In today’s blog we’re going to be reviewing the market update numbers for Durham Region as of May 2019. Please keep in mind this is a general overview for all of Durham Region. Every single city as well as every single neighbourhood within those cities are going to have varying numbers. If you’ve ever got any questions please never hesitate to reach out.
Now let’s jump right into the numbers. We saw a fairly significant increase in activity for May across the board. Keep in mind when comparing ourselves to May 2018 we were at that point less than 12 months away from the market taking a complete dive off a cliff. Property values have come down 20%, buyer and seller confidence were at an all-time low and everyone was just kind of waiting on the sidelines to see how things were going to play out. So yes we’ve seen and uptick, but it’s an uptick compared to that point in time. When we look at the total number of listings that came to market, we saw an increase of about 6.5% in Durham Region. Ajax was the leader of the pack with almost 20% more listings this May than 12 months ago. Funnily enough, Oshawa was in last place with a decrease of 3.5% less listings this year than we did last year.
When we look at total number of sales we see an increase of about 36% more sales this month than we did 12 months ago. This shows that buyer confidence is returning and people who have been waiting on the sidelines have realized that property values have stabilized and are now starting to increase month over month and it might be a good time to get into the real estate market. Ajax and Whitby are at the front lines with an increase of 53% and 50%, Clarington is lagging behind with only a 12.5% increase with total number of sales.
Now when we look at the average sales price, which let’s be honest it’s the most important number people want to keep their eye on, we seen a 4.2% increase in property values from a year ago. The average sales price in Durham Region is at $622,000, which is an increase from $597,000 a year ago. Pickering is still at the front line with an average sales price of $708,000, but they’ve seen a drastic decrease from a year ago where their average sales price was $730,000.
Some of the other numbers we like to take into consideration when we’re reviewing any market is the months of inventory. Right now we are sitting at 2. What does months of inventory mean? If we were to stop listing today, but kept selling at the current rate, how long would it take to run out of inventory? Anything under 4 months is a seller’s market, 4-6 is a balanced market, and 6 and above is buyer’s market so we are nowhere near a buyer’s market right now. Ajax is actually the hottest market with a months of inventory of only 1.4 and Clarington is lagging behind at around 2.3, but it’s still again a seller’s market. This is what’s actually attributed to the days on market being really low. The average days on market for Durham Region is 19. That means it’s taking the average person less than 3 weeks to sell their home. Keep in mind this is an average, there’s quite a few homes selling with under a week on the market and quite a few higher than that.
When we look at the sales to new listings ratio we’re sitting at around 49% for Durham Region. That means that almost half of all the listings coming to market are selling. It is a seller’s market, but even in a seller’s market that also means that 51% of sellers or people who are listing their homes are actually not selling. That is a fairly significant number. 1 out of every 2 people are listing their home and just sitting there helping the other listing across the street from the sell.
Buyers, if you are thinking about buying a home in this market the number one thing you need to do is hire a professional to help you with your search. It drives me crazy when people call real estate agent directly because they think it will get them a better deal dealing with that particular agent. What I mean by that is, often I list a property and then I get a phone call or message from somebody saying, “can I please get some more information on 123 Street Way.” I will call them up and start asking them question, and one thing I ask is if they are being represented by a real estate agent right now. They will say no and explain to me that they’re calling each agent specifically for properties they like and if they put an offer in they will go with that agent. You are shooting yourself in the foot if that’s the way you’re actually going about your search. You can buy and sell real estate without the help of a real estate agent, but just because you can represent yourself doesn’t mean you should. In the long run you will probably hinder yourself and leave a lot of money on the table. A professional agent knows what they’re looking for and they’re going to be ahead of the curve. They might know real estate agents in the business that they talk to all of the time. They’re going to be aware of what listings are coming up. Just the other day I gave a heads up to another real estate agent about an upcoming listing we have. They are now going to be first in line when that property goes on the market. These are things that agents do that are invaluable to your home search. A lot of people have this misconception that if they use the listing agent on a partner purchase they’re going to save themselves money. At the end of the day the listing agent has signed a contract with the seller of the property and their goal and obligation is to sell that property for the most amount of money in the shortest amount of time possible. When you’re signing on with them all you’re going to do is give the agent al little bit less work to do and they’re going to double their commission. You’re not going to be reaping the benefits of saving from using the same agent on both sides. I personally would never feel comfortable using a lawyer to represent me who is also representing the other side. I don’t that’s even legally possible, but you get my point.
