Welcome back to our monthly report!

The market is in a holding pattern. As far as the stats are concerned, not much has changed in the marketplace. But don’t confuse the stats with a lack of news in the real estate arena. Lots is happening around us and I want to use this report to bring you up to speed.

Firstly, lets quickly go over the stats. Sales are down from last month and year over year. But we already knew that. The number of listings are up a bit from last month and just about the same as it was this time last year. The sales to new listing ratio is at 40% (officially a buyers market), but you would never know it. And the average price of a home in the GTA is hovering around 1 Million dollars, as it has been since last summer.

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Now for the interesting stuff, take a look at the chart below. It’s called the SNLR vs Annual Price growth. The orange line represents the annual change in prices and the blue line represents the Sales to New Listing Ratio, the all-important barometer by which we can predict the direction of the market. If you go all way back to 2007, you will see that when one line goes up, the other follows, and when one drops, the other follows it down. This must happen because of the relationship between the two. In other words, as demand increases, so do the prices, and when demand falls, well you now where I’m going with this. Now look at the gap between the two lines in 2008. That gap was filled in 2009 by the blue line dropping to meet up with the orange line.

Now move your eye to the right all the way to 2017/2018. There was a huge gap between the two lines. A gap, like a vacuum, that was bridged. Sure enough, that gap was indeed filled by the orange line rising. Whenever there is a gap between these two lines, you can bet your bottom dollar that sooner or later those two lines will meet. Now look at today’s lines. There is a larger gap between these two lines than there has been in the past 15 years, and I have a sneaking suspicion that the last time this gap was so large was in the crash of 1989.

Those two lines must once again meet and there are only two ways in which they can do that. Either prices have to rise, and in this case, significantly, or the blue line must fall significantly. If the blue line falls significantly, it will cause the orange line to drop even further, but as you can see from the past 15 years, they play a game of cat and mouse with each other, and invariably intersect.

Cutting to the chase, very few times in our history has the blue line dropped below the 40% mark. 2007 was one time and 1989 was the other. And the few times when the orange line drops significantly below the blue line, like a phoenix rising from the ashes, so do the prices. Because of this chart and the interactivity between the lines, it is telling us that prices will rise again. The only question is when? My best guess is it will take 12-18 months.

Here's the message I want to leave you with. You marry your mortgage and you date your interest rate. Everybody is getting caught up with the “high” interest rates, forcing their attention on them at the expense of missing the opportunity. Don’t!!!  It’s a mistake. By the time the interest rates fall, the prices will be on their way up. You always want to buy on the downswing, not the upswing, and the downswing is being caused by the interest rates. In a very funny way, right now the interest rates are a buyer’s best friend.

Ken Wilder BA, ABR, CH