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Market Review September 2017

October 13th, 2017 Posted by Blog, Market Review No Comment yet

The most obvious aspect of the September market was the drop in sales volume. Transactions were down 35.1%, from 9,830 last year to just 6,379 this year. At the same time, the number of active listings surged from 11,255 to 19,021, an increase of 69%. This is, broadly speaking, good for the market. For perspective, there were 21,571 active listings in September ’07, and that was down from 26,363 the previous year; the current number is below historic levels. However, it does make for some stark-looking numbers. Still, the average price did manage to eek up 2.6% year-over-year. That means that, despite the wild roller coaster ride that the market experienced in the first half of the year, we are still in positive territory over-all.

The average sale price for the month was $775,546, well down from the fever-pitched levels that we saw in the first quarter of 2017. I don’t usually track same-year stats, but with the way things have gone in 2017, I think it’s warranted. Average price hit a peak of $920,791 in April, and had trended downwards every month since then, quickly giving up the rapid gains seen in the first few months. The August average was $732,292, so September at least showed its usual strength relative to the summer months.

When discussing the condo market, I always make a point of focusing on sales in the 416 area code (separate from sales in the 905). This month, it’s interesting to note the difference in prices for detached homes in the 416. Last month, the average sale price in Toronto was $1,355,234, up significantly from the $1,191,052 average we saw in August. That indicates a strong market, despite the news. In the 905, the August average was $906,592 and rose just slightly to $912,921 in September. Clearly, the decline in the overall average sale price isn’t because of lower prices for detached homes. As TREB noted in its report, “the MLS® Home Price Index (HPI) composite benchmark was up by 12.2 per cent on a year-over-year basis”, which indicates that the ‘decline’ in prices is more due to the mix of home types sold, which is a healthy reaction by the marketplace.

The condo segment was also interesting. Sales in the 416 volume was down 23.2%, but the average sale price was up 24%, to $554,069. Condos seem to have been acting as a ‘relief valve’ for people finding themselves priced out of low-rise dwellings, and the price gap is narrowing in reaction to that….

So, what does it all mean? Who knows! The real estate market has been under constant pressure from the government for a few years now (several rounds of tightened mortgage rules, with more to come; new taxes; enhanced rent controls, etc.) so it’s hard to tease out what’s actually going on. The ‘fundamentals’ are still in favour of a strong, growing market: decent economy, some job creation, historically low interest rates and a growing population. But, with so much meddling by governments, and the natural confusion that causes, the behaviour of the market is not a reflection of fundamentals. It’s probably safe to say that the fundamentals will eventually show through – meaning a resumption of solid price increases – but we may have to wait for the meddling to recede before we see that…. In the meantime, the market is surviving!  😉

 

 

 

August 2017 Market Report

September 8th, 2017 Posted by Blog, Market Review No Comment yet

August was a slow month in the Toronto real estate market, which is fairly typical. TREB reported 6,357 sales, down 34.8% from the 9,748 sales we saw in August of 2016. While that sounds pretty dramatic, it’s more than the 6,418 sales reported in August of 2012 (which I just picked randomly when looking for something to compare this year to).

The average sale price has been volatile this year. For the last decade or so, that number has trended upwards steadily, and only sometimes dramatically. Then, in the first part of this year it spiked way up, mostly due to extremely tight supply. Then, as the ‘spring market’ got going and more supply hit the market, the average price dropped back down to normal. The average sale price in August was $732,292 – well below the April average, $920,791. Still, that number is up 3% over August 2016. Check out the graph (click to enlarge, courtesy my RE/MAX Hallmark colleague Robert Ede). Despite the hysterical headlines about a ‘plunging’ Toronto real estate market, we are still up over last year!

The condo segment had an interesting month. Sales volume in the 416 was down 24.5%, to 1,476 transactions. At the same time, the average price spiked 20.9%, to $540,169. That indicates to me that supply was limiting sales volume, and forcing buyers to step up.

