Benjamin Tal (Deputy Chief Economist for CIBC) gave a seminar to real estate agents last week to help make sense of the current real estate market. His main take-away is that we should not use the market data that we are getting right now as an indication of the future of the real estate market, for better or worse. Our market is currently frozen. The market data that is coming out (and being dramatically reported on in the news) shows that transactions are down by about 70%, on a year-over-year basis. This is not the sign of a market crash, rather, it is a sign that the market is frozen. People are not transacting unless they absolutely need to because the fear surrounding this public health crisis is keeping people inside. How the market comes out of this will depend, according to Tal, on the overall management of COVID-19 in our community.
Don’t get me wrong. To a lot of real estate agents right now, it feels like the market is back. Houses are again selling with multiple offers. Buyers are out in droves and sellers are starting to feel more comfortable putting their house on the market. About this, Tal predicts a Zig-Zag market that follows the fall and possible rise of COVID-19. If cases go up, the market will stop. If cases go down, as they are now, market activity will rise.
Tal cautions against making long-term predictions while in the middle of a crisis. This seems like good life advice in general but is especially good financial advice. With that said, he predicts a year or two of recession and then back to a normal economy fuelled by pent-up demand. The real estate market, he predicts, will not crash “by any stretch of the imagination.” We can all breathe a sigh of relief.
– Robyn VanderVennen
The Kim Kehoe Team