Toronto, Ontario, October 5, 2022 - Toronto Region Real Estate Board Realtors’® monthly residential MLS® market activity report, MarketWatch, was released this morning by Board president Kevin Crigger. The report covers home sales activity across the Board’s market area including Metro Toronto, the balance of The GTA, and parts of South-Central Ontario’s Greater Golden Horseshoe.
We - and a whole bunch of others - have been saying for quite awhile: “This market is unsustainable.” Well, it’s taking a breather… it had to: exhaustion, interest rates, inflation in other areas of the economy…
Even though sales volume declined drastically compared to September 2021, average selling prices actually held up reasonably well: The number of sales reported was down 44.1% to 5,038 homes while the average selling price was down “only” 4.3% to $1,086,762.
The number of newly listed homes was down 16.7% to 11,237. That’s the lowest tally for new listings in twenty years for this particular month and prompted more calls for loosening of restrictions and processes to alleviate the “shortage of homes”.
But wait a minute: We’ve always maintained that the more important inventory statistic is Total Active Listings. That figure, “TAL”, was up 47.3% on the month to 13,534 homes on the market. Not sure how we can cry “shortage” and quote that stat in the same breath.
“Overall”, by the way, refers to all home types and styles across all of TRREB’s market area. All figures herein are year-over-year comparisons unless otherwise specified.
One other "aside": that September, 2021 post was bylined, "Chronic Inventory Constrains Activity; Prices Up Again". Something hadda give. And, while COVID-19 and its fallout certainly played havoc with real estate markets - among many other markets, of course - some people I talk to seem to forget that this market was running pretty wild well before the pandemic came to town. Have a look back at late 2015 and into 2016. The feds changed the down payment rules because the market was overheating 'way back then.
By March, 2016, our blog post byline was "Hot, Hot, Hot!" And, by the Summer of '16, we'd begun to slow a little - but I remember we listed one of the higher end Bungalows for sale in King City [a fabulous place to call home in York Region - King Township - just north of Toronto and about twenty minutes to Pearson Airport]. It did need a little updating, but we still sold it in multiple offers [5 of them] and, not surprisingly, significantly over asking. Our clients - the sellers - were, naturally, ecstatic. So much so, in fact, I actually got a bear hug from her. Love it. That was over six years ago. Helluva run for the residential real estate market.
Specific Numbers Home Type
Metro T.O. saw 497 Detached homes sell through TRREB’s MLS®, off 44.3%, averaging a sold price $1,585,589, down 11% even. In the rest of the Greater Toronto Area - "The 905" (area code) - 1,837 Detacheds were reported sold, off 38.7%, averaging a sell price of $1,310,639, off 9.5%.
Condo Apartment sales in Metro Toronto were down - gulp - 51% to 875 units averaging $769,058, up 3.4%. In the rest of The GTA, 442 condo Apartments sold, down 49.2%, at an average of $655,117, up 3.3%. Let the good times roll.
In fact, there were only two “positive” numbers in September’s report: Total Active Listings, and Days on Market. More below…
Still on the Inventory thing…
If we take the TAL - Total Active Listings - figure and divide it by the month's total sales, we get "Indicated Forward Inventory": a general idea of how long it would take to sell all the existing homes on the market assuming the rate of sales remains constant. That calculates out to 2.69 months of inventory on the shelves, or about eleven-and-one-half weeks [there are an average of about 4.3 weeks per month - rounded - over the course of the whole year - 365 days divided by 12 months divided by 7 days].
Hate to break it to the “housing shortage” crowd, but I’ve been in residential home sales for over a quarter of a century and I’m here to tell ya: That’s far more in line with historical norms than we’ve seen in a long time. Further, we’ve been saying for a long time that this market is not sustainable. It doesn’t take a rocket scientist to figure out that no market can romp “+25%” forever. In fact, that forward inventory stat’s still a little low by historical norms.
Speaking of historical norms - which markets always revert to [and, usually, beyond] at some point without the [usually late-to-the-party] government intervention policies - the time it took to sell a home in September was “64.3% slower” than last September at 23 days on the market. That length of time to sell a home is still well below - e.g. faster than - historical norms - but it’s getting there.
The long term average time a home is on the market before selling is more like 60 days… and I’ve seen market circumstances where it’s far longer than that. The middle-1990’s, for example, when you could hold an open house at a mainstream listing on a beautiful weekend afternoon and nobody - nobody - showed up. Hmmm… I gave up predicting the future a long time ago. And I won’t venture an opinion here. I have my suspicions, but nobody knows. Best tip I can offer is this: Watch the Canadian government 5-year bond yield chart. That can give strong clues as to where mortgage interest rates are going… Image of the current chart is at the bottom, courtesy of Investing.com.
Bungalows appear to be continuing to buck some of the characteristics of the broader market. Demand for the one storey home styles continues to be strong and supply relatively limited which, of course, results in prices in that group remaining stronger than the broader market, on average.
Kevin Crigger, TRREB President: "We must ensure that the temporary dip in housing demand is not allowed to mask the critical shortage of homes available for sale in the GTA. Candidates running in the upcoming Ontario municipal elections must ensure home buyers and renters have adequate housing options in the years to come. Municipal council decisions have a direct impact on housing affordability, in terms of the protracted development approval processes, high development fees and other related policies that preclude timely housing development."
Jason Mercer, TRREB Chief Market Analyst: "Hovering just below $1.1 million, the average selling price may have found some support during the last couple months of summer. With new listings down quite substantially year-over-year and well-below historic norms, some home buyers are quite possibly experiencing tighter market conditions in some GTA neighbourhoods. October generally represents the peak of the fall market, so it will be important to see where price trends head over the next month."
John DiMichele, TRREB CEO: "Elected councils must also reconsider existing policies that preclude homeowners from listing their homes for sale, including significant added upfront costs like the land transfer tax. Potential new policies like mandatory home energy audits could also create unnecessary interference and delays in the home selling process and dissuade some homeowners from listing their homes for sale."
Hope you’re enjoying the beautiful Fall colours this year! Not to mention the weather. We’ve usually had some snow “by Hallowe’en”, but that’s not looking likely… In fact, the week ahead’s looking beautiful again - get outside and enjoy! And thanks, as always, for stopping by. Drop a line anytime if we can answer any of your real estate related questions.
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