Another number that I have been tracking recently is Active Listings. There were 16,419 at the end of last month, up 65% over August 2016 (9,949). Again, sounds dramatic, but in August 2012 there were 19,043 Active listings. So, when we are looking at what direction the market is going, it’s important to think past the short-term graph (which looks pretty wacky) and try to step back for a broader view. Supply is still tightly constrained, and demand is still strong. Look no further that the latest economic data and we’ll see that the economy and job creation are really picking up steam. That always boosts the real estate market. Also, this week’s Bank of Canada rate increase, and subsequent mortgage rate increases, should act to push more buyers into the market, as they look to lock in a great rate before those rise too much more….

Of course, anything could happen, but I expect the fall market to be busy, and for prices to start going back up – although I hope at a more sustainable rate than we saw earlier this year. We’ll know more in the coming weeks!

 

 

Market Review – May 2017: Double-counting of ‘new listings’ confounds data

June 16th, 2017 Posted by Blog, Market Review No Comment yet

Much is being made (e.g. in the media) about the ‘decline’ in sales in Toronto. As I have been saying (writing) for years, it’s one thing for the pace or volume of sales to decline, and another for prices to decline.

It’s true that the volume of sales in May 2017 was lower than sales in 2016. That said, 10,196 transactions is typical for a busy month in the spring market. The number of sales in May 2016 was 12,931, an all-time record for that month. So, we saw fewer sales than the record set last May. Do we have to set a record every month?! I don’t think so.

Also, the average price in May 2017 was $863,910, up 14.9% – or about $112,000 – still a very high increase. It was down from April (which was basically the same as March) because the market was so crazy in the first quarter, and that drove prices up quite dramatically. I’m glad to see that those super-high price increases are behind us.

Much is also being made of the increase in the number of new listings. As noted in the headline, that number is faulty: TREB has double-counted (and in some cases triple-counted) some new listings. Here’s how: a new listing is posted with an eye-catching price. The home-owner wants competition that will drive up that price. Then, due to the slowing activity that we’ve seen in the last six-to-eight weeks, ‘offer night’ comes and goes without a sale. The Realtor cancels the existing listing and posts a new listing with a higher price. TREB (through no fault of its own) can’t yet track that, so that property has appeared twice in the system and gets counted twice. You can imagine that this could easily happen a couple of times with the same property, and it happens all the time across the city. There could be hundreds, if not thousands, of double-counted properties in that “New Listings” number. Clearly, it’s not what it seems.

The better number to track is Active listings, which hit 18,477 last month, up 42.9% over May 2016. This is a good thing! The market has been trapped in a low supply situation for years, and if a bunch of new listings can take off some of the pressure, that would be great. Ten years ago, in May 2007, TREB reported  23,739 active listings (which was down from 26,220 the year before). The city population is higher now, and we are still nowhere near that volume of available listings for all the eager buyers out there. Why would anybody start ringing the alarm bells in conditions like this? My guess is sensationalism. Fear sells, doesn’t it? :/

The supply issue is perhaps more easily understood if one looks at the number of active listings added to sales. That number would provide a sum of the real estate activity for the month. In May 2007 (which I chose as a nice, round ten years ago), there were 23,739 active listings and 11,146 sales, which adds up to 34,885.

Last month there were only 18,477 active listings left at the end of the month and 10,196 sales, which adds up to 28,673, only about 82% of the activity recorded in 2007. With a rising population, solid economy, good job growth and continued low interest rates, we still have less real estate activity now than we did ten years ago. In this supply-constrained, competitive environment, what would cause a correction? There’s certainly a fear factor infecting the market these days, but underneath all that is the relentless supply shortage, and that should absolutely preclude a correction (beyond the simple re-balancing we’ve seen recently).

By the way, looking at the 11,146 sales in May 2007, from that ‘selection’ of 34,885, it’s clear that buyers had a lot more choice then; prices were up a manageable 5% that month. That was a strong market, and we would be lucky if our supply were to increase steadily over the next few months to get us back to that level.

