2020 Real Estate Market Update For Durham Region and Kawartha Lakes
March 5, 2020
Well, we are in the backside of winter here in March, everyone wishing for spring and done with old man winter! We thought it best to bring you up to speed on what has been happening in the local real estate market in the first two months of 2020:
One phrase seems to be popping up across the GTA – “lack of inventory”. There is a shortage of properties on the market to meet present buyer’s demand. Locally (north Durham, southern Kawartha Lakes), it’s the lower price range, under $600,000 that is now seeing fewer days on market and in some cases multiple offers. The higher price ranges over $600,000 are still seeing average activity with a more balanced market between buyers and sellers. This type of demand in the market is a little early in the year given traditional norms.
Statistics that you read in the media have to be taken with more than a quick glance. Not all areas are experiencing the same numbers and it depends on a number of factors including location and neighbourhoods:
Check this out:
Durham Region as a whole have the following:
The average price in Durham Region reached $657,788, representing a 13 per cent increase from the same time last year. The MLS® Home Price Index Composite Benchmark was up 9.30 per cent in February 2020. The Composite Benchmark price for all home types in Durham reached $595,600.
In North Durham (Scugog/Uxbridge/Brock) combined numbers look like this:
Average sale price is $728,000
Days on Market is hovering at approximately 60 days which is more than twice the amount of southern urban markets.
Sale price to list price ratio is 97-98%
In comparing to more urban markets such as Ajax, Whitby, Oshawa, Pickering where:
Days on Market is cut more than half at 20-30 days and list to sale price ratio is 100-101%
There is an urban/rural divide in these numbers and more and more people are driving to qualify for their mortgage given the current heady market conditions in more urban areas. Source: DURHAM REGION ASSOCIATION OF REALTORS®
Kawartha Lakes Real Estate by the numbers:
Average sale price is heading higher from January $436,000 to the end of February at $479,000
Days on Market has dropped from 52 in January to 26 in February indicating good demand
Sale price to list price ratio is heading higher from 97% at the beginning of the year to 99% at the end of February.
Kawartha Lakes has more affordable pricing and more people are making the drive due to mortgage qualification and for lifestyle, pushing market values higher. Source: CREA Stats for Kawartha Lakes
What to watch: (from Consumer Mortgage Trends and Mortgage Professionals Canada’s chief economist Will Dunning):
On April 6, 2020, the mortgage stress test is being modified. People with less than 20% down on a purchase will be able to stress test at a lower amount using a different formula:
Current stress test rate for insured mortgages (typically those with less than 20% equity):
5.19% Based on the Big 6 banks posted 5-year fixed rates.
New stress test rate (if it were in effect today):
4.89% Based on a rate equal to the weekly median 5-year fixed insured mortgage rate plus 2%.
How much does it help the average buyer?
There’s no question the new formula for stress testing insured mortgages will help many buyers who are currently just on the cusp of being able to pass the stress test.
Consider that the current stress test rate of 5.19% is a full 283 basis points higher than the lowest available insured mortgage rate on the market.
The new formula will narrow that gap by 30 basis points after April 6. This will decrease the income required to buy a $300,000 home by roughly $1,500, assuming a 5% down payment and 25-year amortization.
Alternatively, it will allow those who can easily pass the stress test to purchase about 5% more home. As Ron Butler of Butler Mortgage Inc. told us, “Someone who qualified for a $500K mortgage (previously) will qualify for $525K in April.”
And of course the Bank of Canada has lowered its base rate by 0.50 basis points for a bank rate of 1.25% trying to head off the head winds of a potential slower market due to the COVID-19 virus and in turn the big banks have slashed their mortgage rates making affordability even better.
All said, heading into April, May and June we are cautiously optimistic, but we are watching carefully the economic impact of the COVID-19 virus as it could affect our real estate markets. In the past 2 years, there hasn’t been a more affordable time to buy given the changes in the mortgage market and interest rate cuts.
Brett Puckrin, AACI, P.App, PLE