Toronto real estate sales sometimes fall through, it’s a reality of any market. It’s often not until a few months later that we find out how many sales actually closed. Toronto Real Estate Board (TREB) data shows sales fell through at a higher rate than usual last year. In a small window where price growth reached peak, the rate of cancelled sales doubled.
Cancelled Sales Are Normal, Except When They Aren’t
To get the number of cancelled sales, we’ll be comparing TREB’s reporting over two periods. The first, will be a snapshot of the numbers reported at month end. The second, will be what those sales numbers are one year later. The difference are the number of sales that didn’t complete.
Sales don’t complete for a number of reason. Issues like financing falling through or failing inspection are actually pretty routine. Numbers normally get a downward revision after a year or so, as a result. Last year, these numbers spiked during the period where we see prices rapidly increase. Sales that would have been completed during the window where price growth decelerated, fell through at a faster rate than normal.
Toronto Real Estate Price Growth Was Bigger Than The US Bubble
Quick refresher for those that don’t remember what happened last year. Looking at the benchmark price, we see that price growth peaked last year. In April 2017, the price of a typical home in Toronto experienced annual gains of 31.26%. To give some context, the US housing bubble saw peak annual growth of 27% in 2005. It was a huge climb, that not even the best spinster can explain. Toronto then saw price growth decelerate for the next 13 months.
Toronto Benchmark Price Change
The annual percent change of TREB’s benchmark price for all home types.
Source: TREB, Better Dwelling.
The Number of Cancelled Sales Spiked Over This Period
The period when Greater Toronto home prices really surged, is when we see the most revisions. March 2017 received a downward revision of 123 homes, an increase of 86% from the year before. April 2017 was the highest with 162 home sales cancelled, an increase of 134% compared to the year before. May 2017 saw the number taper down to 130 canceled home sales, an increase of 62.5%. The growth tapers in June, after a decline in sales makes it one of the worst Junes in decades.
Cancelled Toronto Real Estate Sales
The number of sales per month that were removed, one year later.
Source: TREB, Better Dwelling.
If the numbers seem high, it’s because they are – especially compared to the year before. March 2017 saw 1.02% of sales removed, compared to just 0.64% the year before. April 2017 saw 1.39% of sales removed, up from 0.57% the year before. May 2017 came in at 1.28% of sales cancelled, up from 0.62% the year before. Yes, the ratio of cancelled sales more than doubled in some of those months.
Cancelled Toronto Real Estate Sales As A Percentage
The number of sales per month that were removed, as a percent of total sales.
Source: TREB, Better Dwelling.
Why most of these buyers walked away from their sales will forever be a mystery. Some have popped up in the court system, sometimes with huge consequences. One buyer that backed out without sufficient reason was ordered to pay $470,000 to the seller. On that note, we’ll leave you with the wisdom of Justice Edwards: “When the residential real estate market is a rising market, most people – perhaps with the exception of first time buyers, are happy homeowners and investors. When the market turns and drops, it is not for the faint of heart.”
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Photo: Simon Carr.
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Yeesh! There’s only one thing worse than buying a house and temporarily losing value. It’s buying a house, cancelling the sale, and being forced to pay the difference out of pocket.
Another reason to not trust TREB data. How many of these people overpaid, then changed their mind? Depending on the concentration, this could really change comps.
Noted this a few weeks ago based on direct knowledge;condo townhouse in downtown fell apart twice over the course of 45 days in may-June and, last time I got recon, did not sell. Sold conditionally twice. I never found out why, only the buyer and seller know for sure,however based on the price, the market outlook and the defensive actions of banks in anticipation of the shit storm they denied financing. Tick tock. BD4L.
Rates up. One more to go. Tick tock
LL lost his bet
Doubt he’ll be here to congratulate me though. Probably has bigger fish to fry
Grizz…thumbs up! Looks like swaps have odds of dec at 25%…probably hit 50% by October…thoughts?
Never tell me the odds Blue!
My bet rests on the fact that inflation has continued to pick up in the US and Powell seems like a hawk. Don’t think the US economy breaks in the next few months. Tariffs will be inflationary in the short term.
LL is right as long as there is truly a 0% chance of another rate increase this year. I suspect that’s not the case.
My bet was we would get one for sure Today, but I would go double or nothing on getting another one this year. Any takers?
I will take that, give you 3-1…
Market only priced in a 90% chance of hike, so it was still a gamble… lol.
Spread has almost inverted but you had me at 3-1! Deal
I cannot wait to see how this plays out… You guys are awesome.
I don’t think we’ll see LL around here anymore.
Also, if I had to say… there will be another increase by year end.
But that all depends on how quickly housing falls apart.
How many conditional sales fell through and why? This will give a better indication of the market problems. At times in the London market the RE office where I worked last year was having as much as 20% or more of the conditions sales fail to firm up and close.
Would be nice to know if these were conditionals, but the underlying point is still valid – conditional sales were made with price points that improved comps, without completing. They did so at close to double the rate then, and continued well towards the end of 2017 from what I’m seeing on TREB.
The investment mania has def. spread to Montreal. A realtor there I know said their usual branch inventory of 50 houses has evaporated practically overnight, including properties that just last year were considered almost unsellable junk. Montrealers really do believe they are superior to Torontonians, especially the remaining Anglos, and that the market craziness couldn’t possibly infect them the same way. They’ve been waiting for this since the 80s, and the pent up greed is a thing to behold. The credit crunch and recession will no doubt kibosh it.
Dirty money is moving from West over Ontario to Quebec…who know where will stop it..
Seattle’s market has gone a little crazy. https://www.cnbc.com/2018/07/09/the-hottest-housing-market-in-the-country-may-be-headed-for-a-crash.html
This heat up started the month after the foreign buyer’s tax went into effect in Vancouver. I always kinda thought that their property had room for price growth given the average incomes in the area but I they are starting to sound a lot like Vancouver now. I wonder what the price multiples are there to income. Are they also starting to diverge from local incomes? How much foreign demand has diverted from Vancouver to Seattle?
Mind boggling. The government overlooking money laundering to that degree
makes them complicit. We joke about being governed by mobsters but it’s literally true.
Is it just me or after today the housing inventory started pouring?..Seems like everybody waited to list their home….
please tell me more, I am not in the know, anything helps.
check out 1415 Queens Ave , West Vancouver, BC
Classic story of a Greed, Boom, Bust. Owner over leveraged on the uprise, taking HELOC money out from creditor based on the rise, bought a bunch of other places. Flowers hit the fan when she couldn’t pay for 50$ west Vancouver renovation and licensing fees!
sold approx 35% below 2016 assessed on June 2018 at https://www.bcassessment.ca/
Many stories like this in Vancouver. it is just not being told or reported.