 

April 2017 Market Review

May 8th, 2017 Posted by Blog, Market Review No Comment yet

April was another busy month in the Toronto real estate market. New listings finally started to appear (21,630 new listings for the month, up 33.6% over April 2016) giving buyers more choice. Coupled with 11,630 sales for the month (down 3.3% from the 12,016 recorded in April 2016), that allowed available listings to edge up 3% ,to 12,926 by the end of the month.

Price pressure remained in place, though, with the average sale price up 24.5% to $920,791. Note that the average sale price in March was $916,567, meaning prices remained essentially flat month-to-month. So, although we saw another big year-over-year price, this could be a sign that prices are leveling out, which will come as a relief to buyers.

The condo segment in the 416 had an impressive month. Sales volume was up a modest 8%, but prices soared 32.3%, keeping pace with last month’s increase.

The long-awaited increase in the supply of available listings is great news for the market, but it still leaves us far from historical levels. For example, in April, 2007 TREB reported 22,829 available listings, almost double the current level. The average Days on Market (i.e. how long the average listing took to sell) was around 30 days. Last month it was just 9, indicating how short-lived our supply really is. If we are lucky, we’ll get a couple of months of increasing supply, which should bring some balance to the market.

Right now it looks like the price increases are locked in, but it’s important for sellers to note that the market is not the same as it was in Jan-Feb-March. The new supply is taking some of the heat off buyers, meaning they don’t have to put everything on the line for every house that they see. So, while we are still seeing multiple offers on a lot of houses, we won’t get that for every single listing. Marketing – especially pricing – is more important than ever. But, we’ve seen this before; almost every spring, in fact! We make the adjustment, and move on.

The bottom line is that it’s still a great time to sell, and an even better time to buy.

 

 

 

SOLD!! 18 Gwynne Ave – huge detached home in Parkdale

April 18th, 2017 Posted by Blog, SOLD!! No Comment yet

Parkdale has seen some hard times over the years, and the owners of this huge, detached home have witnessed a fair few of them. When they bought back in the early 1980s, the neighbourhood was known for being a bit run down. But, the gorgeous housing stock from the late 1800s-early 1900s, when the area was a wealthy suburb, was there waiting to be brought back to life. A neighbourhood this close to downtown could only go up!

Parkdale is now better known for beautifully restored homes and the rapid growth of Queen West. Most of the condo and townhouse development in the area is east of Dufferin St (e.g. Liberty Village and the old Massey lands); to the west, it’s still mostly Victorian semi-detached and detached, with some Georgian row houses, so it has a classy, old-Toronto feel to it.

Built in around 1880, 18 Gwynne Ave was expanded a couple of times over the years. At some point, it was duplexed, which is still apparent as you walk through the house. The main floor now features a large living/dining room, a huge eat-in kitchen, and a separate family room. The ‘back porch’ isn’t insulated, but at about 14’x14′ it serves many purposes. The custom deck out the back door is the perfect place to sit and enjoy the weather.

The second floor has five bedrooms, although one of them was gutted and roughed-in for a laundry room some time ago. The back bedroom provides access to stairs to the third floor, and a fantastic custom office.

The basement is mostly unfinished, but with painted joists and recessed lighting, it’s a very usable space. Beyond the huge laundry area is a small finished room that was set up as a sewing room. It could be an office, a kids play area or general crafts room.

The front and back yards have been lovingly cultivated over the years. Flowers bloom almost constantly from spring ’til fall! At the back of the lot is a solid, two car, cinderblock garage, accessed via the lane. There’s room to park one more car behind the garage, too.

