Back in April 2020, I decided to do what everyone seemed to do during the pandemic, I decided to binge watch The Last Dance. So I prepared myself to hunker down, drinks, snacks, a blanket etc. Snack of choice was a big old bowl of popcorn that I made myself old school…stove top! When you make it like that there are un-popped kernels which I love!!! So I bit down on an un-popped kernels and noticed it made a sound in my mouth that I never heard before. Thinking nothing of it, I just went about my business.

Fast forward to when dental offices re-opened and I went for a cleaning, they said I was due for an x-ray, all good…not really, they found I had a horizontal crack on one of my back molars. I asked what to do and they said nothing, until one day last week, as I was driving to one of our offices, and suddenly found a piece of my tooth roaming around my mouth. My tongue immediately went to the jagged edge of my back tooth to investigate. It felt like a sharp edge, like a fragment from a broken rock, but not sharp enough to cut my tongue.

For the next 30 hours my tongue could not stop going there, it was like my tongue had a mind of its own. My brain knew exactly what happened, my tooth broke, but my tongue could not stop going there to investigate what had happened over and over again. It became a nuisance, something was out of place in my oral environment and my tongue instinctively was obsessed with it. At about the 24 hour mark, my tongue’s journey to the broken tooth became less frequent, and it wasn’t until 30 hours later my tongue got used to the foreign feeling, and just adapted to the jagged edge as if it was there all the time.

My mouth’s experience maybe a metaphor for the real estate market, every time our market environment changes (stress test, foreign buyer tax, interest rate increase), it forces all stakeholders (like my tongue) to immediately surround the issue. It is like we focus on what is different and forget to understand what else is at play. We focus on the jagged edge and fail to highlight the other data points which are evolving, which may be able explain the shift which is occurring. And sometimes it may take 30 hours, or 3 months etc., to become accustomed to the new reality.

The Unemployment Rate is a Key Market Indicator

Furthermore, there are some very strong economic indicators which are not being highlighted at all. Unemployment is one of them, unemployment is at an all-time low, and as a matter of fact it is the lowest since Statistics Canada has been tracking this variable. Low unemployment is a buffer between high inflation and higher interest rates. There has never been a correlation between higher interest rates and mortgage defaults, (bad news for the real estate vultures out there). But there has been a correlation between high unemployment and defaults….take that economic pundits!!!! Large default rates could lead to falling house prices, but there is no indication of that happening anytime soon.

Get over it you complainers!!!

Over List Price in 2022? Have you ever thought to see how many homes sold over the list price, in the markets you serve in 2022? In 2021, our companies, RE/MAX Escarpment and RE/MAX Niagara, averaged 109.03% and 106.06% over the asking price respectively.

In the last 2 months, our various trading areas had a relatively high amount of properties which sold for 100% and over the asking price. Furthermore of the subset of properties which sold at 100% or more over asking, the average ranged from 105.02% to 111.87%.

Hamilton Surrounding (Ancaster, Dundas, Waterdown, Glanbrook, Stoney Creek) 44% sold at 100% or more, with an average price of $1,123,754, 109.32% over asking, with an average of 9 days on the market.

Burlington 42% sold at 100% or more, with an average price of $1,227,381, 108.17% over asking, with an average of 8 days on the market.

Oakville 27% sold at 100% or more, with an average price of $1,490,314, 105.97% over asking, with an average of 7 days on the market.

Hamilton (Old City) 57% sold at 100% or more, with an average price of $752,156, 111.87% over asking, with an average of 8 days on the market.

Niagara 42% sold at 100% or more, with an average price of $793,210, 105.02% over asking, with an average of 9 days on the market.

What is Happening with the Luxury Market???

I define luxury in our trading area as over $3,000,000, when you run the numbers for Oakville, Burlington, Greater Hamilton and Niagara there were 145 transactions over 3 million dollars, with an average price of $4,243,972 and 28 days on the market for Q1 and Q2 of 2022. In 2021 for the over 3 Million crowd there were 155 sales for the same period, with an average price of $4,143,934 and 37 days on the market. When I took out the Oakville sales, and left the rest in, there were 40 sales over 3 million, and in 2022 there were 60 sales, a 50% increase. I know, I would be criticized if I did not run the Oakville upper end numbers, which after much internal debate, which I determined at 5 million dollars plus, there were 20 sales at that level in 2022, and 24 in 2021 (17% decrease).

Dare I Say….

Sidebar, but maybe the stress test wasn’t such a bad idea after all, and maybe just maybe, it could be one of the main reasons if we are headed towards something negative in the real estate market, we will probably have a soft landing.

Also Of Note…

According to the Bank of Canada 35% of Canadians have a mortgage, and of these many have paid down a substantial amount of principal, making them very low risk. 37 percent are renters, which leaves 28% mortgage free. So I ask again, “what is all the fuss about??