December 2022: Toronto & GTA MLS® home sales: Crisis? What crisis?
Tags: HOME SALES STATS, 1 Storey, HOUSING CRISIS, BUNGALOW, ONTARIO
Toronto, Ontario, January 4, 2023 - Toronto and Greater Toronto Area Realtors® this morning released the monthly MarketWatch stats publication for December, 2022 confirming… or maybe “quantifying” is a better choice of words… a continued softening of the residential real estate market across the Toronto Regional Real estate Board’s portion of the South-Central Ontario market area.
The Big Picture
We’ve said here many times over the past couple of years that the market was simply unsustainable in terms of price growth, tight inventory, multiple offers on anything that so much as looked like a home… but the second sentence of the Board’s report states, “Existing affordability issues brought about by a lack of housing supply were exacerbated by sustained interest rate hikes by the Bank of Canada.” which we’d probably tweak a little to: “Existing affordability issues brought about by artificially low interest rates were exacerbated by sustained interest rate hikes by the Bank of Canada.” Or whatever. The fact that, with interest rates normalizing, “housing supply” - which we delve into a little more below - has swelled to 169% of the levels last year for the same period. That speaks for itself: Cheap money - and “FOMO”... fear of missing out…. - drove us into such a frenzied market and the resultant tight inventory which many refer to as a “housing crisis”. Markets, by their very nature, will self-correct sooner or later. Period.
As usual, “new policies” introduced by the various levels of government are not only misguided, by the time they’re instituted the market’s usually already corrected on its own or is in the process of doing so. Which is where we are now. Another factoid: mortgage rates are still relatively modest by historical standards. Chart below showing fifty years of 5-year posted rates…
We’ve heard industry watchers and even participants say things like “market softening” is all a “media event” - whatever’s meant by that - and that prices and the market in general haven’t really softened at all! Seriously. And the foreign buyer “problem”? Statistically speaking, foreign nationals’ buying of Canadian homes registers as marginal at most. But now we have the Prohibition on the Purchase of Residential Property by Non-Canadians Act… phew… to “ensure that housing remains available to Canadians”. See the section below on “Inventory”. Hopefully it helps out local buyers, but… #Squirrel!
Not only that, but the fine for violating that Act appears to be $10,000. That’s more like a bit of tax to a “foreigner wanting to buy a home in Canada", isn't it? Oh, and the prohibition doesn’t apply to foreign students - even if they have wealthy parents, apparently - or folks on work permits or refugees or homes with more than 3 units or homes in towns with populations under 10,000 people. Makes us, as taxpayers, wonder how much it costs us in terms of time, money, and other misallocated resources to draft, debate, and pass such legislation…
The total number of homes reported sold through TRREB’s MLS® System on the month came in at 3,117, down 48.2% from last December …and without trying to “gloss over” what’s clearly a softening market, let’s also keep things in context by remembering what an anomaly “last December” - and the many months before it, for that matter - was, though.
The average sale price of that total volume came in at $1,051,216 which was 9.2% lower than the year-earlier month’s $1,157,837. What’s $100k - usually after-tax - amongst friends, huh? Easy come, easy go… though likely more to “go” in the months ahead if the current trends persist. Buyers rejoice. Though, as the infamous Yogi Berra put it, “It’s tough making predictions...especially about the future.”
Also have to note: While figures in the residential real estate space tend to be YoY comparisons due to the strong “seasonality” of the market - which is why we use them here - peak home price [to date] actually came in February, 2022 at $1,334,062 overall which means the actual drop from that peak to the December average “overall” was actually $282,846. December’s $1,051,216 average was the lowest of 2022. Similar on the sales volume front: The sales volume peak came the month after the average price peak with March 2022’s [that links to our blog post which we titled, "Winds of Change, or...?"!] 10,864 MLS® sales reported. December’s 3,117 was the lowest of the year - though it’s not abnormal for the month of December to have the lowest sales volume of the year.
Specific Numbers by Major Home Type
Three-hundred-and-ten Detached homes sold in Metropolitan Toronto in December which was a 44.9% drop. The average selling price of that 310 sales was $1,627,635, down 4.1%. In the rest of TRREB’s market area - “The 905” [area code], generally speaking - 1,042 sales of Detached homes were reported, down a similar 44.2%. The average sell price for that area surrounding Toronto was 1,312,278, down 16.4%.
