The real estate market is UP. Wait, what?

I know you've all read the news and have seen the doom and gloom headlines: “Millions of jobs lost,” “Economy in peril,” and “Real estate market to fall 20 to 30%.” There's a lot of bad news out there right now, so the headline of this article might come as a shock.

Wait, the real estate market is UP?

Yes, it is. You didn’t misread and we haven't made a mistake… the proof is in the numbers. Confidence in the Toronto real estate market has rebounded from the April lows, and while transactions and new listings are still down 55% and 53% respectively, prices are almost back to their pre-COVID record highs.

Here's why:

Over time, we've all been adjusting to what everyone keeps calling the "new normal." In early May, as we all settled into another month of isolation, we had just gotten that much more comfortable with the things we have to do differently to keep living our lives. And that meant buyers and sellers getting more comfortable, too.

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In the last month, sellers have done a better job of preparing high-quality virtual tours and photos to narrow down the people who actually have to come into their homes. They've taken plenty of safety precautions — some have even left their homes altogether to accommodate multiple showings. At the same time, buyers have been more active online, looking more closely at virtual tours and choosing to minimize in-person visits to only properties with a serious chance of being “the one."

The May numbers reflect those increasing comfort levels and the ability to adapt. The number of transactions are up 55% over April, and the number of new listings are also up, but not quite as much, at just over 47%. Basic economics: demand is outpacing supply, so prices will rise. And rise they did, to the tune of 4.6% month over month.

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However, the increases we're seeing aren't just up over the last month, they're higher than they were at this time last year, too: average prices are 3% higher than they were in May 2019. Semi-detached homes in the urban 416 led those gains, jumping up 8.8% compared to last May. Condos in the 416 are up 5%, and semis in the 905 also saw strong year-over-year growth, with an average price increase of 5.6%.

So how are prices rising, given the economic uncertainty, job loss and overall chaos brought on by the pandemic?

The government and the banks have put interventions in place to keep the Canadian economy, (which includes the real estate markets) from imploding. So far, that's helped.

Banks are allowing people to defer their mortgages for up to 6 months and the CERB and other government support mechanisms are putting some cash back into people's pockets — and into the economy. I won't tell you that these promising May results mean we've gotten through all the tough times: there could be more to come. A lot of experts are saying we may not actually start feeling the true economic fallout of this pandemic for another 4 to 6 months, once all the financial aid and loan deferrals have dried up.

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But there's one important thing to remember: the GTA real estate market is not the Canadian real estate market, and we can't compare the two. It's a market of its own — deferrals and aid may end, but we will also slowly see immigration restart and international businesses reopen, both of which are huge drivers of the local real estate market. It's a market that has historically been very resilient, and there's no reason to expect it won't be this time around.

I know a lot of buyers are hoping for the 20-30% discounts some economists are calling for, but that may not be realistic. Remember, those same economists have been calling for the Toronto real estate market to crash since 2012. While there are certainly a number of scenarios where prices could fall further, I don't see one where the plunge is that dramatic or as long-term as the 2-3 year time frame being tossed around.

In the long term, I'm still bullish on the Toronto real estate market.

I'll repeat the one thing that I always tell people who ask me if now is the right time to buy: if you're prepared to see your purchase as a long-term investment, there is never a truly bad time to buy in the GTA. Historically, even people who have laid out top-dollar in a hot market have walked away, 5 or 10 years later, with a place that's worth significantly more than what they paid for.