When will we know that TO/GTA real estate has bottomed?
Just as it very difficult to accurately predict exactly when peak values will hit, it is tricky to predict when prices will bottom. That doesn't prevent us from trying though.
What will we need to see to recognize that the bottom has arrived? (I am referring to the bottoming of the benchmark price of a home- all types- in Toronto and GTA)
Not sure how long or how much the fall will be, but I opine that the fall will continue throughout 2018. Why? Combination of the following factors.
OSFI broad stress test to hit in January.
We are just at the beginning of a tightening cycle. There is a close correlation between lowering rates and increases in prices in TO. To think that the converse does not apply is naive.
Toronto is the most overvalued market in the world according to UBS. Household debt has never been higher. Many households have their heads just above water and will struggle with small increases in rates.
Big money/ investment and flippers are running for the hills.
Money is getting much more expensive and difficult to access. Many deals falling apart in Nov because of financing issues according to my agents and banker. When January comes, the situation will get even worse.
Now that MLS data cannot be hoarded by TREB, buyers can make more informed and educated decisions, and will be less likely to overpay.
So, what will the bottom look like? My opinion, when prices in relation to local incomes recede to more reasonable levels, and we are near the top of the interest tightening cycle. I see a noticeable drop in prices early in the New Year (stress test), then a slow melt until the two markers noted are hit.
Your thoughts are welcome and appreciated.