Queen West amenities are great, and getting better. Pretty much everything you need is within walking distance. Walkscore.com gives it a rating of 92 – “walker’s paradise”. (And hey – it’s walking distance to the Gladstone Hotel!) The location also offers quick access downtown via the King or Queen streetcars; if you are going uptown, hop on the bus to Dufferin subway station. Walkscore.com gives it a transit rating of 100 – “rider’s paradise”! Sad to say, driving downtown is sometimes the fastest way to go, but cycling is a reasonable alternative (53 rating – “flat as a pancake”). If you need to get out of town, the Gardiner Expressway is 3 minutes away, which is awesome.

This grande ol’ dame is listed for $1,299,000. It’s a fantastic home with unlimited potential, but it needs work. While the mechanicals are sound and the structure is solid, most buyers will want to do substantial renovations. For the right buyer, a full restoration would be the way to go.

More pictures here….

 

 

Supply and Demand: factors driving the Toronto Real Estate Market

March 31st, 2017 Posted by Blog No Comment yet

We all know that real estate prices in Toronto have been skyrocketing in recent months. Up 22% in January (year-over-year) and 28% in February, the rate of increase has been well above income increases and inflation. While Toronto remains more affordable than Vancouver, and is still well behind super-expensive cities like San Francisco, Melbourne and London, prices are still hard for most locals to fathom – much less keep up with.

There’s plenty of debate about the causes. I have written before (e.g. here and here) about the supply problem – i.e. there are not enough houses (or condos) for all the buyers out there, so buyers have to fight over the listings and that drives up the price. Lose a few such battles and one starts to get more aggressive – maybe due to experience, or maybe desperation – and the price increases escalate. This has been going on for years. In a low interest rate environment with a reasonably good economy, it should come as no surprise that we are where we are.

What’s influencing prices?

The average sale price in 1989 (the previous ‘peak’) was $273,698 (TREB). According to the Bank of Canada inflation calculator, that equates to 484,953.97 today. So, when we look at the average selling price today (TREB February, 2017 stats) and see $875,983, it’s important to note that inflation alone accounts for more than a third of the increase (about $211,256). Next, we have to look at other influences.

I’ll start with what seems to be the most overlooked component: renovations. It’s obvious that improving a home through renovations increases its value. Canadians spend billions of dollars every year on renos, and homeowners (or professional renovators) who chose to sell reap the profits of their investment. That said, it’s hard to quantify, isn’t it? Still, we all know how it works, and when we look at price increases, we have to take that into account.

Another obvious influence is migration/immigration. The population of Toronto continues to grow rapidly, and everybody has to live somewhere. Demand for housing from population increase, totally independent of inflation rates or anything else, will put pressure on home prices where land is restricted. By comparison, in sprawling cities like Austin, Tx (one of the fastest growing cities in the US), where it’s easy to expand, we don’t see the same price increases. This is why so many in the housing sector look with frustration at the Green Belt. (For the record, I’m in favour of preserving green spaces. I’m just noting that it’s a factor in our housing market.) So, we have to squeeze more people into a limited space, and that also causes price increases.

Lack of new rental construction has also been a problem for years in Toronto, although the condo boom and small investors renting out some of those condos has somewhat filled the need. Apartment construction in Toronto dropped in the early 90s, and has only started to pick up again in recent years. (In time, that could take some pressure of the re-sale market….) Keep that in mind when you hear another fear-mongering report about ‘investors’ in the Toronto real estate market: they’re not all ‘speculators’.

In fact, it seems that very few are. Numbers are hard to come by, but RE/MAX Hallmark Realty recently looked at our sales over the last three years (about 35,000 of them, so a much bigger sample size than some other ‘studies’ that got wide play recently). By looking for clients who did more than two transactions over that period, we found that only about 12% of our clients might be called ‘investors’. (Taking into account other explanations, like job transfers out of town and divorces, it could be even lower than that.) If close to 90% of buyers are either end-users (they are going to live in the house) or small investors with only one or two properties, then there’s no threat from so-called speculators who might quit the segment en masse and flood the market with properties, which could cause a crash.

