A stable decline is exactly what is anticipated and from what we are seeing so far in the first quarter of this year, that is what we are experiencing. One major aspect that many people have to keep in mind is that a stable decline does not necessarily mean prices of homes in Riverdale will tumble 20% but rather that their growth will decelerate. The rate of change in price will plateau and may even experience a slight downward trend but it most certainly won't be a huge drop. Sales volume is decreasing as sales prices are correcting (not decreasing). I surely wouldn't hold my breath on buying a detached house in the Annex for $500,000.
Imagine what would happen if house prices did tumble, say, 25%. Buyers will flock to the market to pick up these "great deals." What happens next is that the flock of buyers will start bidding up the house prices once again, probably even back to the price point close to where we are today.
considering the Annex proper where prices are $2+ million, a 20-25% decline does not equal $500,000 price point.
even properties in the south annex are ~$1 million.
have you ever heard of deflation and a deflationary spiral when reductions in price lead to a vicious circle ...
who would buy today (unless absolutely necessary) when prices will likely be cheaper in the future?
keep in mind, prices may adjust slowly. so no, buyers will not flock to the market to pick up these "great deals."
A question for those who are optimistic about prospects for TO RE prices...
What is your narrative to explain drastically reduced sales volumes coupled with small incremental average price increases from the sold properties?
Here is mine:
"For every 10 properties at each price list point that sold in March 2012, only 8 sold in March 2013. The 8 that sold were the best of the 10. ie best maintained, best renovated, etc. The 2 that didn't sell were the crappiest of the ten (which presumably would have sold in 2012 at discount to the top 8). This change in product mix skews higher the average price of the properties which sold, which we are using a proxy for the market as a whole.
In summary, to ignore the substantially reduced sales volumes while delighting over a 1.8% YOY price increase (adjusted for inflation) is somewhat myopic.
the sales-to-new listings ratio is 52.4% for March 2013, while it was 56.7% for March 2012.
so i would say, for every 10 properties at each price list point in March 2012, 6 sold and they were the best of the 10. (ie best maintained, best renovated, etc.)
in March 2013, 5 sold out of every 10 properties at each price list point.
the sales-to-new listings ratio is trending down.
^^^
Dave,
My explanation would be that in such a low interest rate environment and low rental rates, people do not need to move unless they have had a personal situational change (move or job loss for e.g.).
One would simply not put their house/condo on the market.
Also, with new uncertainty, I think people are just electing to stay put. Hence sales volumes go down unless people get the price they want.
We would need to look at the Teranet numbers to decide if your narrative is correct, though certainly there is some logic to it. However, this will be ongoing. Next year if the numbers continue, 8 of 10 will sell with the crappiest of the ten still not selling and hence the "average price" will continue to remain elevated.
i agree that people are staying put because there is too much uncertainty in the market and transactions costs for R/E is high - 5 to 10% loss to r/e commissions, land transfer taxes, moving expenses, etc.
in addition, we've reached teh 70% ratio of buyers-renters. it's saturated now ... not many more new buyers left.
it's probably only those making moves up/down the property ladder (ie. up or down sizing)
