Why People Predict A Market Crash
Written by: Remington Joseph
If you’ve ever looked into real estate, there’s a good chance that you’ve read some pretty wild headlines, most of these either predicting a crash in the GTA’s real estate market, or announcing that it’s hanging on by a loose thread. We can tell you with absolute certainty that the market isn’t in any danger, but where do these headlines come from? Why are there so many “experts” predicting the impending downfall of the real estate industry? There are several answers to that question, but within the last few years especially, these are some of the core reasons that lead people to the misconception that the real estate market is in danger.
The Global Pandemic Effect
Needless to say, the COVID-19 pandemic had an effect on just about every industry. Jobs were lost, travel was restricted, and for a lot of people, less than ideal financial situations were becoming a bit more commonplace. We’re fortunate enough to see that the impact that the pandemic had on the world isn’t still being seen on a daily basis, but many industries are still dealing with the aftermath.
In real estate, the pandemic created an eighteen month long period where buyers were in a frenzy. It wasn’t surprising for any one listing to have upwards of thirty offers lined up for it, and prices were continuing to soar. Additionally, this created a historically low level of inventory within the market. Unsurprisingly, the headlines around this time spelled doom and gloom for the industry, but that really only looked at one side of the coin. While it was true that buyers were having a really rough time in the market, it was a paradise for sellers in the GTA, and very few of them would say that the market was crashing.
The Market’s Correction
Combating the effects of the pandemic, changes needed to be made. If you own a home, you likely know all about the recent interest rate hikes. While it’s easy to view these increases as a sign that the market is in bad health, when you look at the bigger picture, these actions play their part in evening out the market for everyone. With increased rates, many buyers became a bit more hesitant to purchase properties, giving the market time to develop a larger amount of inventory. In the last 28 days alone, we’ve seen over 4,337 new listings across the GTA. Even better, the average price of these homes is around $1,061,995, a significant price drop compared to a few months ago.
Much like when we were facing a seller’s market, the opinion of the state of real estate is going to change depending on who you ask. When sellers aren’t able to list at the same price as during the pandemic’s peak, their opinion is bound to be less favourable. At the same time, higher interest rates may have someone skeptical about whether or not now is a good time to purchase property. If you’re looking to invest however, diving in even with the higher interest can be well worth the cost. In Canada, The average rent for all property types in August 2022 was $1,959 per month, representing an annual increase of 11.1%. The average rent is up 1.3% monthly, and 16.8% from the recent market low of $1,676 per month in April 2021. If you’re looking to make a profit through real estate, now is the time to do it.
An Outsider’s Perspective
For as harmful as the doom and gloom clickbait articles about the real estate market can be for anyone looking for useful information and guidance, it isn’t impossible to see where they come from. From an outsider’s point of view, the market can appear sporadic, constantly shifting in different directions that might seem unfavourable if you aren’t looking at it from every point of view. The numbers are always there, but if you don’t know what they mean, it’ll be impossible to make an accurate prediction. For this reason, we always stress the importance of looking back at the real estate market’s history, giving you a slightly better idea of what to expect. Like an ocean, the waves flow in different directions at times, but it never dries up.
The truth is, no one can predict the future with absolute certainty. The reason we can speak so confidently however, is due to our time in the market. If you’re looking for an honest perspective about its current health, speak with the professionals who work with the numbers daily, selling property, and helping others to make investments for their future.
Remember, It’s never about timing the market. It’s about your time IN the market.