How Much Did Toronto Real Estate Inventory *Really* Jump?

How Much Did Toronto Real Estate Inventory *Really* Jump?

Greater Toronto real estate inventory is piling up, but is it really as high as some people are making it seem? Numbers obtained from the Canadian Real Estate Association (CREA) show a massive build of inventory relative to last year. Crunching the numbers however, relative inventory is still low compared to historic trends. The question is, does that matter?

Oh Yeah, Months of Inventory… What’s That Again?

Today we’ll be looking at an indicator we don’t typically use, months of inventory. Basically, it’s the velocity of real estate sales. It determines how long would it take to sell off the current inventory, if there was no more added stock. It’s a primitive measure to determine “buyer” and “seller” markets. The number goes up when inventory grows faster than sales. It goes down when sales grow faster than inventory.

The general rule of thumb is over six months of inventory, and you’re in a buyers market. Less than 4 months of inventory, and you’re in a sellers market. Between those, and you’re in a “balanced market.” Some markets rarely go into “balanced” territory, so it’s best to look for deviation from norms.

Greater Toronto Area Jumps Over 144%

The Greater Golden Horseshoe (GGH) is coming off of historic lows, but made a huge jump in a very short time. First off, the GGH is the new government buzzword for the economic zone surrounding Toronto, and includes suburbs like Hamilton and Niagara. August saw the GGH hit 2.3 months, which is down 11.53% from the month before. However it’s up 109.09% from the same month last year. The historic low was hit in January 2017 when it was just 0.9 months. August was 144.3% higher than this low. It’s hard to argue the climb wasn’t steep.

Canada vs Greater Golden Horseshoe (GGH). The GGH is the economic zone surrounding the Greater Toronto Area, including bordering real estate boards around TREB. Better Dwelling, Source: CREA.

This is still dramatically lower than the long-term average. According to CREA’s calculations, the long-term average for the GGH is 3.1 months of inventory, 34% higher than August’s number. August was below the long-term average, but we haven’t hit the average since February 2013. The median months of inventory since 2010 was only 2.6 months however, so we’re only 13% from that. Inventory is lower than it has been historically, but the quick jump is sure to be felt the same way the quick drop was last year.

Canada Average 6 Months If You Exclude the GGH

The months of inventory across Canada is in buyer market territory if you exclude the GGH. Canada had 6 months of inventory in August, up 1.6% from the month before. However, it’s still 7.69% down from last year. The long-term average according to CREA is 6.2 months, which was last hit in January 2017. The trendline moved in the same directions as Greater Toronto, just not at the same extremes.

2016 saw real estate sales pick up across the country, sending inventory to lows. Greater Toronto saw this trend amplified, with people buying into the frenzy at a very steep premium. As quickly as months of inventory disappeared, they began appearing. It’s unclear how much more last year’s frenzied buyers paid than they should have, but we’re probably going to find out as this trend levels off.

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  • Reply
    Go Away Hipster! 7 years ago

    Let the house prices collapse in Toronto! We need no more of you Yuppies and Hipsters trendyizing our communities! Go live in downtown Toronto where public nudity isn’t illegal.

    • Reply
      Bluetheimpala 7 years ago

      Wow. You again?

      I am now convinced you are from a troll farm (russian or alt-right or whatever)…

      “Hipster” is soooo 2010; we are now called bunsters as we attempt to, and generally fail to, grow ‘man buns’.
      “Yuppies”, well my boy, that hasn’t been part of popular lexicon since the 90s. I can only assume you are basing your understanding of western culture on ‘Seinfeld’ and ‘Who’s the boss’ re-runs. (Tony!!!).

      ‘Trendyizing’ is my new word. It sounds like something that would be blurted out in a town hall in rural alabama to explain why fashion is a beacon for corrupting our youth (The devil is trendyizing those god foresaken skinny jeans!!) I’ve used it twice already so one more time and it is mine!

      But you had me in tears with the nudity reference. I looked outside to see if I could spot some boobs but no. So random. So frisky. So naughty.
      Keep it up (sloooww wiiink).

    • Reply
      PLC 7 years ago

      The prices are not going to collapse. The August inventory numbers which this chart doesn’t show yet, has seen inventory drop further after lot of sellers decide to wait for a better market to come. The September inventory numbers so far show a bit of a bump up, but the numbers aren’t showing much increase as lot of people had expected as people try to sell in the Fall market. From now on, the inventory numbers will drop steadily and the prices will start creeping up again come soon.

      • Reply
        steve 7 years ago

        That’s assuming all things in the market remain the same, which of course they won’t. OSFI’s stress test implementation is just around the corner. This will push many out of the market for some time until they can pony up another 20% for their detached house with the granite counter tops. Count on more rate increases as soon as October and probably more next years. Prices will drop more, how much? Don’t wait!! BUY BUY BUY now before it’s too late!

  • Reply
    savemax 7 years ago

    Its a very useful information. Thanks for sharing

  • Reply
    Sunny Batra 7 years ago

    Nice post, it will be very helpful for all the real estate investor.

  • Reply
    Savemax Canada 6 years ago

    Such a useful and informative blogs. Thanks for sharing with us…

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