It goes without saying that we are living in strange times indeed. Everyone was going along with their lives, shopping, socializing, going to sports events, travelling. The economy was humming along, and Spring was on its way with the promise of renewal. And then, THIS?
Most of us had never even contemplated the possibility of our normal societal interactions being in lock-down, let alone ever experiencing such a thing. But here we are, with Covid-19 impacting every facet of our normal lives.
Depending on the type of work you do, you are probably spending most of your time at home these days. And depending on your financial position and general outlook, this may be a wonderful time to re-set, slow down and spend more time with your family. Or it may be a time of stress and worry. Probably a bit of both.
As you would imagine, social distancing has had a big impact on real estate. Open houses are not permitted at the current time. Showings, while not prohibited, are strongly discouraged by the real estate boards. Aside from buyers who have sold their homes and need to buy, or sellers who have a significant need to sell, most people are stepping away from real estate for the moment.
In the Oakville market, this is an abrupt change from earlier in the year, when sales activity was brisk and running at much higher levels than last year. In the last few weeks, showings are down 80-90% from normal levels, and transactions are also down dramatically.
Unlike previous soft periods, when challenging economic factors sometimes drove reductions in real estate demand and prices for a period of time, the market is now essentially in a pause. This is something we have not seen before.
So far, it is not clear that prices have been impacted much. The volume of transactions is smaller, but prices seem to be about where they were before the pause. Of course, we would all like to know where prices are going once things start to return to normal, but it really is too early to tell.
On the plus side, there is a lot of underlying demand that was building earlier in the year, especially in better communities like Oakville. Most agents and brokerages expected this to be a strong year. And interest rates remain low. So if this period is not too prolonged, many people expect a return to similar prices, with a bias upward as buyers come back into the market.
However, if the pause is for an extended period, and there is a significant negative impact on the broader economy, despite mitigation efforts by the government and Bank of Canada, there is a potential that prices could decline for a period. Only time will tell, but I think we can rest assured that if there is a period of price weakness, the underlying attractiveness of real estate in the growing GTA, combined with supply constraints, will continue to positively impact real estate values over time.
Stay safe and here’s looking forward to a gradual return to normal, starting sometime soon!
Written by Terry Smith
