The numbers are out and it is an exciting month to review for the Toronto Real Estate market. I say this because the news always loves to talk and compare our current market with a year over year basis.
This approach is problematic as the last 5 months are not a good comparison to last year’s numbers. Last year we were hitting record high price jumps due to record low inventory. Our month of inventory levels (M.O.I) last year hit 20 year lows and drove the market in an upward trend until the government stepped in to cool the market with a foreign buyer's tax. Which definitely had an impact and slowed the market down.
Which brings us a year later to talk about where we were and where we are now. Toronto Real Estate Board (TREB) total sales came in at 7,834 which was down -22.2 % from May 2017. This number is surprisingly lower than I expected. Active listings came in 20,919 which has higher than last year's number of 18,477 (+13.2%) Which brought our month's of inventory levels to 2.7. This is the amount of months it would take the market to absorb the current inventory if no new listings came up. I typically use this number to gauge where the market is heading. If this number continues to climb expect prices to drop.
The big number everyone loves to watch is average price. Overall it tells you if the market is averaging higher or lower than over months. Average price slightly increased from last month but remains at $805,000. This is down -6.6% from last year which was $862,000. Total average total days on market also very similar to last month's came in at 20 days. This is also up 81.8% from last year when it was around 11 days.
Overall the numbers are lower than expected but still in favour of sellers. This changes if we start to dissect types of properties and price ranges. Since we are in an election year many buyers and sellers are opting out of the market until the dust settles from the election. In recent surveys 25% of people value housing as the second most important factor for current issue with today's election.
Has this played into the supply issues we have been seeing over the last few years? Polls suggest listing intentions have been down since last fall due to lack of alternative types of properties in the market. Many seller's having no idea where to go if they were to sell their properties. TREB has been stressing to policy markers to help bridge the gap between detached housing and condos. As they see a big gap that the demand is there but no inventory.
In my opinion it's how builders get the most out of their inventory. The biggest buyers of pre-construction properties are definitely investors. As they swallow up the 1 and 2 bedrooms then resell after completion or rent out. These types of units have the least amount of risk for investors to either rent out or sell. Definitely less home buyer's who intentions are to move into the unit, are purchasing these units. This is due to the fact on average it takes upwards of 4 years for most condo buildings to be completed. Buyers are not thinking long term when it comes to buying a 3 bedroom condo to move into in 4 years. So why would developers risk potentially sitting on the inventory and not be able to sell. As larger units are the hardest to sell pre-construction. As well most down payments are 25% of the purchase price. Some buyers do not have this and opt out to wait to get a higher loan to value mortgage from the bank once completed.
When we look into TREB's market numbers these numbers cover a pretty big area, as it covers all of the Greater Toronto Area (GTA). These numbers are great to use as a gauge but depending on what you are looking to do in the market, more specific information should be analyzed. Let's look into the city of Toronto, 416 area code and compare it against the GTA's average.
As we can see the overall sales 3,092 out of the 7,834. With Active listings coming at 5,797 the total month's of inventory is only at 1.9 months. This makes Toronto's market more in favour of Seller's compared to the GTA's month's of inventory of 2.7. Average price for Toronto's real estate matket is $861,000 and total average days on market is at 16.
As you can see when looking into Toronto's real estate market specifically in the area code 416 the numbers are very different. So anyone looking to buy in the 416 should be looking into these number instead of TREB's market numbers.
We can go even further into analyzing specific types of properties. As we continue to dive into Toronto's 416 area code, let's take a look at types of properties and the amount of sales each one has.
As you can see detached 782, semi-detached 242 and townhouse 303 make up less combined compared to condo sales of 1745. The main argument for this is affordability for most people. As many do not have over a $1,000,000 to shop around in the detached market. This will be a growing trend for many as interest rates continue to jump as the economy continues to do well.
I feel the next few months will be similiar to what we have been seeing for the last few month's a cooling market. For anyone looking for a deal out there I suggest to follow the detached market. Specifically in the higher 3-4+ million price ranges. As inventory continues to climb in this sector a savy buyer will be able to potentially get a property that they may not be able to buy again in our lifetime.
Remember sometimes in life we get the opportunity to buy beachfront property. Once that opportunity goes, it may never come up again. So in times where there might be some opportunity one must not let it pass by.