February 2018 charts: No February Bump

Here's your Toronto real estate market report for February. Still a slow start, as predicted here in my "What's in store for 2018?" post back in December. I have seen a couple of signs of things picking up but if you look at sales, no way you slice it the first couple of months this year have been slow.

Here's what I saw in February. As always, these are just selected highlights. The full set of market charts is available on SlideShare.

1) There was no February Bump!

Last year I wrote a post on the February Bump. For freehold houses, February average prices increased over January prices for 21 consecutive years, to an average of 9.2%. In 2016 and 2017 the month-over-month (MoM) increases were 15.8% and 18.2% respectively. But this year, the average house price actually dropped. It wasn't a huge drop as you see below - only 0.6% ($7K), but it's the first time that has happened since 1996.

2) But wait - there was a Bump with condos!

While the MoM average price change was the second worst in the last 23 years for freeholds, it was the third best increase for condos. At +7.5% MoM it trailed only 2017 and 2012.

This is a theme with a lot of stats these days - freeholds aren't having a good year while condos are.

3) Freehold sales are really low right now

 

I've been tracking the rolling 12 months sales figures for a while now and they are now the lowest they've been in the 23 years I have monthly data for. It's also interesting to see that the peak for 12 month house sales wasn't actually in the spring last year, it was January (the 16,982 you see below). You'll also notice that the freehold sales weren't at any crazy heights last year. The average rolling 12 month figure since 1996 has been 16,562, so even the peak last year was just a touch over average. The 2008/09 trough for sales volume seem to tie into global financial crisis, and the other low was in and around the dotcom bust, but the NASDAQ actually peaked on March 10, 2000 so sales were already at lower levels a couple of years before then. 

In this next chart I decided to overlay MOI and see if I saw anything. I reckon since 2007 you can see that sales volumes decreases have accompanied MOI increases. This makes sense as the MOI calculation = active listings divided by the month's sales. So if the denominator is decreasing you're going to have a bigger total. The February MOI was 2.48, which is definitely higher than the 23 year average of 2.21, but it doesn't seem to be wildly over. So though sales are down, supply is also down accordingly. As an aside, I wonder what other global cities have had an average MOI of 2.2 over the last 20 years or so. Seems pretty nuts.

Anyway, we're in a really low sales volume time for houses. 

4) Condo supply is still a problem

Active listings are still about 40% below their average level over the last 7 years. With elevated freehold prices, it feels like a lot more people have their eyes on the condo market, and inventory is moving very rapidly. In fact 23 of the last 24 months have had a condo MOI of less than 2.00, which is an unprecedented run. The amount of new listings released in January and February didn't help this problem as they were lower than even 2017 new listing levels.

Implication: expect continued pricing pressures in condos as more people are fighting over less inventory. You can see that in the level of condos that have been selling over asking. Leaving aside last years ridiculous levels (nearly 3 in 4 condos were selling over asking at the peak in April), bidding wars on condos have been right in line with houses the past three months and I don't see this subsiding soon.

As always, you will find the full set of market charts on SlideShare. I tried something new this month with my indicator arrows. Instead of using green for up and red for down, I've used blue for getting colder and red for getting hotter (grey is fairly neutral).

 

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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. To discuss how I can assist you with your real estate needs, call me or reach out via the Contact Me section of my homepage.

Your home is the single largest investment you'll make—trust it with an accountant.

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Scott Ingram

Scott Ingram

REALTOR®
CENTURY 21 Regal Realty Inc., Brokerage*
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