Toronto

Toronto Detached Real Estate Prices Fall Below Inflation, Inventory Jumps Over 195%

Toronto Detached Real Estate Prices Fall Below Inflation, Inventory Jumps Over 195%

Toronto’s detached real estate continues to explore where prices should be. Numbers from the Toronto Real Estate Board (TREB) show detached prices are starting to fall across Greater Toronto. The lower prices were accompanied by lower sales, and higher inventory. Sounds bad, but that means the market is now adopting healthy market mechanics. Healthy market mechanics is a good sign that the market will normalize.

Detached Prices Fall Below Inflation

The benchmark price, which is the typical price of detached home, is slightly higher. TREB reported a Greater Toronto benchmark of $907,100 in January, a 0.25% increase compared to last year. The benchmark in the City of Toronto is now $1,080,800, a 0.37% increase compared to the same time last year. Both of these numbers are up, but it’s also worth noting these are both well below inflation. Slowing or negative growth is needed to correct last year’s market frenzy.

Source: TREB.

Since there’s been a lot of discussion around a “lag” on benchmark prices, let’s also look at the median price. The median sale price for a detached home across TREB fell to $805,000 in January, a 7.46% decrease compared to last year. In the City of Toronto the median fell to $940,000, a 6.65% decrease compared to last year. As discussed earlier this month, a median price helps determine upgrade and dollar flow. Not sticker prices.

Source: TREB.

Average Sale Price Declined 9.1%

The average sale price for detached homes logged the fourth consecutive month of declines. Across all TREB regions, the average sale price fell to $970,823 in January, a 9.1% decline compared to last year. Breaking that down, the City of Toronto average was $1,283,981, a 3.9% decline. In the suburbs, aka the 905, the average fell to $879,048, a 12% decline. As you would expect, the average price for detached units in the city is holding up much better than the suburbs.

Source: TREB.

Detached Sales Decline 26%

TREB numbers show that detached sales continue to decline. TREB regions combined saw 1,659 detached sales in January, a 26% decline compared to last year. Breaking that down, the 416 saw 376 sales, an 18.3% decline. The suburbs saw 1,283 sales, a 28% decline. Every month we remind you this, but: sales means nothing, unless compared to inventory.

Source: TREB.

Detached Listings Jump Over 195%

Speaking of inventory, detached listings continue to build. TREB numbers show 4,375 new detached listings in January, a 34.86% increase compared to last year. The City of Toronto saw 834 of those listing, a 15.99% increase. The modest increase of listings continued to add to already building inventory levels.

Active detached listings, which are total listings available on TREB, continued to climb. The total number of active detached listings across TREB hit 6,819, a 195.7% increase compared to last year. The City of Toronto saw 543 of those active listings, which is 134% higher than the same time last year. Last year we saw “record low” levels of inventory, so the increase had to happen. That doesn’t mean a whole lot though, since sales declining while inventory is rising.

Sales declining and inventory rising releases pricing pressure, which is what’s happening. From the sounds of it, this trend might just be getting warmed up. TREB recently released survey results, showing more homeowners are planning to cash in on recent gains by selling. 25% of these prospective sellers do not have immediate plans to buy again either. The same survey also showed less prospective buyers want to buy a home this year. If that was too opaque, it means more people are planning to sell, and less people are planning to buy than last year. It’s going to be hard to get prices to move higher with that happening.

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Photo: Amber Dawn Pullin.

39 Comments

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  • Reply
    Ahmed 8 months ago

    Inflation should be about 2.5% in Toronto, plus a household formation increase of about 3-5%. The benchmark needs to come down by at least 20% before inflation from last year and this year become balanced. Unfortunately, prices go to extreme on the way up, and down. So expect a much bigger drop.

  • Reply
    Singh 8 months ago

    Toronto is the number one place for immigrants to come to this country. There’s very few other places (maybe Vancouver). They will buy the low prices, and send it higher while you’re waiting for a crash. Best to get in now if possible.

