Toronto real estate is printing new records, but not the good kind. Toronto Real Estate Board (TREB) numbers show prices increased in December, when compared to 12 months ago, but are still below peak. It was also the slowest December for sales in 6 years, with the second highest inventory in the same period.
Toronto Real Estate Prices See Smallest December Gain Since 2008
The price of a typical home (a.k.a. the benchmark) is higher than last year. TREB reported a composite benchmark of $764,200 in December, up 2.98% from last year. The City of Toronto benchmark hit $845,000, up 6.41% from last year. Almost all of the gains across TREB can be attributed to a rise in condo apartment prices. More than half of sales came from segments with price increases lower than inflation.
Greater Toronto Benchmark Price
The price of a “typical” composite home across Greater Toronto.
Source: TREB. Better Dwelling.
Price growth is experiencing mild growth, but there are a few things to note. The 2.98% annual increase is higher than the 12 month increase seen the month before. However, this December’s 12 month increase is the smallest we’ve seen since 2008. Prices are still 6.39% from the May 2017 peak, so this is still technically a down trend for both prices and price growth.
Greater Toronto Benchmark Price Change
The annual percent change of TREB’s benchmark price for all home types.
Source: TREB. Better Dwelling.
Toronto Real Estate Sees Median Sale Price Rise Over 4%
Toronto real estate’s median sale price made huge improvements from last year. The median TREB sale price reached $653,000 in December, up 4.48% from last year. The City of Toronto median sale price reached $640,000, up 8.47% from last year. The median isn’t great for determining how much you’ll pay for a home. However, it is helpful for understanding the dollar flow, and is popular with foreign buyers.
Toronto Real Estate Sees Average Sale Price Rise 2%
The average sale price of Toronto real estate moved close to inflation. TREB reported an average sale price of $750,180 in December, up 2.06% from last year. The City of Toronto’s average sale price came in at $762,627, up 2.82% from last year. Much like the median, the average sale price isn’t a great indicator of how much you’ll pay. Instead, it’s more of an indicator of dollar flow.
Greater Toronto Average Sale Price Change
The annual percent change of the average sale price of all homes.
Source: TREB. Better Dwelling.
Toronto Real Estate Sales Fall Over 23%
Toronto real estate sales continue to trend lower. TREB reported 3,781 sales in December, down 23.3% from the same month last year. The City of Toronto represented 1,473 of those sales, down 25.22% from last year. This is the slowest December since the 2012 slump, with lower December sales only seen 5 other times in 20 years. One time was during the Great Recession, and the 4 other times in the late 1990s. For those that need a real estate history lesson, the late 1990s were not fun for Toronto. It was just off of the bottom of Toronto’s most significant price correction ever.
Greater Toronto Sales To New Listings
The number newly listed units per month, in contrast to sales.
Source: TREB. Better Dwelling.
Toronto Real Estate Inventory Falls Over 11%
New listings of Toronto real estate are lower. TREB reported 4,308 new listings in December, down 31.94% from last year. The City of Toronto represented 1,426 of those new listings, down 33.33% from last year. New listings fell more than sales, so predictably this brought total inventory lower.
Toronto real estate inventory is lower than last year. TREB reported 11,431 active listings in December, down 11.56% from last year. The City of Toronto represented 3,270 of those active listings, down 12.47% from last year. Last year there was a rush to try and catch buyer’s before the new mortgage rules kicked in on Jan 1, 2018. In context, this is the second highest inventory for December since that 2012 slump. TREB has only seen active listings fall below this level 7 times in the past 20 years.
Greater Toronto Active Listings
The number of listings available for sale in May 2018, across Greater Toronto.
Source: TREB. Better Dwelling.
Toronto real estate prices did move higher, but they’re below peak and sales are falling. Until prices rise above the May 2017 peak, they’re still technically in a downtrend. December also saw fewer sales and more inventory than typical for the month. The decline of sales with prices moving higher means less people are validating the rise. Rising prices should be accompanied by rising volume, especially when there’s more inventory.
