Resurgence in Home Prices Entirely Predictable (October 2013)
PREDICTIONS come true!
In May of this year, I predicted that the average price of a single family home in the GTA would be $535,139 by Halloween. I had also predicted in May that the price would be $502,706 by the end of August.
How did I know that?
Fairly simple, the market is performing this year as it always does. Nothing unusual. So, if that’s the case, remember 100-7-99.
The real estate market will achieve its peak in May, basically one of three dates: the 1st, the 15th, or the 31st. That’s the high water mark for the entire year. Then, it will decline in June, July and August where it will bottom out. In September, it will rise again, and at the end of October, it will reach its Fall peak.
If we gave May a number or a percentage, it would be 100.
The market over a decade will follow the same pattern (9 times out of 10).
The drop on average is 7%. That occurs at the end of August.
The increase of 6%, will bring the Fall peak in at 99% of the May number.
Hence, the rule of thumb: 100-7-99.
This year, how did it work?
Well, at the end of May we had $540,544. So, I predicted a loss of $37,838, with an average price of $502,706. It was a simple 7% decline. Not too bad a guess, the number came in at $501,937 for a 7.14% decline.
Also, at the end of May, I predicted $535,139 by the end of October. Again, simple math, 99% of the May number. Again, a fairly good guess, with the October number coming in at $539,058 or 99.73% of the May number.
So, don’t forget the formula 100-7-99, most of the time it works. And, when it doesn’t, there’s usually something “big time” happening like the worldwide stock market crash wiping out one half of the values on the stock markets. That would be hard to miss.
But, if you are just looking at the numbers, don’t forget the real estate cycle.
Any guesses for the year end numbers?
Brian Madigan LL.B., Broker www.iSourceRealEstate.com