Greater Toronto real estate is showing signs of cooling, but buyers haven’t noticed. Toronto Regional Real Estate Board (TRREB) data shows home prices reached a new record high in May. It was accompanied by accelerating price growth, despite a decline in home sales. Home sales falling faster than new listings is typically followed by a drop in price growth. It may be hard to believe that with the moves home prices made last month.
Greater Toronto Home Prices Rise $20,600
Greater Toronto home resale prices are still making insanely large increases. The TRREB composite benchmark, aka a typical home, reached $1,045,800 in May, up 2.01% ($20,600) from the month before. Prices are now 17.83% ($158,250) higher than the same month last year. Both the month-over-month and annual price increase accelerated in growth. The annual rate is now the largest seen since June 2017, during the single-family home gold rush.
Greater Toronto Benchmark Price
The price of a “typical” composite home across Greater Toronto.
Source: TRREB. Better Dwelling.Price Growth In The City Made A Bigger Jump
The City of Toronto had been lagging over the past year, but made a huge leap last month. The City composite benchmark reached $1,105,900 in May, up 4.72% ($49,800) from the month before. Prices are now up 9.11% ($92,336) compared to the same month a year ago. Annual growth came in at almost half the rate seen across the Greater Region. However, the monthly rate was twice that, which is a large acceleration. A typical home increased by half the annual median household income over just one month… again.
Greater Toronto Benchmark Price Change
The annual percent change of TRREB’s benchmark price for all home types.
Source: TRREB. Better Dwelling.Toronto Home Sales Are Falling Faster Than Inventory
Price growth acceleration is likely to cool on its own, without outside intervention. Seasonally adjusted home sales fell to 9,786 in May, down 8.90% from the month before. This helped to push the unadjusted sales to new listings ratio (SNLR) to 64.30% for the month. Over the past few months, this indicator has been rapidly falling, dropping from over 120%. At a high level, the market is now almost twice as well supplied as it was during the tightest period over the past year.
Greater Toronto home price appreciation is coasting largely on expectations. As the market becomes better supplied, price growth is rising even faster. With that in mind, such a fast deterioration in the SNLR has always been followed by a drop in price growth. This usually starts to happen about 6 months after the peak, and last month was the fourth month. Even if price growth slows, there is still a lot of room for the market to cool down.
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Populated regions are slowing, but look at cottage country. Cottage listed at $400k, with 71 bids, sells at double.
People are spending credit like it’s free.
https://torontolife.com/real-estate/she-listed-her-cottage-for-399000-and-got-71-bids/
Doesn’t say what month it was, and it was intentionally listed under comps for a “bidding war.”
That’s really different from what you might think happened.
Credit is never free, it is pulling future wealth into the present.
It’s just going to be a very poor future for most, as somebody will have to work to pay off the debt at some point.
The Bank of Canada and government really want you to think it’s free though.
Like Rob said, that is very dated. That property sold in February, it also had near $100k a year in Air BnB income and was grandfathered in. Cottage market is still strong, but not as nuts as it was in February and March.
From US news, where they have a real economy, but interesting to see how many people are quitting their job instead of going back to the office.
https://www.bloomberg.com/news/articles/2021-06-01/return-to-office-employees-are-quitting-instead-of-giving-up-work-from-home
High-skilled workers are going to call the shots, and I bet a large number of Canada’s talent ends up working remotely for big US companies.
Interesting point. Set up a satellite office in say Thunder Bay. Hire people anywhere in Canada to work remotely from home.
Good idea.
The longer you wait, more you pay.
If you actually analyze inflation rate and housing price world wide you will find that housing price will always track and most of the time out perform inflation.
We have high inflation coming, thats why housing will not fall. Especially in those under valued cities.
That’s not necessarily true.
Real estate values are dependent on relative cost of borrowing – that is to say, how much people’s incomes can support monthly mortgage and ownership expenses.
If inflation were to be sustained at heightened levels beyond Q3 2021, then we would likely start seeing a shift towards hawkish interest rate policies from central banks, as well as a shift away from QE. Since our real estate industry is highly leveraged, this would present itself as a huge increase to relative cost of borrowing assuming peoples incomes don’t increase overall (which they likely wont). This would directly impact valuations on real estate two-fold: Increases in inflation reduce the present value of cash flows one could receive from renting property, and interest rate hikes would likely lead to deleveraging which would result in capital depreciation.
I know realtors like to believe that real estate valuations could never decrease, and they have countless weak arguments to sustain their assumptions, but the reality is the Canadian real estate industry is exposed to more risk now then it has ever been in recorded history.
Long time bear here. I actually don’t think prices will drop that much for just one reason: construction cost.
Steel, cement, wood are all used in infrastructure and housing. With the US printing trillions for their infrastructure plan and competition for resources, I cannot see construction prices coming down in the next few years. And new builds will be in inferior location.
Other factor is new immigrant money coming in and the federal govt, alongside with Ontario/British provincial governments, have either backed these debts and don’t want to carry them or rely on insane pty valuation to keep them from going deeper red in their annual budget.
These debt I meant they don’t want to take over insured mortgages