Clearly, there are some simple explanations for why the Toronto housing market is so competitive. Still, plenty of people think that we should Do Something about it. Governments are great meddlers these days, and all three levels of government think they have to get involved in the hot Toronto real estate market – but what to do, really? The last time the city government stuck their fingers into the market they gave us the Toronto Land Transfer Tax. Years ago, that was pegged as an early cause of the supply problem in Toronto, as homeowners hunkered down and made renovations (or made do) rather than moved: why pay tens of thousands of dollars *more* in transfer taxes to City Hall? Lots of folks said ‘no thanks’, and that reduced the overall supply.

(For the record, I would rather see City Hall raise annual property taxes, based on the actual sale price plus inflation – NOT based on MPAC assessments. I think it’s fair to assume that a buyer who pays e.g. $850k for a house today has the means to pay property taxes on that house. On the other hand, charging the same tax amount to a senior who paid $30k fifty years ago for a similar house doesn’t seem fair.)

The feds have been playing around the edges of the mortgage market for several years, now. Of course, they knew from the beginning that Canada already had fairly stringent mortgage qualification rules, that our banks were relatively cautious and the mortgage market fairly safe. Also, the buyers  most affected by those rule changes are the first-timers, but I suppose it was easiest to throw that lot under the bus, eh? Honestly, I can’t see how tying the hands of young buyers impacts the million dollar market…. And, obviously, changing mortgage rules haven’t slowed things down.

Now we have talk of the provincial government getting involved. Ugh.

I believe that the bottom line is that we need more homes on the market. Without a steady supply of new listings, we are left with a logjam – almost nobody wants to sell before they buy, because buying is so difficult. What can the government to do help with supply? I’m definitely not going to suggest anything to make it cheaper for builders! They do just fine, and local governments really do need the money from development charges (to upgrade infrastructure to accommodate growth). How about better transit – dare I say a new subway line or two? That’s something that the senior governments could actually help with, and make a real difference. If the subway went farther, and to other parts of the city, the improved transit options would have the effect of adding supply, and it would encourage redevelopment in some areas (e.g. Scarborough). That would take some pressure off central neighbourhoods. Broader transit options that extend beyond Toronto’s borders would also help. TREB has been on about this for some time.

What about a foreign buyer tax? To me, that has a bit of the old “Canada for Canadians” ring to it…. On the other hand, if foreign buyers are treating our housing stock like just another investment, and in a manner that harms Canadians (inflating our market and decreasing our access to it) we have a right to address that. As much as I’m skeptical of government intrusion into markets, this one might help. (Yes, I realize that I’m at odds with TREB and OREA on this.) That would impact the demand side, and in a city growing like Toronto is one can’t say how much of an impact it would have, but if the Vancouver experience is any indication, it could make a difference – but, one that might be filed under Be Careful What You Wish For….

And what conversation is complete without blaming Millennials? Maybe if they could get out on their own, their folks would put the ol’ family homestead on the market and help increase supply! 😉

Without government intrusion, we could see a market that just ‘is what it is’. Builders would build more to meet the demand. Homeowners would sell and cash out, maybe move to a condo or the cottage, or take a work transfer to another city; such things happen all the time. Investors would build more triplexes, or divide up existing houses. Lots of things would happen naturally. What government intrusion into markets does is create uncertainty (“what the hell are they going to do next?”), and that doesn’t help at all. Governments can and should to more about infrastructure, trade and tax reform, and leave real estate markets alone.

That house sold for *whaaat*?!

March 28th, 2017 Posted by Blog No Comment yet

I’ve been a full-time, professional Realtor for almost 15 years, and I have seen lots of interesting influences and changes to the Toronto real estate market. Over almost that entire time, the market has been strong. As far back as 2002 there were people (buyers, the media, maybe even some Realtors) thinking that the run we were on then was due for a break. Well, the market roared along through the early 2000s. Then, the ‘Global Financial Crisis’ caused a dip in late-2008-early-2009, but that only lasted for a few months, and now barely registers as a blip in the charts. (Scroll down to the table TREB Housing Market Charts – TorontoMLS Average Price, Monthly Time Series With Trend Line.) Since then, the market has been charging ahead. Today, we have a reasonably good economy, moderate job creation and continuing low interest rates, which all points to a continuation. It seems like there is no end in sight….

