What a headline! 

Did I attract your attention? Or are you a tad cynical with thoughts of 'who is this fool'? 

Allow me to elaborate....

2017 has no doubt been one of the most memorable in our housing market. As I reflect back and put the year in perspective based upon my blog a year ago, I became curious in a desire to add perspective from the past several years. After all, markets are fluid - they ebb and flow - and perspective is always gained by looking at more long term historical trends in the hopes of gaining clarity amidst our current market.

We learned the hard way in 2017 that one cannot look at a short-term history to gain perspective of our current market. The inventory levels that hit considerable highs this year clearly indicated a desire to cash in; and for many, the dream of those heady April prices never occurred. And this, in my opinion, was where our paradigm or perspective got skewed. We started to focus far too much on the short term results and past performance; and took our eyes off the more long term perspective. (And yes, if you analyze the month over month numbers, the housing market does look more grim at this time. The challenge with month over month numbers is there are far too few sales currently to get an accurate result.) And so for the purposes of this blog I shall take a more long term analysis and review the Year End averages.

From December 2016 to this year's peak in April, the average price in Aurora rose by 22.5%. This is clearly not sustainable and must not be relied upon for a balanced and healthy housing market. Since April, the average Year to Date price in Aurora has eroded by 7.3% and, in evaluating the Year to Date price December to December, Aurora actually remains up by 13.5% in total. (Pretty close to my estimate from last year's blog.)

Why am I using Aurora as a specific example? York Region, and most specifically Aurora, was one of the biggest price increases in this year's surge. And as such, both the Region and Aurora specifically have been hardest hit in the lull.  As Aurora is the lion-share of my business, it seemed logical to focus in on this one geographic area. Of note, however, is a cursory look at all the other communities in York Region and south Simcoe County did clearly show similar patterns.

In a desire to put 'hardest hit' into perspective, I went back to the last price correction in Aurora which occurred from December 2006 to December 2007. The Average price of a home in Aurora year end 2007 was $412,133 - down 1.5% from the previous year. The US housing crisis occurred in 2008 and we saw total sales in Aurora drop by 21.8%. Curiously, however the average price rose 4.4% to $430,338 by the end of 2008. 

The 2008 US correction impacted our market for about 9 months with confidence pretty much restored by fall of 2009. Year over year, total sales rose by 27.7% and the average price rose by 2.7% by the end of 2009.

How does this all relate to our current market? Generally, one of the biggest indicators of a housing correction is the decline in total sales. Locally, we saw this pattern during the US collapse in 2008. Similarly, we saw this same pattern in 2017 with a decline of total sales in Aurora of 30.9% from December 2016. When buyer confidence erodes, sales activity plummets. And buyer confidence was hit hard in 2017. Who can blame them. It was a heck of a ride this year.

However, like the US market where the symptoms were present for a few years before the correction, an analysis of the price trends in Aurora (and surrounding areas) clearly show that we should have seen this coming as early as 2014. Until that time, our annual prices increases remained reasonably sustainable with percentage growth being in the single digits. However, double digit average price increases began in 2014 and rose considerably each year. 10.8%. 13.5%. 28%.

During that same time, we saw a considerable rise in the total annual sales. Until 2015, the total number of housing sales had remained reasonably stable - hovering just around 900 home sales per year on average. And then, quite suddenly, we saw a spike of 17% total sales in 2015. No doubt, in response to the first double digit price increase that we saw in 2014. Then, as prices continued on their eye-popping price increase trend, sales similarly bulged 28.9% in 2016. More cashing in!

Then came the crazy ups and downs of 2017 and all that contributed to the 'perfect storm'.

However, what no one is focusing on presently is that we are still up 13.5% since last December. That is correct! Our prices are still strong. Most families still have solid equity in their homes. The sky is not falling. We are fine. The past trends tell us that real estate is a cycle. We are cycling back a bit now however the data clearly supports that what goes up must come down; and similarly, what is down must go back up again. Keep it all in perspective. This has been a tumultous year. A shock to any system causes a time of recovery.

So what of the year ahead. Well, my crystal ball that shattered earlier this year just came back from the shop! Yep, just a bit cloudy right now.

Even economists cannot agree on where the housing market is heading in 2018. From one, I am reading of a 5 - 8% increase in housing prices; and from another a 5 - 7% drop in prices. We do know that there are some uncertainties heading into 2018. The new Mortgage Stress Test for all mortgages comes into effect January 1, 2018 and interest rates are likely going up. Both of these factors could put downward pressure on house prices. Conversely,  the Millennials at the 'home buying' age are at an all time high and immigration into the GTA continues to rise. This invariably will impact demand.

What we do know for certain is that we continue to have unusually high active listings and unusually low buyer confidence as we turn the corner on 2017. My sense is we will see this active inventory remain high and that most buyers will hesitate on the sidelines just a bit longer to wait out any possible impact the 'stress test' may have on prices - if any - and see what the Feds will do with interest rates in the first quarter. We may see our year over year price increase continue to slide a bit further from the April 2017 high. 

Then look out 2nd and 3rd quarter 2018. That pent up demand will kick in. The potential downward pressure on prices from the stress test will now have factored into the market; one, possibly two, rate increases in the first quarter will cause some to wake up and finally recognize that locking in on a mortgage now could be the best decision to make. 

I know it is a bold statement to make. And I must temper this with a reminder of my cloudy crystal ball. This is just one opinion. And we all know what they say about opinions. Yes, everyone has one! So be careful who you seek advice from.

Our team is here to help you in any decision you are pondering. Sell to buy up; buy for the first time; sell to downsize; sell to ultimately retire. Or perhaps staying where you are may very well be the best decision. We are here to support you in exploring all your options. Give us a call or connect to set up an appointment and let us help you make the very best plans for the year ahead.

All the very best for you and your family for abundance in all areas of your life this coming year.