Toronto Home Sales Take a Bigger Dive Than Neymar
TREB has released its most recent market statistics for Toronto Home Sales in June. Many industry analysts are using the most recent data to suggest a rebound in the GTA.
Toronto home sales jump most since 2004 as buyers return to market
This Financial Post headline released last week is referring to the fact that sales jumped 18% on a month/month basis, from May 2018 to June 2018. This is a positive sign and one that could indicate some momentum is coming back to the market. The fact that both prices and sales increased on year/year basis last month is also noteworthy, given that we haven’t seen an annual increase in prices since December, and in sales since March of 2017. However, it’s important to understand that June of 2017 was a low point in the market and unique month, like much of 2017. While it’s true sales are up 17% from May, sales in June have not been this low prior to last year since 2003.
So whether the news is positive or negative, it’s important we add some context to these stats before making any snap judgements. When you step back and look at sales for the first half of 2018 (January-June) instead of just focusing on June, a different picture emerges. One that could have you looking past the dip experienced from 2007 to 2008 and taking you all the way back to 1989.
Mentioning 1989 in a real estate comparisons is kind of like mentioning Voldermort at Hogwartz (Harry Potter, anyone?). But that is how far back you need to go to find a sales drop off that is larger than what we experienced in the first half of 2018. For those of us that were too into New Kids on The Block at the time to notice, Toronto Real Estate prices peaked in 1989 and went through a prolonged readjustment period through the better part of the 1990s. However, isolating sales alone could also be misguided, so let’s take a look at some of the more noteworthy stats from June and come up with some takeaways.
Great Toronto Area Home Sales:
-Sales are up 17% from May 2018 to June 2018.
-Sales are up 2.4% from June 2017.
-The last time sales in the month of June were lower than 8,082 prior to 2017 was 2003.
-Condo Sales were down 5.3% from June 2017 while Detached Semi’s and towns were up between 5-8%.
-Sales for the first half of 2018 totalled 39,922. The lowest sales number recorded for the first 6 months of the year since the year 2000. Down 27% from 2017 and down 33% from 2016. (Sales for the year in 1989 dropped 22% from 1988 to 1989 and 48% from 1988 to 1990 before increasing again in 1991)
-Sales in the first half of 2018 are also down at least 13% from 2012-2015 levels, years with more “normal” sales volume.
Prices:
-Overall prices are up 2% from June 2017.
-Condo prices are up 9.5% from June 2017.
-Detached houses are still down 2% on a year/year basis despite June being a lowered benchmark in 2017.
-The median price is up 4.2% from June 2017.
Listings:
-Months of Inventory (MOI) in the GTA was 2.6 for all home types up from 2.5 in June 2017 and 1.8 for condos up from 1.7 in June 2017.
-In the City of Toronto MOI is 1.9 for all home types and 1.6 for condos.
-Active listings are up 5.9% from June 2017 and New listing are down 18.6% from 2017.
Key Takeaways:
Toronto’s condo market has been an important driver of Toronto’s Real Estate market since the downturn started last spring and it’s worth keeping an eye on. The new found wealth of some condo owners has likely created upsize opportunities for some looking to move from a condo to a freehold. This could be a contributing factor to the positive freehold sales numbers recorded this month. Affordability could start impacting that market segment more after its strong run up in prices over the past 2 years. Condo sellers need to be cautious as financing and affordability challenges are real. An increasing number of would-be buyers are having challenges finding financing through traditional sources, and if the numbers continue to trend as above and we see a bump in inventory, selling your unit will not be as easy as it’s been in recent months.
Selling conditions are better now than they were at this time last year, as demand is up and the number of new listings is down. Sales have been really low but so has inventory. Buyers appetite to purchase seems to increase as more inventory comes to market. A more patient Buyer is something that was missing in 2016 and 2017. It could also signal that if we want to see an increase in sales in the second half of 2018, we need an increase in inventory. Buyer’s can’t afford or aren’t willing to compete in the same manner they were in previous years.
So what is a Torontonian to do?
Lower your price appreciation expectations and think long term. Do an investment comparison. Look at alternative investment options and decide if Real Estate is the right option for you.
Do a rent vs buy comparison (Like this one). Those renting should have stronger motivation to buy than someone looking at Real Estate strictly as an investment option. Factor in the equity gained when doing a monthly comparison, and the tax advantages on investing in a principal residence when comparing to other investment vehicles.
Don’t over leverage yourself. If you are feeling overleveraged in the current interest rate environment, your stress levels are likely to continue to rise with interest rates.
