Toronto

Toronto Average Detached Real Estate Prices Go Negative For The First Time In Months

Toronto real estate has been slumping in the detached segment, and that continued in October with lower prices and higher inventory.

Toronto Average Detached Real Estate Prices Go Negative For The First Time In Months

Toronto real estate is still producing a less than stellar trend in the detached market. Numbers from the Toronto Real Estate Board (TREB) show that prices are still up for detached homes in October 2017. However, price growth is tapering, sales are down, and inventory is higher.

Detached Prices Are Still Up, But Tapering Quickly

The price of a detached home is softer than it’s been in a while. The detached benchmark price across all TREB regions is now $921,200, a 5.43% increase from the same time last year. In the 416, this is now $1,088,200, a 3.9% increase from the same time last year. The tapering gains aren’t just apparent in benchmark prices.

Source: TREB.

The average sale price of a detached home dipped into negative territory on an annual basis. The average price across all TREB regions dipped to $1,008,207, a 2.5% decrease compared to the same time last year. In the City of Toronto that price is now $1,287,765, a decline of 1.1% from last year. Detached homes in the 905 fell to an average of $910,488, a 4% decline from the same time last year. Remember, average sale prices aren’t helpful for determining a price for a home. It’s helpful for determining dollar volume, and upgrade flows.

Source: TREB.

Toronto Detached Listings Are Higher Than Last Year

The city’s detached inventory is swelling compared to recent history. New detached listings in Toronto hit 7,849, a 15.99% increase from the same time last year. This is the highest it’s been for an October in at least 5 years. Active listings for detached units, which are the total detached units available for sale, hit 11,004 across TREB. This represents a whopping 111% increase compared to last October. Last October’s inventory numbers were touted as notoriously low, but it’s hard to argue this increase isn’t substantial.

Source: TREB.

Toronto Detached Sales Are Lower Than Last Year

Detached sales are softer than they were this time last year as well. Detached sales across TREB reached 3,135 sales, a 30.32% decrease from last October. This is the lowest number of detached sales for October in over five years. In the City of Toronto that number dropped to 812 detached units, down 25%. The 905 saw 2,323 detached sales, down 31.4% compared to last year. One positive note here is that the sales to new listings ratio is now ~40%, which is higher than last month. However, this indicator is also the lowest for an October in over 5 years.

Detached price growth is tapering, but we knew they wouldn’t be able to keep these monster gains. Some pullback is somewhat expected as the trend normalizes. Improved sales to new listings ratio did rise as seasonally expected, but was still significantly below trend for this time of year. What do you think? Is the market improving, or still in a lull? Drop your comments below.

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22 Comments

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  • Reply
    Jack Mack 11 months ago

    Yeah, indicator might be improving slightly but it’s a stretch to say this is a good time to buy.

    • Reply
      Jill T. 11 months ago

      You might never get this much selection again, so there’s that. Inventory is really high. When inventory drops again, you won’t be able to nab the place you want necessarily.

      • Reply
        Dennis 11 months ago

        If you have the resources you should wait until the spring. You will have better selection at a discount. However you will not get the same financing arrangement.

      • Reply
        MH 11 months ago

        “You might never get this much selection again…”

        Yes, it is obvious that shortly there will be no real estate left for sale in Toronto so this is the last chance to buy. Hurry up before the stress test is in effect and live your dream*.

        * Terms and conditions apply. The dream may end up being a highly indebted one.

      • Reply
        Inna 11 months ago

        High inventory would be only useful if you needed to buy many houses. In all other cases, price is what matters. Price is going to drop significantly within a year. Why to buy now? What is your logic?
        And, by the way, price will go down at the same time when more and more people put their houses on the market. I don’t think selection will be a problem!

