Here's your Toronto real estate market report for August. Since June the year-over-year (YoY) comparisons have looked pretty favourable. But if you follow me semi-regularly you know that (and you might be tired of hearing about) things still look slow compared to long term averages. Underneath TREB's favourable spin, did we experience some summertime blues?
Here's TREB's always-bullish point of view via TREB President, Garry Bhaura:
"It is encouraging to see a continued resurgence in the demand for ownership housing. Many home buyers who had initially moved to the sidelines due to the Ontario Fair Housing Plan and new mortgage lending guidelines have renewed their search for a home and are getting deals done much more so than last year.
And below is what I saw in August (which is usually different from how TREB sees it through its rose-coloured glasses). As always, these are just selected highlights. The full set of market charts is available on SlideShare.
1) Prices fell from July to August
Well indeed they did. TREB has been highlighting that average prices are up YoY. But what about month-over-month (MoM)? As you see below, freehold ("houses," or non-condo ownership) prices have been falling since May.
Is this cause for concern? Well, no. For two reasons.
The first reason is because property prices always (well, usually) fall during the summer months. I showed why in this blog post, but in short it has to do with the quality of the listings. The inventory that's left in the summer is not on average as good as that in the spring and fall. Lower quality, lower prices.
The second reason ties into the first. Below are the "seasonally adjusted" numbers. They take into account the heavy seasonality we see in real estate sales and prices, and adjust hot months (like April) down, and slow months (like August) up. In this way, you can more equitably compare MoM numbers. And you'll see below (which are TREB's GTA-wide numbers) that June and July were actually better than May by this measure for sales and average price, and August prices were basically flat (while sales volumes were up).
So by that reasoning, the drop in average price from July to August isn't a worry. Average prices for 416 freeholds have dropped nearly 3/4 of the years from 1996 to now. However, the degree of the drop is interesting; it's the second largest July to August drop (second only to last year) and much steeper than the median and average.
2) 416 Condo apartment sales were down YoY
What's happening here? I thought condos were the saving grace of the Toronto market? Well, true, the condo market has been the comparatively strong part of market since the Ontario Fair Housing Plan came into effect last April. While YoY sales for all housing types have been down across the board, they haven't been down as much for condos (Condos bottomed out at -29% in March, while freeholds had three months lower than -30%; YTD August sales are -17% for condos and -19% for freeholds).
So when I took a preliminary look at the August numbers last week, this surprised me:
Of all eight of the 416 and 905 YoY numbers, the sales decline in this segment was the highest. Taking a look into it, I think it's just a matter of last year condo apartment sales didn't fall as hard as other housing types. Freehold sales last year had an average YoY decline of 38% in June July and August. For condo apartments that was "only" 25%. So it was easier for other housing types to bounce back this year.
3) Condo inventory still at record low levels
Condo active listings started taking a dive versus historical seasonal patterns back in 2016 (when houses really started getting out of reach). Last year was way below recent norms in active listings, and though the first several months of this year were higher than 2017, the last three months in a row have been even lower.
I shouldn't say these are record lows, as the pre-2002 numbers are lower, but that was an entirely different time with way less condominium stock:
This year has ranged between -34% below average for the last 7 years (July & August) to -45% below (March). This should keep sustaining the prices, even in the face of lower sales.
What's up for September?
Last year many observers were waiting for a flood of listings to hit the market in September. For 416 houses, freehold active listings at the end of September ended up 5% higher than the 7-year average, so no big catastrophe. I've heard other agents tell me they'd just relist their slow not-selling listings in September rather than take a lot price in August. I'm not sure things will magically get better for their overpriced listings. I don't foresee any great shifts in the month. Some stats will look okay, some will look bad, and the market will chug along.
As I said last month, my general comment is there is more risk built into the market right now than normal (due to affordability levels, risk of rising interest rates, and place in the economic cycle). I take that to mean that when the next recession inevitably hits, the dip in the market
As always, you will find the full set of market charts (for this month and prior) on my SlideShare.
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About Scott Ingram CPA, CA, MBA
Would you like to make better-informed real estate decisions? I believe knowledge is power. For that reason, I invest a lot of time researching and analyzing data and trends in the Toronto real estate market. My Chartered Accountant (CPA, CA) side also compels me to dig a lot deeper into the numbers on individual properties my clients are interested in. The better the information you have, the better decisions you will make. If you're interested in talking about your real estate situation, call me or reach out via the Contact Me section of my homepage.
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