL Cool J is! Mama Said Knock You Out was epic! Actually, I'm gonna go listen to it on YouTube right now... "Don't call it a comeback!" That opening line is legendary.
And that line precisely describes what the downtown Toronto condo market is probably shouting out to the world right now. "Don't call it a comeback, I've been here for years!"
You may be under the impression that the condo market is dead. I mean, that's what the media was saying back in October and November, with investors jumping ship and people flocking from densely populated areas for that dream of a backyard in the suburbs. And the inventory levels basically supported that. Condos in the core (which I define as MLS regions C01 and C08, which is basically anything south of Bloor, between the DVP and Liberty Village) jumped to a record high of around 3500 available units for sale in October. We've never seen inventory levels like that and to say there was a glut of units and that the condo market was slow was an understatement. Units would get maybe 1-2 showings a week and would sit for 30, 60 days with no action. Price drops would sometimes work but even still, buyers would lowball. Most sellers held firm but you did see quite a few "deals" during those couple months. Frustrated sellers worried the worst was yet to come and buyers who had too many other options. And prices *gasp* actually started falling. By my own analysis, prices for condos in the fall of 2020 had dipped back to where they were in the Spring of 2019, give or take.
Then something weird happened. In December, inventory started falling. Quickly. Every day 100-200 units would disappear. Some sold, some were leased, some were simply terminated. By mid-December, we were back to under 2000 units available in the core. And sales went through the roof. December 2020 recorded the most condos sales EVER in Toronto in a December. What was going on!?
On Jan 1st, there were exactly 1385 condos available in the core. A huge drop from October. But I would have bet any amount of money that this number would rise through January as sellers who took their condos off the market over the holiday would rush to get back on the market. But it never happened.
On Feb 1st, there were exactly 1130 condos available in the core. Inventory actually went down through January. Mind. Blown. As I'm writing this, that number now stands at 1092.
I really started noticing condo activity pick up in December. Then, rolling into January, things went into high gear. By mid-January the market was really warming up. Multiple offers on good properties were back and units were selling in days. By late January, the market was on fire. Not warm. Not hot. But on fire. I'm starting to see offer "hold backs" on condo listings more and more frequently, which signals to me that sellers and their agents are also noticing this build up of demand and are feeling confident that there are enough buyers to support offer nights and multiple offers on condos again.
Prices we saw in October and November 2020 are nowhere to be seen right now. That condo that didn't sell for $650k in November after 60 days on the market will sell for close to $700k today. And it will sell quickly. The demand is there and inventory is creeping back down to under 1000 units. If we're not firmly in a seller's market right now, it's right around the corner.
So what can you do? If you were looking at condos in the fall of 2020 (and I have many clients who were) and you thought to yourself back that things will just keep getting worse and prices will continue to drop and there's no rush, your logic wouldn't have been flawed. I can point to a bunch of very successful agents who were all over social media telling condo buyers to sit back and be patient because prices will keep falling into 2021 and that's when they should act. Guess who has egg on their faces now. I will never, ever try to predict a market. Markets never do what they're "supposed" to do.
Oh yeah - so what can you do now? I think you have two options.
1 - You can accept that the market has shifted, ignore October and November 2020 sale prices that are no longer in play, and move with the market. You will pay more for a condo today than you would have in the fall of 2020. That's a given. If you're ok with that, get out there quickly and fire offers. Because there are a ton of buyers who have the same idea and once the "herd" gets going, it's hard to stop the momentum.
2 - Or you can try to convince yourself that this is just a blip, that the flood of inventory that was "supposed" to come in 2021 is still coming, and that inventory will outpace demand and prices will drop again very soon. In which case, sit back and wait.
Which camp am I in? Well, I'll never try to move against a market. I truly believe October 2020 was the bottom for the condo market and we're heading into a recovery, back towards the long-term trend. Wifey and I were condo hunting in the fall of 2020 for a larger place for ourselves and we couldn't find what we wanted. If that perfect place comes up today, it will cost more than it would have in the fall. We know that. And I'm accepting that. I'm not going to fight the market. Because I know from experience, trying to wait out a market that I think will eventually drop will either mean we never get our dream place, or we'll be priced out when it finally does.
If you're purely an investor, it's a little more difficult. The rental market plain sucks. So the usual math just doesn't work. But what happens if resale prices move upward before the rental math makes sense again? Are you ok paying $30k-$40k more for a condo just to secure an extra $100/mo in rent when the rental market improves? Maybe you are, and that's your choice. But remember - you can't get today's prices with tomorrow's rents. So something has to give. (Btw - the rental market will improve. That's not a prediction, it's just common sense. Cities are not dead. Do 20-something-year-old new grads really want to share a house in the burbs and work from home? No. That guy was me not too long ago. Living downtown was the dream. My entire social circle was people I worked with - in person. These folks will be back with a vengeance when they can. Watch).
Right now, I'm spending most of my days trying to educate buyers that the condo market has shifted, things are very busy again, and the "deals" are gone. That condo you wanted to see next week? It sold in multiples already. And I'm calling sellers telling them that right now, at this exact moment, their condo is worth more than I said it was two months ago.
Everything could change and get worse again tomorrow. But I'm not betting on it.
Have you checked out my previous blog posts?
Your Toronto condo lover,
iPro Realty Ltd, Brokerage
Direct: 647-223-1679 (call/text)