I really believe you should be interviewing real estate agents. Talk to them and find one that you feel comfortable with to actually help you. So many people are scared to sign a buyer representation agreement, but they are just contracts explaining the working relationship you have and it’s also establishing the obligations that the real estate agent has to you. So you do want to sign that contract, it’s just that you want to sign it with somebody that you feel comfortable with and who’s going to be able to guide you through the entire search. Just like how you interview real estate agents when you’re selling a home, you should be interviewing real estate agents when you’re buying a home. Get a couple references and referrals from friends and family, but then also reach out to a coupe people that you have talked to and see who you feel the most comfortable with. At the end of the day you need to hire someone that is going to be able to understand your circumstances and is going to work in your best interest 100%.
When it comes to selling your house in this market, things are still moving fairly quickly. You have to understand that it really depends on what your price point is, what demographic and what type of property you’re selling. You may have a home that is worth $900,000, don’t expect that to sell in 7-10 days because that is an area or price point that is a little bit more slower moving. You should be working with your real estate agents and they should be explaining to you what’s happening in your certain type of market. If you’re under the half a million-dollar mark in the Oshawa/Bowmanville area, you’re going to get a quite a bit of activity and it should sell fairly quickly. As a real estate agent we are going to be doing what we can to make sure that this sale is as seamless as possible, but I’m not forcing the traffic to come. The traffic is there because that’s what the market dictates, there is a lot of buyers out there for this price point.
On the flip side, if you have a home that is $900,000-$1,000,000 you’re not going to get a lot of activity and walk through traffic just because these segments of the market have slowed down drastically. You also have to keep a close eye on what’s happening with this property and the other two types of homes you are competing with. If there’s not a lot of activity and nothing else moving then you understand it’s slower moving segment and you shouldn’t do a price reduction right away. If you’re noticing that the other homes in the area that are your competition or newer homes are coming and they’re selling before you, that might be the market telling you that your property may be a little bit too overpriced because there’s other things with better value that are moving forward. It’s very important that you work closely with your real estate agent so they can explain this to you and give you an idea of what kind of market you’re dealing with. In Durham Region there are so many different pockets of activity taking place, you really have to get a good understanding of what’s happening in this type of property demographic before you understand how you’re going to price it, market it and how you’re going to approach it overall.
Last week I posted a couple videos about investing over on Instagram and had a huge response. It is obviously a topic that a lot of people have interest in so we are going to be producing a lot more content talking about investing in real estate. Investing in real estate is a very general and broad statement. There are a variety of ways you can invest in real estate. Number one is homeownership. It is the most basic form of investing in real estate. If you believed your property was going to be worth less in the next five years you probably wouldn’t buy real estate. You’re buying it because you’re expecting the property values to increase of the next few years. So the very most general version of investing in rea estate is going to be owning your own home. You’re going to be paying down the mortgage, property value should be increasing over time and that’s where you’re going to be really making a return on your investment.
Going a little bit deeper, you can go into what they’re calling these days. “house hacking.” It’s renting out the basement, or you can live in the basement and rent out upstairs. It’s a way to generate some sort of income from the property you’re living in. It’s a great way to pay down your mortgage and to help you handle some of the costs associated with homeownership.
