October 2018 charts: Condo market spitting image of 2017

Here's your Toronto real estate market report for October. Condos in the 416 remained strong and houses seemed to pick-up with a few indicators as well.

Here's this month's Bull Corner, the always-bullish point of view of the TREB President, currently Garry Bhaura:

"Annual sales growth has been positive since the late spring. While the OSFI stress test and higher borrowing costs have kept sales below 2016's record pace, many households in the Greater Toronto Area remain upbeat on home ownership as a quality long-term investment. A strong regional economy and steady population growth will continue to support the demand for housing ownership as we move into 2019,

It's pretty funny how similar these things are from month to month. Below is last month's, featuring classics like "kept sales off 2016 record pace, "households remaining positive/upbeat," and "quality long-term investment."

"While higher borrowing costs and tougher mortgage qualification rules have kept sales levels off the record pace set in 2016, many households remain positive about home ownership as a quality long-term investment. As the GTA population continues to grow, the real challenge in the housing market will be supply rather than demand."

I love it how it's positioned like the market's natural state is to claw towards the 2016 record highs (113K transactions for the GTA), but it's just being beaten back (should finish about 78K by my estimate) by the evil government with its higher interest rates and OFSI B-20 stress tests. 

And below is what I saw in October (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) Condos - same as last year

Here's what I'm talking about for mirror image.

Can't get much closer than that. Only difference is this activity is taking place at higher average prices than last year ($608K vs. $564K, up 7.7%).

2) Condo market remains stronger than houses

Condos continue to be a stronger market than freeholds by a couple of key measures:
- Average prices up 7.7% vs. 2.6%
- Months of Inventory (MOI) at 1.7 vs. 2.1. This marks a record 20 months in a row condos have had a lower MOI than houses. In 254 months before this streak began in March 2017, this had only happened 19 times in total

However, things are usually not that clear-cut and houses appear stronger than condos in a couple of measures:
- YTD sales are down 14% in houses, but 15% in condos. However that's just because house sales last year dropped much more, so with a longer term perspective, condos are much healthier (off 5% for Oct YTD 7-year averages, vs. off 26% for houses)
- Days on Market are lower for houses (18 vs. 21) but again a longer term perspective shows houses are 1.3 days above the 7-year average, which condos are 6.4 days below.
- Houses had 38% of sold prices be above asking, which condos had 25%. But again, houses are below the 4-year October average (42%) while condos are above (21%).

For the last 9 months (since February) the 5 year compound annual growth rate (CAGR) on prices has been stronger for condos than houses.

That's unusual. In just these last 3 years, the spread has been as high as 7.7% the other way (houses less condos), so the fact that condo CAGRs have climbed above houses in that short a time is fairly remarkable. Here's a look at the 20-year picture, and houses are still ahead.

3) Freehold market improving on YoY measures

If I look at year-over-year (YoY) comparisons, many have improved versus September, or for the last few months. To wit:
- Sales were 4% higher than last year in Sept, but 11% higher in Oct (and the YTD numbers have improved for 7 straight months (since March)
- Active Listings were 6% higher than last year in Sept, but only 1% in Oct (tightening). Again, the YTD numbers have improved every month since March
- MOI improved from 2.9 in Sept to 2.1 in Oct (tightening). This happens most every year (2008 only exception in last 23 years) but the average drop is 0.4 and this Oct it dropped 0.8 months.
- DOM has lowered from 23 in Aug, to 20 in Sept, to 18 in Oct (but this happens most years due to seasonality)

4) Still a very low sales year

No matter how you slice it, volumes are low this year. They are just below the 23-year average, and also below the trend line (transactions should increase over time due to population growth: City of Toronto was 2,387,000 in 1996 (1) and 2,930,000 in 2017 (2), or 23% higher)

You can see below that it's the freehold market that's really pulling things down, as transactions sit at a 23-year low.

So no matter how hard you try to spin it, you can't truly say it's a hot market with demand being so low.

As always, you will find the full set of market charts (for this month and prior) on my SlideShare.

Note 1 - Toronto population 1996 source: http://demographia.com/db-toronto-ward.htm
Note 2 - Toronto population 2017 source: https://www.toronto.ca/city-government/data-research-maps/toronto-at-a-glance/


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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.

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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