    • Reply
      Vince L. 8 months ago

      This guys is probably owning few houses and selling it now…who would like to catch a falling knife?

      • Reply
        Dmitry 8 months ago

        What a stupid comment. From your comment I assume you own one pair of pants.

    • Reply
      bluetheimpala 8 months ago

      Please pump this narrative. We need the rest of the bad $ to be flushed out. We’re in the most FOMO time of our FOMO history with FOMO within FOMO; this is like the inception of FOMO.

      • Reply
        John 8 months ago

        Hitchhikers Guide to Avoiding FOMO.

        When the media pumps. You dump.

        Last year the media pumped real estate and crypto. Hope you dumped.

      • Reply
        Justin Thyme 8 months ago

        Blue, I think you have the ‘F’ confused with another ‘f’.

    • Reply
      Alex Johnson 8 months ago

      What’s with this perception that someone is “praying and waiting for a crash”

      I do not own a home and I am not praying for anything.

      A roof over my head is just that. Right now I pay for that service by renting because it makes more sense to rent right now than it is to own. I invest my residual income.

      When it makes more sense to purchase my dwelling rather than pay for it I will BUY it.

      The only people praying are those who are heavily invested in a single asset (house/condo) and are praying for the prices to remain high because that is all they have.

      What is the cost of ownership over cost of renting? Whatever makes more sense is what people should do.

    • Reply
      tits mcgee 8 months ago

      Obviously Singh is heavily invested in the Toronto Real estate market……….. Explain how a market rises forever to never crash?

      A healthy market has rises and pullbacks. Toronto had a fucking surge in price in a short amount of time, and you are calling this pullback the bottom now……… its likely to continue to make up for all the growth with zero pullback since 95. the one in 2008 does not count cause the big 6 banks were bailed out secretly if you care to learn about that stuff……

  • Reply
    Ghan W. 8 months ago

    The worst part here is that condos are still rising. Once the two get close, the bottom is going to fall out of condos so fast, buyers heads are going to spin.

  • Reply
    Spiked Toffee 8 months ago

    This is the lowest it’s going to go. Calling it. You’ll be lucky to get a detached in Toronto for the prices they’re going for last month.

    • Reply
      bluetheimpala 8 months ago

      Hello: I have these beans, they are magic…you definitely seem like someone who would be interested. Let me know if you’d like to get in, at the ground floor, of the next ‘giant’ investing opportunity.

      • Reply
        Dmitry 8 months ago

        From your comments the only thing you can afford is a can of magic beans. Normal people buy homes(detached) to live in, not as an investment.

    • Reply
      Alex Johnson 8 months ago

      I’ve been hearing “this is the lowest its going to go” for nearly a year now.

      • Reply
        Dmitry 8 months ago

        And I’ve heard that market is going to crash for at least 7 years. Prices doubled since then…
        No one knows what will happen – it’s herd mentality phase now.

    • Reply
      tits mcgee 8 months ago

      Spiked Toffee, You’ll be unlucky to buy nearly at the top. This beginning of a pullback is a small blip on the bigger picture to come.

      When does smart money ever buy at the peak of a Mania or a bull trap?

      when the average salary is 50k but an average detached is in the millions, its obvious it cannot sustain itself for any significant amount of time unless employers suddenly want to do a round of significant raises across the board. Foreign buyers are the small peice of the pie that pushes the market through the roof full of retail buyers into FOMO and overpaying

    • Reply
      Rui 8 months ago

      I agree, this is the lowest price, until next month, and then the next.

  • Reply
    Realturd 8 months ago

    Important to remember that many of these buyers had mortgages that were approved before January 1. We haven’t seen the full impact of the stress test yet, and won’t for another few months. It’s going to get real messy, real fast.

