October 2019 charts: Climbing back to 2017 peaks

Thursday Nov 07th, 2019


Here's your Toronto real estate market report for October. It's the seventh month in a row that GTA-wide sales volumes are up by double-digits versus last year
> April +16.8%
> May +18.9%
> June +10.4%
> July +24.3%
> August +13.4%
> September +22.0%
> October +14.0%

But keep in mind last year's 78,020 sales were the lowest total since 2008. You know we like to dig a little deeper here.

Below is what I saw in the October stats. As always, these are just selected highlights. The full set of market charts is available on my SlideShare

1) Climbing back to 2017 peaks

This month the Single Family Attached (SFA) HPI benchmark for the 416 reached $929,700. (HPI explained) That puts it over the price it reached in the spring 2017 peak. This means that Single Family Detached (SFD) is the last holdout. Here's how long each housing type took to recover (non-inflation adjusted):

SFA: 29 months
Townhouse: 11 months
Apartment: 5 months

Likely non-coincidentally, these quicker ones to recover are also the most affordable housing types. That seems to me it's because there are a lot more buyers at the bottom of the pyramid than the top, hence greater demand. Here's how the recovery played out. The yellow is the spring 2017 peak, and the green is the month in which it surpassed the peak. SFD is currently sitting 6.8% below peak prices.

Condo apartments are nearly $100K clear of the spring 2017 peak - and they're the lowest dollar value housing type, so quite a percentage jump. Kooky. Here's a look at the 416 composite prices. They took 10 months to recover. The composite holds the mix of housing types constant. Since detached home sales are only about one-quarter of 416 resale housing volumes (30% in 2016, 27% in 2017, 26% in 2018) they don't have as large of an effect as you might think. Condo apartments are a larger weighting factor (51% in 2016, 55% in 2017 and 2018). The composite is 3.5% clear of the spring 2017 peak ($860K vs. $830K).

In terms of average prices, 416 semi-detached had an average price of $1,100K last month, which is the second highest value ever, only behind $1,109K in April 2017.  Condo apartments recorded the highest monthly average ever, at $663K, handily beating the $642K posted in May 2019. And condo townhouses reached $700K for the first time ever, going all the way to an average price of $716K for the month of October.  

2) Tightening market conditions

TREB has certainly been talking about this. From the October 2019 Market Watch report, here are a couple of TREB quotes:

The problem is that the supply of available listings is actually dropping, resulting in tighter market conditions and accelerating price growth

And further down, basically the same thing:

As market conditions in the GTA have steadily tightened throughout 2019, we have seen an acceleration in the annual rate of price growth.

When sales are up and active listings are down, that drives months of inventory (MOI) down. [The formula is active listings at the end of the month, divided by sales in that month. It's a measure of the inventory and the velocity that inventory is moving at.] MOI is an indicator of how tight the market is, and the tighter the market is, the more upward pressure is put on prices. It's commonly cited that 4-6 MOI is a balanced market, and under 4 is a seller's market, and above 6 is a buyer's market. Toronto has been in seller's market territory for over 20 years (hence the big price growth in that time). But there's seller's market, and extreme seller's market (see 2016 through early 2017). Take a look at the recent history:

416 Freeholds (lowrise, or just "houses" as I've called them above) is getting low again. For the first 3 months of this year it was above 2018 levels, but for the last 7 it's been below (tightening). Freehold MOI is also below the 24 year average of 2.2 months, but just a little bit below the 10 year average of 1.8. But check out condos:

Just 1.35 last month, just a touch off the all-time low of 1.30 in October 2016. The 24 year average for October condo MOI is 2.8, with the 10 year average at 2.5, so it's certainly a good chunk lower. These last 4 months have been below 2018, whereas the first 6 months of the year were above last year, so there's been a shift (tightening). We're also at a record 31 months in a row that condo MOI has been lower than freehold MOI. To put that in historical perspective, in the 254 months before March 2017 that only happened 19 times in total.

3) TREB has already beaten 2018 dollar volumes

This is for the entire GTA area that TREB serves. 2018 final transaction volumes (12 months):

Sales: 77,426 transactions
Dollars: $60.957 billion

And here's where we were at the end of October 2019 for the year (10 months):

Sales: 76,413 transactions
Dollars: $62.361 billion

That's $1.4 billion more already. Last year at this time there was $53.2 billion in sales, so this year we're up 17%.

Last month I predicted final 2019 volumes would be around 88,000 transactions, and that still sounds about right to me. Note TREB is only tracking re-sale transactions through its own MLS system. If this 88,000 prediction holds true, the 12.8% YoY increase would be the highest since 2009 (17.1%). This is how it would look compare to recent years.


As always, you will find the full set of market charts (for this month, and for archived prior months) on my SlideShare.


About Scott Ingram CPA, CA, MBA

Would you like to make better-informed real estate decisions? I believe knowledge is power. For that reason, I invest a lot of time researching and analyzing data and trends in the Toronto real estate market. My Chartered Accountant (CPA, CA) side also compels me to dig a lot deeper into the numbers on individual properties my clients are interested in. The better the information you have, the better decisions you will make. If you're interested in talking about your real estate situation, call me or reach out via the Contact Me section of my homepage.

Your home is the single largest investment you'll make—trust it with an accountant.

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