  • Reply
    Dennis 11 months ago

    You will have credit buyers go out and become indentured debt slaves over the next 55 days. After that we reach a new reality and we go into a new phase of price discovery. This exercise will be lead by “smart money” cash buyers who are disciplined and not emotional. If this supply is not soaked up, the spring market will see a further -25% collapse.
    Expect at least one maybe two more rate hike(s) by April which will raise the posted rate(the new bar for qualification to 5.5%). Yikes!

    • Reply
      Mario 11 months ago

      Not sure if you realize this Dennis, but although active listings have definitely increased, there is only a ~3 month supply of detached inventory in the GTA. If the new mortgage rules increase supply to 8-10 months, that would actually be a good thing. I don’t think there’s reason to panic just yet.

      Also, there are already a few loopholes with the new rules, such as qualifying for a VRM and then switching to fixed (the bank does not have to re-qualify you). Unless there is a large shock to the system (ie. global economic downtown) I don’t see your scenario coming to fruition.

      • Reply
        Dennis 11 months ago

        *I am only referring to Detached in the GTA
        I don’t think you 8-10 months to get into trouble. Most of 905 is at 6 + months and they are in trouble at -25% since peak.
        There is no advantage to switching from VRM to fixed the rate for stress test it is the HIGHER of posted or contract + 2%. Posted today is 4.99%.

        Reason to wait to buy /List your property (cash out)
        All in the last 6 months + next 3 months
        1. Foreign Buyers Tax
        2. Rent control
        3. OSFI stress test
        4. OSFI prohibiting mortgage bundling
        5. -35% volume in sale every month since May
        6. Highest active listings in 5 years
        7. New minimum wage that is set to remove 100,000 + jobs
        8. Capital control in China

  • Reply
    Mario 11 months ago

    Couple points not mentioned in this post:

    – Although there has been an increase in detached supply, there is still only 3.1 months supply in the GTA (based on last 12 months’ sales)
    – The proportion of detached sales to total sales in the GTA is decreasing rapidly, making up ~3% less of total YTD sales compared to Oct. 2016. This 3% difference is being made up almost entirely by condo sales, which represents almost 30% of total YTD sales in the GTA. This trend will continue as a result of the Places to Grow act and the new mortgage rules
    – Condo prices have surged at least 20% YoY in every region in the GTA. This is a result of the above: as detached prices reach their limit, more and more people are adjusting their preferences and are buying condos

    • Reply
      MH 11 months ago

      Thanks for this additional insight Mario. It looks like Toronto is destined to run out of condos very soon so folks thinking about ever owning a place should better act quickly. After all, as you pointed out condo prices are up 20% and more people will be buying condos… only fools wouldn’t understand what it means. It’s too bad, Toronto just started recovering form the myth of running out of detached houses and now condos… But why bad? It’s perfectly splendid if one is in the business of flipping condos.

      There are many good books on human physiology explaining the hardwired reactions people demonstrate as a result of evolution. One of the reactions is based on the principle of scarcity. It has been proven through many experiments that even rational people confronted with scarcity (real or perceived) of something they want/need often behave irrationally. It is driven by the deep fear of extinction through the scarcity of food. In other words it is driven by amygdala, which is way older than the cerebral cortex responsible for thinking.

      It matters because people who want you to act in a certain way, like I don’t know… sales and marketing folks, know these pre-wired buttons very well and don’t hesitate to push them even if you are not aware of it and believe that you made your very own very rational decision.

      Is it a big surprise that people who profit from the real estate bubble use the scarcity button all the time? And why wouldn’t they? It worked beautifully so far… Scarcity of land, scarcity of detached houses, scarcity of available credit when the stress test comes into effect, and in this example, skillfully crafted by Mario, the scarcity of condos or the scarcity of buyer’s money to afford a condo going forward…

      • Reply
        Patel 11 months ago

        Very detailed and A+ english. Sorry i am an immigrant and can’t decide. Are you favoring Mario or against him!

      • Reply
        Mario 11 months ago

        I agree with you, there is definitely a psychological aspect. From what I’ve seen, people love to be the ones to say “I told you so” even if it means neglecting the data and being wrong for years and years.

