These last eight months have brought a housing revolution. Who ever imagined a virus would ignite a rush into sleepy London, pedestrian Halifax or boring Kelowna? But it’s real. Stunning, in fact. Sales in those places are up dramatically and prices have increased by at least a third.
We’re not alone. The same pattern has emerged in the US. Almost identical. Here’s an interesting comment from the head realtor in the Republic of Trump:
“The hottest housing markets in the new landscape are cities which offer desirable amenities—larger homes, leafy neighborhoods, access to the outdoors, walkability and proximity to grocery stores—in a more affordable package. Home buyers still want to be within commuting distance of large employment centers, but with the prevalence of remote work, they are willing to extend the distance from urban downtowns.”
Indeed. Ditto north of the border. Niagara. Kamloops. Moncton. Barrie. Squamish.
At the same time, a malaise has hit urbanity. A new report from BMO days ago – “Big City Blues” – spelled that out. The highest unemployment rate in the nation (of 33 centres) is Toronto at a withering 13%. Vancouver and Montreal sit around 11%. These are awful numbers, and at the same time real estate in the GTA and YVR is essentially unaffordable to 90% of the people living there.
Big-city house prices keep going up, but some see disturbing signs of weakness. Condo sales have started to backslide. Rents have plunged 15% in Toronto in just a few months. Inventory is starting to edge higher. In Vancouver detached prices are forecast to shed at least two hundred thousand on average. And meanwhile the suburbs sizzle – average prices have topped a million in Mississauga, where Costco is a cultural destination.
Big cities have taken a big hit, as hotels, tourism, concerts and pro sports are killed by Covid. Layer over that the WFN phenomenon. Many people think the soaring office towers in the core will stay empty, that commuting’s no longer a thing, and society will achieve that elusive work-life balance, which means you can now go for days without your pants.
Small cities have benefited the most, where the quality of life is high, streets seem safe, lockdowns are less likely, wildlife scampers through your garden and houses actually affordable. Once untethered from the need to be in a downtown workplace, enough people are flocking to Hamilton or Vernon to inflate values and stun the locals.
Of course, it’s not all Covid. Mortgages at 2% or less have inflated real estate everywhere. Worries over the US political situation have scared some people away from financial markets. GICs and savings accounts paying dirt have convinced some savers to shift into real estate, where gains appear endless. And above all, there’s stress. The pandemic is the most unsettling, consequential, disruptive and victimizing reality of our entire lives. It’s led to an emotional need for security. Nesting. A retreat into a cocoon we can control, in a world out of control.
Now, can it last? Are these wise decisions?
Sure, it makes sense for old, retired farts on fixed incomes to bail out and head for Hicksville. But what about the moisters with sprouting families, serious financial obligations and in the middle of growing careers?
That’s the gamble. And, yup, it’s a risk.
Remember GreaterFool Rule 12: before you buy any real estate, figure out how to sell it. A slow, sleepy, cheap market that just woke up because of a once-a-century event might not be the best choice. What happens when the pandemic ends? When the best jobs migrate back to the city? When you must sell but the boom’s long gone?
Meanwhile, could the virus do to housing in January and February what it did in March and April? If this cold-weather, second-wave gains traction things might look dire once again. Maybe it’s already started. On Friday Ontario’s realtors started banning open houses.
The province slid back into Stage 2 restrictions a few days ago, following the lead of Quebec. People are being asked to stay home, and agents instructed to stop showing listings, especially in condo buildings. “We are calling for our members to do the right thing,” says the head of the provincial real estate association.
If you think anything happening now is normal, you may be jolted by what’s to come. Caution.