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Toronto real estate industry: there’s less homes for sale*
* than last year, since everyone was listing to get out. The second most homes for sale since 2012, the last time people thought Toronto would crash. Except it couldn’t have crashed, because that’s when it had just RECOVERED from the 1990 crash in real terms.
Recovery. lol.
https://i.imgur.com/ilJa52h.png
For those that think we saw a correction, we didn’t. This is still technically an up trend, since prices have only declined 6.39%. The drop needs to be more than 10% to be a correction.
I can’t see prices moving much higher than here though, so a correction is likely to come.
You’re superimposing correction over downtrend.
The article specifically says downtrend. And downtrend holds true.
If sales go down, and inventory goes down, does that mean “hope” is up? (how do you measure hope?) Folks hoping this stasis will all blow over soon? aka they’ll get their high nonsense price if they just wait a little. The inventory figures have been baffling me. I expected them to balloon. The only explanation I can think of for not pulling the parachute to limit your losses, is hope.
Can builders and flippers and downsizers all afford to play the waiting game? Seems a tad weird to me.
“Just wait until the Spring Market – things will pick up.” – Joe Realtor
My hunch is inventory will bloat in the Spring with re-listings: what sales do from that higher number will be the tipping point. I think it will be a bloodbath …
The GTA market is in a very strange place. Why? Because of the emotional factors involved in buying and selling real estate. Buyers want to buy, but are afraid to pull the trigger because they are bombarded with mixed messages as to whether now presents a buying opportunity or are prices going to drop further. The market has been on a roller coaster ride and there are exceptions in trends, even within the same housing category across the GTA. Sellers who don’t need to sell are looking to signs of an improvement in prices before putting a property on the market, hence the low inventory.
The other reason we aren’t seeing a massive sell-off (ie. lower inventory available and lower sales) is because investors don’t NEED to sell into a losing position when rental rates are climbing. Long-term investors are likely finding their investments are better off than ever, as they see more income vs. expenses. In my example, a condo I have owned since 2012 carries for $1800-$1900 (including property tax and maintenance fees) and income is $2600. A year ago, that would have been $2,300. When you are netting $3600 AND building equity via principal paydown, why would you sell into a softer market? This is a common finding with many investors. There is just no need to panic sell.
If anything, there is a specifically good opportunity for 416 condo owners to sell and buy freehold housing, since the price gap has shrunk so much, making it possible to make that move when it wasn’t so attainable in the last several years. This is true even with rates rising in the same timeframe. Don’t forget that incomes have also risen to offset at least some of the higher interest.
Al, if what you say holds true (and I’m not disagreeing with you, I want your insight into this), what pushed things to plummet in the previous versions of today? Renters are going to keep on renting while owners continue to receive the monthly rental income. Why break this cycle if the owners continually put money towards their prinicipal through these renters? There must have been a trigger in the past to break this highly valuable set-up for owners.
Not sure if you’re trolling for the answer, but I’ll assume not.
Renting and owning have an unsavoury relationship. People gravitate to the cheaper option, cyclically. So depending on where your timeline starts, one trails the other.
Over the last 4 years purchasing a home has become more illogical for a median wage earner. As such the number of people looking to rent has increased, lowering rental stock pushing rents higher.
As the market declines people who have been long term renters will see the opportunity to own a home and purchase one. This will open up rental stock and push rents downward. These people also help build the floor on housing prices.
As the next real estate cycle starts new renters will help build the floor for rental prices until we are back having this same conversation in 18 years.
This is why so many people who think they are landlord geniuses and will ride out the cycle will be sorely mistaken. If they are overleveraged on their rental stock and dont sell before the price collapse they will STILL loose everything when rental demand inevitably disappears.
Hi John, definitely not a troll. I was missing the part of the houses eventually dropping and the renters taking advantage of the lower price.
Much appreciated.
Not sure about Toronto specifically, but nationally, year over year wage gains were just 1.9%, which is below the rate of inflation. That’s a real decrease in wages. The wage increase for “permanent workers” was even lower – 1.5%.
https://business.financialpost.com/news/economy/canada-ends-decent-year-for-jobs-with-december-slowdown
Negative real wage growth will not help with the interest payments.
