Given the current challenges brought on by the COVID-19 virus and the recent global stock markets crash, many people are questioning the impact this will have on real estate values and demand during the remainder of 2020 and beyond.  Real estate is always a popular topic of conversation and there is no time better than now to delve into where we have come from to determine where we might be going in the months ahead.

In the book Boom, Bust, Echo first published in 1996, author and noted demographics expert Professor David Foote stated: “….real estate is affected far more by demographics that it is by economics.”  Nowhere is this more applicable than in the Southern Georgian Bay region

The role of REALTORS® in recent years has changed.  At one time it was believed that we were the gatekeepers of information and some still try to hoard the facts with the belief we need to in order to protect our jobs.  In realty it’s quite the contrary.  Thanks to Internet based MLS® Systems, an abundance of property photos, virtual tours and media reports, consumers have access to more real estate related information that ever before.  Showing properties and holding Open Houses is the least of what we do, the emphasis has moved to those of us in the real estate profession acting as advisors to our clients, helping them make informed, intelligent decisions with respect to the buying and selling needs and objectives.  To that end I have assembled the following data and observations.

The most recent downward shift in real estate activity happened in late 2007 when we began to experience a market slowdown and subsequent recession driven by the housing bust and financial crisis in the U.S.  This carried over into 2008 when MLS® unit sales in our market posted a 21% and 22% decline in both unit and dollar sales respectively.  In 2009 area real estate recovered and this carried forward into 2010 the year in which Ontario implemented the blended GST and provincial sale tax rate of 13%.  Moving ahead, MLS® dollar sales in the area grew annually from $544.8 million in 2010 to just over $1 billion in both 2016 and 2017, driven by strong buyer demand and low mortgage rates.  Sales activity dipped slightly in 2018 resulting from tighter lending rules and more balanced market conditions.  Gone were the crazy multiple offer days of the prior two years where many properties sold for well over their asking prices.

      Dollar volume sold through the MLS® System of the Southern Georgian Bay Assn. of                 REALTORS® 2007 through 2019.

During 2019 strong demand for area real estate returned with total MLS® sales for the year reaching a new record of almost $1.2 billion, driven by increased sales activity above $1 million.   It is important to note that none of the above mentioned results include properties sold outside the MLS® system by builders/developers directly.  The chart below shows the number of properties sold annually during the local MLS® System during the same time period.  As you will note, despite a couple of minor ups and downs, the computer generated “trendline” shows a constant upward trend in real estate dollar and unit sales through our local MLS® System.

  Number of properties sold through the MLS® System of the Southern Georgian Bay Assn. of    REALTORS® 2007 through 2019.

Notwithstanding the relatively consistent sales activity (dollars versus units sold) that we experienced between 2007 to 2019, what did change more significantly was the demand for higher end properties sold above the $1 million threshold as reflected in the chart below.  Yes there were some bumps along the way but overall the “trendline” reflecting the increase in the number of high priced properties sold shows a much steeper incline than the two previous charts above. Sales above $1 Million increased 41% last year with 132 properties sold in this price segment versus 93 in 2018.  Overall, total MLS® unit sales in 2019 increased 8% last year compared to 2018.  What is important to note however is that despite the 8% increase we experienced last year in total MLS® unit sales, these sold results are 507 properties or 18% less than the high water year of 2016.  At least a portion of this decrease can be attributed to increased sales of new homes and condominiums made directly by builders and developers that do not flow through the MLS® System.

Number of properties sold over $1 Million through the MLS® System of the Southern Georgian Bay Assn. of REALTORS® 2007 through 2019.

Back in 1992, prior to entering real estate the company I was employed with promoted and transferred to Chicago.  Similar to now, both Canada and the U.S. were in an economic downturn which was triggered primarily by what was known then as the U.S. Savings and Loans Crisis.  Like now, oil was trading at roughly $20 a barrel and the U.S. and Canadian unemployment rates were 7.5% and 10.5% respectively.  Essentially that is where the similarity ends.  There was no global pandemic, borders were not closed, the economies of both countries had slowed but businesses were not shut down and people around the world were not dying by the hundreds and thousands.

The current forecast for the U.S. suggests unemployment in that country will rise to 25% with 1 out of every 4 people out of work until COVID-19 is brought under control and wrestled to the ground.  No one knows where the price of oil is going nor do we know with any certainly when we might expect life to return to a sense of normalcy.

As we weather this unprecedented global storm, I believe Professor’s Foote’s quote is more relevant than ever.  Unlike the stock market which can shift at a moment’s notice, real estate and the Southern Georgian Bay region in particular is no less attractive now than it was prior to the arrival of COVID-19.   At the same time however, we are in very unique times.  Never in my lifetime or likely your’s have we been through circumstances as I have outlined in the preceding paragraph.  The flattening of the COVID-19 curve can’t be compared to or flipped upside down to suggest here is where we go from here in terms of the economy, employment, or our daily lifestyles.  The fact is we just don’t know and until such time as we get some of the current circumstances behind us we can’t with any certainly “predict the future” 3, 6 or more months down the road including where housing demand or pricing may be.

I will elaborate more on this in my next post.  In the meantime, please feel free to Contact Me if you have any questions or concerns relative to your specific real estate situation either now as we fight COVID-19 or in the months ahead.

Stay home and stay safe this storm too shall pass…..