October 2017 charts: another mixed bag month

Here's your market report for October. As much as the media likes to pick a hot headline on one side (hot) or the other (cold), I'm seeing October as a mixed bag, along the lines of September and August.

Here's the first line of TREB's press release for the October results:

Toronto Real Estate Board President Tim Syrianos reported 7,118 residential sales through TREB’s MLS® System in October 2017.  This result represented an above-average increase between September and October of almost 12 per cent, pointing to stronger fall market conditions.

And here were the headlines on the October market stats (Financial Post, Toronto Star, Globe & Mail):

So even the difference in headline interpretations seem to confirm mixed bag to me. But "October GTA results signal mixed bag" isn't an attention-grabbing headline. I'm sticking with the key takeaway is that October carried on from August and September, moving away from the May-July bottoming out. As always, this blog post will give you some statistical highlights from the full set of market charts, which is available as a SlideShare report

Freehold sales remain down

In the 416, 9 of 10 months this year have had lower sales than last year - but last year was a strong year. October was down 22%, yet that was the best month since April (last 5 months had been -24% to -42%), so things are getting less bad (i.e. I interpret that as down, but recovering).

October was also down 22% versus the prior 5 years, so it's a down month for sales no matter how you look at it. The 1193 October sales were the fourth lowest October since 1996, and 19% below the 22 year average of 1469.

So what's with TREB's comment about the 12% sales increase from September to October, and that indicating "stronger fall market conditions"? As always, TREB's numbers are GTA-wide and my numbers are 416-only. That October over September sales increase is different in the 416 and the 905:

416: 14.9%
905: 9.4%
Total: 11.6%

And similarly, it's different for freeholds and condos (which is why I always split my charts). Freeholds in the 416 actually outperformed this 11.6% increase by a lot (with sales transactions coming in at 23.6% over September) and it was the fourth highest increase since 1996 (the average increase is 12.4%). I'm not sure looking at my bar chart above if I'd call this a "sales rush" as the Globe did, but it's a possible positive sign.

Average prices remaining near 2016 levels

For all that sales "heat" above, house prices have remained back at or around 2016 levels for 3 months in a row now (ranging from -1% to +2%). I look at the below simply as a give-back of the large run-up in the spring, but people will interpret the same numbers differently when coming from different perspectives.

Months of Inventory has been a bit erratic in recent months going up/down/up/down. The drop from 2.8 in September to 2.3 in October can be interpreted as heating up, though it seems to be following seasonal patters in the last two months. Though 2.3 looks high compared to recent years, the 22 year average is right at 2.2.

Sold Over Asking creeping back up

Something I see as a sign of continued recovery is the continued rise of houses sold over asking, now up for three months in a row. On the flipside one could say that it's only at half of last year's levels. But I prefer today's more civilized markets to having 3 of 5 houses subject to bidding wars. The strategy of way underlisting - by 20% or more - seems to have dried up, hanging around 3% to 5% for the last 5 months.

Condos roll merrily along

This has been the story for several months. Average "only" declined 8% from April peak to the July low, and have gone up three months in a row now (gaining 4% in that time). Average prices have been sitting at 19% to 23% above last year for the past 5 months. and have gained 19% ($88K) since the end of last year. If I was writing the Toronto Star headline, I doubt I would've described the condo prices as soaring. They were up $7K month-over month, but were up $11K in September and $5K in August, so doesn't really seem so special. That 19% YoY increase was $7K attributable to October and $83K relating to other months - it didn't just take off last month.

As per usual, the price gains have held despite lower sales volumes (October was 22% less than last year, though only 2% less than the average of the prior 5 years). While sales have been a lot lower than 2016, the combined sales for the last 5 months are actually only 5% lower than the average for the prior 5 years.


The reason for the continued elevated prices remains low inventory. October was the first month this year with a higher inventory than last year, but it's still 35% lower than 5 year averages. That means the 2,907 active listings at the end of October is about 1,600 less than it normally is. More competition for less units continues to drive up prices.

Revisited: What to expect in October?

Here's what I wrote last month: "I anticipate about the same in October. For condos, that means it will sustain their value gains in the face of low sales due to low inventory. For houses, it will mean continued low sales but the rates of decline have stabilized or will slightly improve." Pretty good prediction on both there.

What to expect in November?

I'm calling for more of the same. Some think that there have been more buyers rushing to beat the new stress test (like in the Globe headline), but I don't think this will change things in a big way, for a few reasons:
1) Buyers would've been doing this in September too, and even before, as the announcement was not unexpected so should've already been reflected in buyer behaviour
2) Sellers would be thinking along the same lines (i.e. I should get my house out there now while more people can afford it)
3) Only about 1 in 6 borrowers is affected, according to RateSpy. above. Not all of them are going to rush in now.

As always, keep an eye on my blog for further charts as the month unfolds, and you can view also view the full set of monthly charts in full size on my SlideShare. And take a look at the October Home Price Index (HPI) numbers here.



About Scott Ingram CPA, CA, MBA

Knowledge is power. I take a "Moneyball" approach to real estate - where both quantitative trends and qualitative information are important. Keeping on top of trends is especially vital in today's rapidly shifting Toronto real estate market. I will dig into numbers most realtors can't or don't, to help you make the right buying or selling decisions for your situation. You'll find my accountant-honed analytical skills and business strategy experience combined with my hometown knowledge and passion are great to have at your back: Your home is the single largest investment you'll make - trust it with an accountant.

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Scott Ingram

Scott Ingram

CENTURY 21 Regal Realty Inc., Brokerage*
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