Hey Ali, nice to see you.
Yep, we have a lot of structural issues already.
– Jobless claims started climbing up but not unemployment yet (which is the most lagging indicator)
– Auto sales declining
– Personal Insolvencies trending up since Q4 2018
– Builders bankruptcies up 50% (not in the news yet)
– Vancouver RE market is dead
– Alberta impacted by OIL prices slump and production cuts.
– Market is pricing 0 rate hikes in 2019 and 50% of rate cut in 2019.
(Easily verifiable in google, can’t post multiple links)
All those will only get worse and recession in 2019 looks very real to me with most certainty before 2021.
But sure spring 2019 will bring a recovery in GTA and new RE market uptrend for very many years to come.
The article opens:
“Toronto real estate is printing new records, but not the good kind. Toronto Real Estate Board (TREB) numbers show prices increased in December, when compared to 12 months ago, but are still below peak. It was also the slowest December for sales in 6 years, with the second highest inventory in the same period.”
One should know by now that markets have cycles and a down cycle may not be a bad thing just as the up cycle may not be a good thing.
Market Stability is generally good, unless we have reason to call it stagnation. Thus, thinking that housing prices should always increase promote anti-stability thinking. Houses are primarily for living life and that means a wise government regulates the housing market so that the Quality of Life is paramount over the profits of developers and speculators.
Canada has followed a poor development model known as New Urbanism ( aka inappropriately known as Smart Planning), which is the opposite of the housing desires of the majority of its families. The New Urbanism has forces up the cost of housing because it increases density and density increases price without increasing quality. Thus, a correction now is better than a crash later.
This is how Canada’s housing correction begins – Macleans.ca
https://www.google.com/amp/s/www.macleans.ca/economy/realestateeconomy/this-is-how-canadas-housing-correction-begins/amp/
Think this article nails it.
Volume drastically down, prices moving higher? If anybody studies the stock market knows that spells trouble. Record mortgage debt for Canadian households, increasing interest rates, stricter mortgage rules… the real estate market in Toronto has yet to see a real correction since the 90s. That’s a record long run and everybody keeps thinking it will keep going? I fully expect a 20-30% correction from the peak of 2017 in the next 2-3 years when I look at the chart.
The most important aspect of TREB’s December report was that the average detached price in the 416 just hit a new low below the trough reached in August 2017… so, that’s it folks the Toronto detached market has officially crashed!!!
At $1,145,892 the price is now 27% (not a typo) below the peak reached in April 2017 when the average price was $1,578,542 and 4% below the trough reached in August 2017. Nearly all the price gains since October 2015 have been wiped out!
We knew we were going to hit a new low before the April/May spring market rebound but only the most pessimistic forecasts predicted we would already hit that level in December compliments of a nothing short of spectacular one month drop of 12% from November!
The interesting thing is that the 905 detached prices have been holding relatively steady since July 2017 and didn’t experience any of the peaks and troughs that 416 experienced so at some point the 416 prices will start dragging down that index as well, which is already 21% below its March 2017 peak.
My SNLAL metric (ratio of sales to new listing divided by active listings) is predicting the spring market rebound could come as early as March at this point. We should see two months of upticks in either March/April or April/May followed by another 4-5 months of declines into September.
I guess some of the most pessimistic forecasts had the total drop at 40% for Toronto and 50% in some to be hard hit areas like Markham and King City. If that turns out to be accurate, we will see the average detached price in Toronto reach $947,000 (i.e. another $100k drop from now) and the average detached price in the 905 will hit $674,000 which is another $220k below the current level.
I think the 40% total drop and $100k from current levels is actually quite optimistic for Toronto at this point considering we just had a price drop of almost $160k in a single month. Unfortunately, this has a national recession written all over it. 🙁
I don’t think any predictions are valid as the circumstances this time are unique to 2019. House prices are still insane. We have to recover from virtually 0% interest rates. +20% rates are not on the horizon. The Canadian problem is not in sync with the US problem.
2019 and onward is new territory that will only be understood and justified after it happens.
One thing is for sure – it doesn’t look pretty.