Please note that all figures quoted herein are year-over-year [“YoY”] comparisons except where specifically noted otherwise.
Condo Apartment sales in Metro T.O. totalled 646 MLS® sales last month, off 55.3%, at an average of $741,584 which, at “+1.4%”, had the honour of being the only “plus sign” on the entire chart. The balane of the GTA saw 320 units sell, down 47.4%, averaging $633,135, off 5.2%.
On the Inventory Front…
It was such a pain point for so long - as we’re all aware… though particularly those on the home buyer side of the fence - it prompted the calls to “do something”. And now it’s clunked into reverse which, as we’ve noted ad nauseam, was inevitable with or without “doing something”. Let’s face it: If prices continued upward, obviously - naturally - we’d hit a point where buyers say, “no thanks”. In fact, many did hit that point… for varying reasons.
“New Listings” were down 21.3%. Again, we’ve always maintained that the more relevant figure is the Total Active Listings as that gives a far more accurate depiction of where were are on the inventory front. So, with newly listed properties “down” - implying tighter inventory as pointed out by many - that TAL figure is 169% of last December’s total. 8,692 homes available on the market compared to 3,231! Housing crisis? What crisis?! Bye the way… if there’s a “shortage”, it’s in the Toronto / GTA [and the rest of Ontario for that matter] Bungalow / One Storey homes market. If you’re thinking of selling one, please do drop us line: They remain in high demand.
“Forward Inventory” gives us an idea of inventory in terms of how long it would take to sell all the homes currently available given sales volume continuing at the same rate as the past month. It’s calculated thus: Total Active Listings divided by the month’s Sales total. As of December month-end we had about [8,692/3,117 = ] 2.79 months of inventory available. That’s another figure that’s much more in line with “normal”. Of course, that’s also for December. What’ll be interesting to watch is what the Spring Market brings when it gets rolling - we hope! - over the next month or two. Will inventory take off resulting in prices falling into a rabbit hole? Will demand pick up with the increased inventory we have now combined with already-lower prices? Hmmm…?? Time, as it tends to do, will tell... or, like our friend Yogi said…
Forward Inventory hit lows of mere weeks when it was at its tightest.
And we came across this from a market stats blog post exactly 3 years ago as the new decade was dawning: “OK. Price growth without supply relief pretty much goes without saying. #Economics101 - But we keep hearing the term “housing shortage”, or variations thereof. Inventory’s obviously an issue. Does that mean we should plough under the greenbelt and all the farmland? That’s crazy. And short-sighted. Perhaps the answer is simpler...and [at least] two-fold: 1] Increase density rather than catering to developers’ profit margins & allowing unbridled urban sprawl, and 2] create policies that make it more attractive for employers to locate beyond Toronto and the GTA.” Just sayin’...
Not surprisingly given the other numbers in the report, December’s time to sell a home was “Average 27 Days on Market” - that was “92.9% slower” than last December.
“In Quotes” from the report…
Paul Baron, the Toronto Regional Real Estate Board's newly elected President: "Following a very strong start to the year, home sales trended lower in the spring and summer of 2022, as aggressive Bank of Canada interest rate hikes further hampered housing affordability. With no relief from the Office of Superintendent of Financial Institutions (OSFI) mortgage stress test or other mortgage lending guidelines including amortization periods, home selling prices adjusted downward to mitigate the impact of higher mortgage rates. However, home prices started leveling off in the late summer, suggesting the aggressive early market adjustment may be coming to an end."
TRREB's Chief Market Analyst, Jason Mercer: "While home sales and prices dominated the headlines in 2022, the supply of new listings continued to be an issue as well. The number of homes listed for sale in 2022 was down in comparison to 2021. This helps explain why selling prices have found some support in recent months. Lack of supply has also impacted the rental market. As renting has become more popular in this higher interest rate environment, tighter rental market conditions have translated into double-digit average rent increases."
Thanks - as always - for stopping by. Here’s to a fabulous, less-stress year in ‘23…
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