    • Reply
      bluetheimpala 8 months ago

      yuuuppp…cheap money is still in the system but it is getting flushed out day by day. Wait until April-June selling period. Blood will be shed.

      • Reply
        Al Daimee 8 months ago

        IMO, prices are going to increase in some areas of Toronto through to about June and then likely level off with a slight (and usual) summertime dip in AVERAGE price (meaning less desirable homes being sold in summer, hence lower average price). The higher demand areas are getting a lot of traffic right now and that will have ripple effects on prices around the city. There is a serious lack of supply of mid-range homes and condos ($700K to $1MM) vs. the amount of buyers. Those not in the market won’t understand what is happening out there, so it is easy for them to say it will correct. What goes up, must come down, right? Tell that to New Yorkers and see what they have to say.

        Already the media is reporting that BoC is not likely to increase rates in March based on job loss data, weaker than expected economic growth and NAFTA unknowns, so this takes away some pressure to rush into the market for those who are just starting now (and let me tell you, there is PLENTY of activity right now!).

        Lenders are also going to want to compete for spring business, so they will offer promotional rates discounting their rates by 10-15 basis points (maybe more) for purchases made within 30-60 days. It has happened in previous years, so I expect it will happen again. HSBC offering 3.29% for 5yr fixed and 2.69% variable right now, while other major banks are offering 3.44% or more. This is still ridiculously low compared to historical average and it is still uncertain if we will see rates increase further than .5% by year end.

        • Reply
          Alex Johnson 8 months ago

          Question…Why do we keep comparing to New York or say San Francisco or Seattle?

          The salary discrepancies between Toronto and those cities are massive, hence we simply cannot compare. Income to home price ratios between say Brooklyn and North York…I do not have a figure now, but I looked this up before, and the difference was significant.

          I used to do a job (IT) downtown Toronto, I had a colleague in Manhattan (lived in Brooklyn) we had the same title, did an identical job. Our company did vary pay based on location, well my colleague made 35k USD more than I did for the same job. We were near parity to USD then but all things considering that is still significant.

          Yes, New York is expensive but people make significantly more than Toronto.

          New York is the center of the universe. It’s New York.

          Toronto is Toronto, there is nothing world class about it. More than a dozen more interesting cities out there in North America, even Montreal.

          • vnm 8 months ago

            Exactly so, based on the income vs cost of housing ratio, New York is considered close to a balanced market, whereas Toronto is still way up there in bubble territory by any traditional economic measure. The most notable thing about Toronto, in the wake of the Rob Ford fiasco, is that it’s been a fantastic place for investors to pillage. But like yeast gobbling up all the sugar in the jar, that can only go on for so long.

          • BetterDwelling 8 months ago

            No kidding. I was once applied to a senior IT job in Toronto just for the fun of it few months back. While we discuss on the compensation, the company offered me 80K Cdn base salary. It is equivalent to ~60kish USD. With the heavier tax. It is probably a bit better than a Manager salary in a fast food restaurant in Seattle. However, friends told me it is already a decent salary in Toronto standard. Same job can pay about 160K USD in here.

  • Reply
    David 8 months ago

    People who got pre-approved before the rule change in January still have some time to buy. Once those people disappear the 1 million range of homes will have a shortage of buyers for a few months. Buyers have about 20% less buying power with the new rules.

  • Reply
    Vince L. 8 months ago

    8Jan 2018…

  • Reply
    CS 8 months ago

    Realistically I think there are a lot of speculators in the market, both foreign and local. If values are going down then rental income isn’t enough on it’s own to make for a good investment, and this makes for decision making time for a lot of speculators. I may be wrong, but my gut says the market supply is only going to increase this year as people see the decline stretching out onto the horizon. Realtors will get that phone call as people decide to cut their potential losses and sell out. It will be interesting over the next year or two.

