Toronto, Ontario - July 4, 2019 – the Toronto Real Estate Board released its monthly MarketWatch residential stats update for the Toronto & GTA market today reflecting the impact of higher mortgage rates [see charts below] combined with still-high home prices and a marketplace exhausted from that price growth combined with “bidding wars” in multiple-offer scenarios.
The Big Pic
Overall - meaning reported MLS sales of both Freehold and Condominium classes across TREBB’s entire market area - sales volume fell 41% compared to last June which, it should be noted, was particularly strong. All figures herein are year-over-year comparisons unless otherwise noted.
The average selling price of those homes was “in the black” across the board: All average prices continued to advance, though the rate of that advance has tempered substantially. The Big Questions: Does it actually go into reverse and, if so, how much and for how long? The overall average came in at $1,146,254, up 5.3%.
Metro Toronto saw 747 sales of Detached homes reported in June, off 30.8%, averaging a sell price of $1,737,012, up 2.4%. The rest of the Greater Toronto Area had 2,265 Detached sales reported, down 44.3%, averaging $1,361,862, up an identical 2.4% [to T.O.].
Condo apartment sales in “The 416” totalled 1,165 units, down 38.5%, at an average of $771,267, up 7.4%. “The 905” saw 513 sales, a drop of 42.8%, averaging $692,598, relatively strong YoY at +13.2%.
Regarding “The Big Questions” posed above, it’s worth noting that the price peak - to this point at least - was February, 2022 with an overall average price of $1,355 million. More specifics on that below, but note that that average sale price has fallen about fourteen percent… in just a few months. That’s resulted in some buyers being unable - or unwilling - to close on purchases made then and due to close in the past month or so. Again, shades of the Spring of ‘17 when prices were also doing that “+30% year-over-year” thing, only to fall back resulting in buyer remorse at the extreme - along with property valuations supporting the mortgage financing. Lots of lawsuits followed as sellers attempted to recoup the difference between the original sale price and the lower sale price attained a few months later. Messy… and expensive.
I remember the Spring of ‘17. “Crazy market…unsustainable…”. It did stall out. Briefly. And came back roaring… that was before COVID-19 showed up though, as we all now know, The Virus turned out to be the equivalent of jet fuel on the fire - for various reasons from low interest rates to people gettin’ outa Dodge. Will the market come roaring back like that this time? Hmmm...
TRREB President Kevin Crigger:
"Home sales have been impacted by both the affordability challenge presented by mortgage rate hikes and the psychological effect wherein home buyers who can afford higher borrowing costs have put their decision on hold to see where home prices end up. Expect current market conditions to remain in place during the slower summer months. Once home prices stabilize, some buyers will re-enter the market despite higher borrowing costs."
TRREB Chief Market Analyst Jason Mercer:
"Listings will be an important indicator to watch over the next few months. With the unemployment rate low, the majority of households aren't in a position where they need to sell their home. If would-be sellers decide to take a wait-and-see attitude over the next few months, it's possible that active listings could trend lower as well. This could cause market conditions to tighten somewhat, providing some support for home prices."
Also chiming in in this month's report was TRREB CEO John DiMichele:
"Our region continues to grow because we attract people and businesses from all around the world. All of these people will require a place to live, whether they choose to buy or rent. Despite the shorter-term impact of higher borrowing costs, housing demand will remain strong over the long-term, as long as we can produce homes within which people can live. Policy makers at all levels need to make this their key goal."
Newly listed for sale homes were up just 1% to 16,347 compared to last year’s extremely tight inventory scenario. Here’s the “tell”: The more important Total Active Listings [TAL] figure came in at +42.5% with total inventory at 16,093 as of month-end [11,293 last June].
That TAL figure divided by the month’s sales gives us an indicated Forward Inventory of about two-and-one-half months - much more in line with historical norms than we’ve seen in a long time. Again, the question becomes, “Will it continue to increase significantly?”.
The “Absorption Rate” is an indicator of how fast the market’s “absorbing” homes newly listed for sale and is calculated as Total Monthly Sales/New Listings. That came in at .396 on the month - not surprisingly, the lowest absorption rate in some time. We’re all well aware of the impact tight inventory’s had on the residential real estate market for a very long time - even to the point where some have called it a “housing shortage”. But more likely it’s just market dynamics at work, massaged by government, fiscal, and monetary policies… with that virus thing thrown in for more fireworks.
For context, here are some previous Forward Inventory / Absorption Rate [& Avg. price] figures:
2022-May 2.12 months / .39 [Avg. price $1,213k]
2022-April 1.64 months / .435 [Avg. price $1,254k]
2022-March 4 weeks [.928 of a month] / .547 [Avg. price $1,300k]
2022-February 3.3 weeks [.768 of a month] / .643 [Avg. price $1,335k]
2022-January 3+ weeks [.735 of a month] / .706 [Avg. price $1.243k]
2021-June 1.02 months / .686 [Avg. price $1,090k]
2020-June 1.61 months / .539 [Avg. price $930,869]
2017-June… just after the last crazy, tight-inventory, multiple-offer style market when our post was titled, “Sales Down; Prices Strong; Inventory Spikes”: 2.47 months / .407 [Avg. price $713,915]
2012-June… a decade ago - just for fun: 2.18 months / .565 [Avg. price $508,622!]
Note - retrospectively, of course - the shift in inventory and price in recent months as well as comparisons to “recent history” - particularly on the Forward Inventory and Absorption Rate fronts.
Here are the daily and weekly Canada five-year bond yield charts, courtesy of TradingView. We expect rates to ease somewhat - beneath 3% before the end of the summer in the case of these bond yields with mortgage rates following - probably - more or less in ratio. Beyond that, the projection is to continue their push upward, at least into the fall.
Homes took “15.4% longer” to sell this June versus last - no shock there given the other stats… though that’s still relatively fast by historical standards.
Thanks once again for stopping by. As always, drop us a line anytime with your questions / comments… and stay cool! ??????Enjoy the summer weather… it’ll be snowing before we know it…
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