The first few months of 2017 have been remarkable. I’ve never seen price increases like this – I doubt that many Realtors have. I have written before about the years-long supply problem we’ve been having, and it’s worse than ever. That said, the ‘spring market’ usually generates lots of new listings. That’s starting, but isn’t fully going, yet. So, we are still in a super-competitive time.

Current conditions are making it hard to figure out what a house or condo is going to sell for. My job as a Realtor is to chaperone my clients through the buying and/or selling process, including guidance on pricing – i.e. what a property is worth. We look at recent, local sales and compare them to the subject property (number of bedrooms/bathrooms/parking, etc.) to come up with a fair price that works for my client. To be certain, we’ve had competition (i.e. “bidding wars”) for years now, and it has always been winner take all. Still, these days it’s different. With some of the prices we’ve seen recently, either the buyer didn’t get that guidance from their Realtor, or they didn’t care: it’s ‘kill or be killed’ and only one offer is gonna win!

So, if you ask me what your house is going to sell for, or what we should put on the offer for that condo, we’ll go through the comparables, talk about your finances and come up with a reasonable number. But, don’t hold it against me if the final sale price is way more than that! That’s just the market these days. On the buy side, we’ll do our due diligence, craft good offers and make the best presentation we can…. If you don’t get it, we’ll move on to the next good option. On the sell side, it’s probably best to plan your budget based on a price close to some recent comps. Then, we’ll market the property right, and enjoy the process – because no matter what, you’ll do fine. 😉

 

 

‘Tis the Season

December 20th, 2016 Posted by Blog No Comment yet

It’s funny how as the year ‘winds down’, the season winds up at the same time, eh? December is ridiculously busy – especially in my house, where we have two birthdays to squeeze in amongst all the other action. At work, it’s staff parties; at school, it’s various performances; and then it’s the fun with family and friends!

Usually, real estate slows down a bit – yes, even in Toronto! – and that seems to be happening. It manifests as an even more acute shortage of listings, and will probably get worse during the last half of December, when some listings get taken off the market (many are likely to be re-listed in the New Year). Of course, while we may not see many new listings, a lot of existing listings will remain available (although sometimes with limited hours). If you are looking to make a purchase, don’t stop now: this might be your chance to negotiate a good deal….

May 2016 Market Review

June 8th, 2016 Posted by Blog, Market Review No Comment yet

May was another blistering month in the Toronto real estate market. TREB reported 12,870 sales, up 10.6% over May 2015, and setting the record for that month. Once again, new listings declined, from 18,611 in May 2015 to 17,412, a drop of 6.4%. Hot sales and fewer new listings cut the total number of active listings from 18,585 last year to just 12,931, a huge drop of 30.4%.

That combination is the primary cause of the intense competition among buyers, and contributed to further price increases. The average sale price last month was $751,908, up 15.7% over $649,648 recorded last May. TREB’s HPI was up by roughly the same amount, 15%.

The 416 condo market also had a booming month. Sales increased by 21.7% year-over-year, while the average price was up a more modest 5%. There’s more selection in the condo segment, and although prices keep increasing, it’s at a much more manageable rate for first-time buyers. If you have your heart set on a house for your first purchase, you might want to consider a condo as a way to get your foot in to the real estate market….

Traditionally, the spring market goes ’til some time in June, and things definitely slow down after the July long weekend. In recent years, however, with the on-going supply shortage and teeming buyers, the summer months have remained competitive. It remains to be seen what exactly will happen this year, but I’m expecting stronger than usual activity in July, due to pent-up buying demand. I think that the key to success this summer will be to stay active!