        As the authors have mentioned, they are “data geeks” with no (or little) real estate background and write these articles part-time – there’s only so much you can know from just crunching numbers and “modeling”. I am not a sales or marketing professional although I am in the development industry. Because of that, I have access to a substantial amount of market data of which I choose to share here to give readers more insight.

    • Reply
      Alex 11 months ago

      Mario- Let me tell you one thing, i know many colleagues and knows those who bought condos early and mid this year are now hiring lawyers to cancel their bookings so that they can get their deposits back. No idea why there are still fools on the market to spend money on these shitty 450sqft condos!

      • Reply
        Mario 11 months ago

        There are very few reasons why a purchaser would want to give up their deposit. Prices have only gone up since the beginning of the year and there are good indications it will continue long term given what I mentioned above (mortgage rules, PTG act) as well as the removal of the OMB (more nimbyism, less density, fewer units). Add to the fact that builders are holding back as much inventory as the banks will allow since they know the value of the units will be higher once the project is complete. Just doesn’t make sense to me why people would want to cancel their purchase now

        • Reply
          Alex 11 months ago

          It will make sense to you in the summer market next year. and also what about Vacancy tax? whats your insight on that!!! 15000-28000 units coming up in the market in just few months, once implemented?

          Btw what is PTG act?

          • Mario 11 months ago

            Where is the 15,000-28,000 figure coming from? Are you referring to new launches? There are ~5,800 unit launches scheduled by end of 2017 and ~13,000 by end of 2018, is that what you are referring to? Take a look at the absorption rate for condos, they won’t last long.

            The impact of the vacancy tax is overstated – look at the (lack of) impact it’s had in Vancouver…

            PTG Act is the Places to Grow Act, which details the Province’s plan for intensification and to combat sprawl

        • Reply
          Alex 11 months ago

          This 15000-28000 (vacant units/homes) is given by the city of Toronto. Its not new developments…..its units sitting vacant. You can google it, it was on the star…ctv…etc..
          PS- I am glad to see that people from development industry now have time to visit these part time bloggers website!

  • Reply
    dana 11 months ago

    Yummy…. the tsunami is coming to Toronto and we will see some folks running for life… LOL … High detached inventory and the stress test will pull the pricing down even more. Two things I could never understand: #1 Why real estate agents separate the two markets: condo and house (detached). The two markets work together. Example: why should I pay $700K for a shoe box when I can snatch a house?! High inventory in detached market will lower the pricing to compete with the condo market. Buyers are driven by affordability. Why do you think we had first detached prices going ballistic, once reached tho top of affordability, the condo market went ballistic; now in the downturn market, this will reverse 🙂 #2 Why real estate agents are so focus on months of inventory??? So many articles about not only Toronto, but global real estate market confirm a speculative nature!! Real estate in every major English city is a commodity trading, nothing to do with a home ownership!! Once the speculators/investors and other creatures (funds) stop being profitable the inventory will increase as fast as the pricing this year! It will take one big fund to panic and dump thousands of condos etc…

  • Reply
    dana 11 months ago

    … btw,… if the sales is down, the transactions will go down, the real estate and finance industry will get a hit two!! Less income … less money spent…………. That is why real estate agents should not play financial advisers cos they have no clue about GDP and commodity trading.

  • Reply
    Justin Thyme 11 months ago

    Please, please, PLEASE save us all from a lot of confusion and frustration.

    Label your graphs to clearly indicate AVERAGE prices and BENCHMARK prices.

  • Reply
    Justin Thyme 11 months ago

    There is a very big anomaly on your sales to listing chart that needs explaining.

    In Mar., sales dropped, and did not recover, but listings continued to go bonkers for the next two months, doping only when it was clearly obvious sales were dropping. Panic selling? Trying to unload while the market was good?

    Does not match the trend on the rest of the graph.

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