    • Reply
      bluetheimpala 8 months ago

      I’ve reviewed/studied historicals for Toronto, Mississauga, Oakville, Brampton, Vaughn, and Milton. A bit of Orangeville and Caledon.
      If you have access to these numbers, take a look for yourself; there is a lot of upside for anyone who got in 3-6 years ago. Many of these investors aren’t landlords, they jumped in for the asset appreciation…I mean who wouldn’t? Once the asset starts to lose value, they may stick around for a little in hopes of s turn around but the smart money gets out.
      Don’t confuse taking a reduced profit to having negative equity or taking a haircut.

    • Reply
      John 8 months ago

      I second Blue’s statement. A friend of mine bought his income property in 2012. If he undercuts the market today by 10%, he’ll still pull a tidy profit after all taxes, fees and cap gains.

      I’m sitting here unable to buy because of people like him. But when my day comes it will also be because of people like him… cashing out as I cash in.

      S’all good in the hood man.

      • Reply
        CS 8 months ago

        Totally agreed on the longer term being a win regardless of where things are at today. I’m thinking of that last bit of irrational buying we saw in just the last couple of years where the insanity was at it’s worst, and that type of buyer will be feeling strong pressure now. I’m like John, out of the market presently (got out in May of last year) with my divorce and am sitting in a hold pattern until things seem a little more feasible again. Hopefully I’m right that things will decelerate and still decrease because it they don’t I’ll never get back in.

      • Reply
        Tommy 8 months ago

        But there are tons of people like you that currently can’t buy and are waiting to when people like your friend decide to cash in. Therefore competition will remain fierce. Your friend will likely sit on his properties until retirement anyway since it’s a passive income source.

  • Reply
    Justin Thyme 8 months ago

    Interesting that the sudden downturn in ALL of the graphs began in May of last year, eight months ago, and it is only being recognized now that there is a downturn.

    For eight months, the message was clear, but it was ignored. Now, people will complain ‘why didn’t you WARN us?’

    • Reply
      Al Daimee 8 months ago

      Real estate trends are measured in longer periods of time vs. stock markets. You can’t make definitive conclusions until you have a few quarters of data, especially when you have external factors (government policy) manipulating what should be an open market where intrinsic values are driving buyer behaviour. Even despite all of the efforts to diminish risk in the Toronto and Vancouver markets, buyer activity has still been active. This could mean that those efforts impacted a smaller amount of people than originally expected.

      As far as I know, there is no measurable trend to predict motivational behaviour. If anyone can provide me that kind of insight, then please share!

  • Reply
    sac 8 months ago

    Shalini Chowdhary · CCS University, Meerut
    It all sounds so good when I read these articles and especially the comments(for a potential first time buyer like me) but I still the see the same list price whenever I search for any houses. No matter if its an old house/new house/town house/semi-detached. Only detached are listed for lower prices but they are still out of range for me.

    I think some of those so called investors have still not learned their lesson, they might learn a really bad one when its time for mortgage renewal on one of the houses they bought in last 3-6 years and then refinanced to buy another one. Only one such property might wipe out all their profit when they have to sell it for a loss.

    • Reply
      Alex Johnson 8 months ago

      It’s the same people that say it will only go up that are selling these properties. The over leveraged, all eggs in one basket crowd that is deep in HELOCs along with their mortgages.

      It can take some time for them to budge…Markets can remain irrational for a long time.

  • Reply
    Dman 8 months ago

    Looking at that frozen picture of Toronto, it’s easy to see that the value is not there. Like any Ponzi Scheme, it’s the FOMO buyers in late that get hurt the most. It’s not just the stress test, interest rates are going up, and could go up dramatically if the U.S. 10 Year Treasury Note yields continue to rise.

  • Reply
    Brian 8 months ago

    There can’t be a big spread between the US Fed and BOC interest rates because money will leave Canada for higher returns in the US so interest rates will rise in Canada as they rise in the USA. Rizing mortgage rates will put downward pressure on real estate prices. Another factor is condo fee escalation pushing down condo prices.

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