Now going even deeper, you can start owning properties that you don’t necessarily live in. It can be a single-family home, duplex or triplex. Anything over a four-unit rental is actually deemed commercial by most banks, so I wouldn’t necessarily recommend that to anybody who’s just thinking about getting into real estate. They all have their pros and cons. For a single-family detached the pro is it’s a lot cheaper to get into, but the con is your entire investment is contingent on the payment of rent from one tenant. If one tenant stops paying or it’s vacant because you haven’t found a renter, you’re going to eat those costs for the next little while. On the flip side, when you look at duplexes and triplexes it’s going to be a little bit more expensive for you to get involved in. However, if one unit is vacant you’re still going to be generating income from the other one.
So there are pros and cons to both, but you really have to talk to you real estate agent and figure out what your goals are and what your expectation are in real estate investing. I highly recommend everyone to think about real estate investing. It is a phenomenal way to grow passive long-term wealth. Be cautious of people who promising you exorbitant returns on investment and telling you there’s absolutely no risk involved. Anything that is going to offer you some kind of reward is going to have inherent risk. If you want something that is absolutely zero risk, you can put your money into T-bills in a 90 days account with the banks. You’re going to get 0.01% return on investment, but at least your investment is safe. If you really want your money to work for you in the long run, you should really consider real estate investing as an opportunity.
I also understand there’s a lot of drawbacks with real estate investing. There’s a lot of work and effort that goes into it and a lot of things can go wrong. You have to acknowledge that before you go into it. One thing I tell people is to just stay away from is flips. Unless you have your own truck with tools and you’re a handy person with connections to all the trades, I highly recommend people to stay away from them. You can’t expect a lot of money in the short term from them because flips can be extremely risky and there’s a huge cost associated with it. Buying and selling real estate is a very expensive proposition that is going to eat into your profit margins. You have to look at it as, how much work do you actually expect to put into it? I actually recommend buying properties that need a lot of work, but holding onto them and renting them out. I don’t like holding onto real estate for less than a year. Whenever I look into real estate investing, my plan is usually to look minimum 3-5 years out, if not 10 or more.
Alright, time for some predictions. Everyone’s got an idea of what’s going to happen with the real estate market, but at the end of the day none of us actually know. All five big banks have very smart people with a little of data available to them and they can’t even agree on what’s going to happen on a Canada wide level. When talking about Durham Region, I think we’re in a very enviable position. We’re a nice little pocket so close to the GTA and we’re so undervalued compared to all of the different area around us. Anywhere to the west and north of the GTA is already extremely expensive. People are noticing the value in heading out east. 10-20 years ago when I moved to Oshawa from Scarborough it was a completely different world. Oshawa especially had a huge stigma which has been shedding over the last little while. There’s been a lot of investing from not only government sectors, but private sectors in Durham Region. You’ve got the 407 expansion, the GO train, a lot of retail shops opening up over here which means they’re seeing the potential of what’s going to happen in Durham Region. A lot of people are seeing the value in Durham Region and that it can’t be competed with anywhere else.
So what do I think is going to happen in the near future? Obviously there’s a million and one variables and anything can happen, but I do believe we will eventually see a $700,000 average sales price in Durham. The reason for this is because we are so undervalued. The biggest drivers of property growth are employment and population growth. We are so close to the GTA that we get to bask in the warmth of Toronto. Toronto in one the fastest growing cities in all of the world, especially in Canada. We have almost 80,000 people moving to Toronto every single year. So that’s Pickering just pouring into the GTA. When it comes to buying, where are people going to go? Most can’t afford the city so they look west and they look north and when they compare they see that they can that they can live in Durham Region for under $600,000. They can still be within commuting distance to their job in the city, so it’s a pretty easy choice to make. We are of course going to go through our ups and downs, but I do believe in the next 5-10-year outlook Durham Region has a very bright future.
That’s it for May’s market update. I hope you enjoyed it. If you have any questions or comments, please never hesitate to leave them below.
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