Toronto

Toronto Real Estate Gets First Median Price Decline Since 2009

Toronto Real Estate Gets First Median Price Decline Since 2009

Toronto real estate set a quiet record, that went largely uncelebrated last month. Numbers from the Toronto Real Estate Board (TREB) show that the median price declined. Boring, right? Not when you realize that decline is actually the first annual decline since the Great Recession. While it’s not an end of time announcement, here’s why you should care about it.

Toronto Benchmark vs. Median Real Estate Prices

The benchmark price is the most commonly used measure, but it doesn’t capture rapid movements. The Canadian Real Estate Association (CREA) claims it’s the most accurate measure, but some agents argue it’s delayed by up to six months. The fact that the method is opaque and there’s no way to verify the numbers, also makes people a little skeptical. This is when you would turn to using the median price, which captures movement much faster.

No method is perfect, and tracking median prices is no exception. The median sale price is the midpoint between all sales. That is, half of sales are above this price and half are below. Due to how median prices are measured, it can be skewed by a shift to buying cheaper units (like condos), or  a shift to more expensive units (like detached units). It’s the more common method of tracking real estate prices, but there’s definitely a trade off. It’s best used in conjunction with benchmark prices, if you’re actually into buying as an investment. If you’re just buying it because you want to, who cares – right?

The Median Sale Price For Toronto Real Estate Fell To $625,000

The median price across Greater Toronto is falling. TREB reported a median sale price of $625,000, virtually unchanged from the month before. This represents a 0.95 decline when compared to the same month last year. The median price remains at December 2016 levels. If you were suspicious 2017 was a waste of a year, you have another data point to add to your argument.

Source: TREB. Better Dwelling.

The Decline In Median Price Was The First Since May 2009

Not very exciting, I know – but there’s a very important detail to take away. This is the first time the median price showed an annual decline, since May 2009. The last time the annual median price decline was this large, was the month before that – April 2009. Considering March 2017 was the highest annual increase in decades, it wouldn’t be all that strange to see the median price fall further into negative territory. Sudden peaks in price growth, are often met with troughs of price declines. That’s how healthy markets work, they display balance.

Source: TREB. Better Dwelling.

The median sale price might not tell you how much to pay for a home, but it is an indicator worth noting. The shift to smaller, or cheaper units could indicate a rapid shift in sentiment. When this value drops, home prices are declining, people are buying smaller units, and/or less people are upgrading. More important, this is the first time in nearly a decade it’s dropped.

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28 Comments

  • Reply
    Depth386 2 weeks ago

    It’s okay just tell Poloz & gang at the Bank of Canada to start QE. In fact, why not just announce a policy intent to “ease” and “accommodate” in perpetuity so that every current homeowner can simply retire and pay their bills with second, third, and “Nth” mortgages tapping their ever expanding equity. They can even hire all the renters as personal assistants, unemployment to zero!

    • Reply
      Shilo 2 weeks ago

      Poloz has less control over rates than most people think, it’s up to the fixed income markets to determine rates. Although we shouldn’t let people control rates like this, since letting Bay Street have its run on the market leads to disastrous things like our housing market. We need a central bank with the guts to do what’s right, not what the market wants.

  • Reply
    Ali 2 weeks ago

    Condo prices are still moving up, which is hilarious. People seem to be unaware that buying a detached or single family home, you’ll always retain value better than a condo. You own physical land, instead of a box with increasing maintenance fees per month, and usable life deteriorating as the building gets older.

    Good luck with your shoeboxes everyone.

    • Reply
      bluetheimpala 2 weeks ago

      1) Why is it hilarious? The price acceleration for condos lagged that of housing until mid 2017 I believe.
      2) ‘..always retain value better than a condo.’, how so? Nothing is guaranteed in this world.
      3) Maintenance fees increases are capped to inflation generally but in my experience, owning a condo for 5 years, they rarely go up. Mine didn’t
      4) Part of the condo fee goes into maintaining the building. A good condo board, working with the management will ensure a healthy reserve and that the proper maintenance is done to retain value.

      • Reply
        L 2 weeks ago

        Detached homes are basically back to price levels in Q1/Q2 2016. Wonder at what point the shift goes back into single family homes. I’m sure things are changing, but for me, I think there is a self full filling prophecy of owning property with land that gives it the premium.

      • Reply
        Justin Thyme 2 weeks ago

        Because some high rise condos have a life span of 30 years, typically 5 years. When the condo wears out, thee is no land to back it up. When the condo wears out, the only choice is to tear it down and rebuild.

        When the cost of maintenance exceeds the replacement cost, it is time to abandon it.

        Wiring, plumbing, weather seals, exposed concrete, elevator systems, all wear out and are very expensive to replace.

        The concrete in high rises built in the 70’s has already deteriorated to such an extent that it is a structural problem.

        And today’s condos are built cheaper and of lower quality.

        See http://www.huffingtonpost.ca/dan-s-barnabic/condos-lasting_b_6956838.html for instance.

        With your own house, the maintenance and lifespan is under your control. In a condo, it is collectively in the hands of your neighbors.

        • Reply
          Justin Thyme 2 weeks ago

          Should have been ‘typically 50 years’, not ‘5 years’.

        • Reply
          Condo X 2 weeks ago

          Location is where the value lies not the type of home. 30 years from now the entire downtown core will be filled with condos. Old condos will be rebuilt with higher density and by that time the prices will justify this costs. I’ve seen it done in Seoul Korea all the time.

          • Tommy 2 weeks ago

            Interesting. When old condos are rebuilt, I assume all the condo owners are bought out by a developer?

          • Condo X 2 weeks ago

            The developer offer the owners first rights to buy in the new development or if they don’t want to buy they will sell their “ticket” to buy to other purchasers who do. The last condo I bought in Korea was bought this way. We paid around $400K for the ticket then paid another $200K to the developer.

        • Reply
          Tommy 2 weeks ago

          NYC and many other major cities are filled with condos and apartments that are over 100 years old. Ancient.

          Upgrading is expensive but that is what reserve funds are for. Maintenance fees are high – higher than the cost of doing maintenance on a home – but it does pay for necessary upgrades, amenities, and the carefree lifestyle of condo living.

          I own condos and houses. There are pros and cons to both but the belief that houses will retain value better only applies in the short term. Over the long run, everything in the core will be condos, and all will be very expensive to buy. On a per square foot basis, condos are already more at par or more expensive then houses.

          • Justin Thyme 2 weeks ago

            These were built with a steel structure, not concrete. Steel bones have a very long lifespan. The interior can be gutted, Try that with a poured concrete structural wall. When you buy a condo, you do not buy an interest in the land or the air rights. If the condo is abandoned, you have no investment.

    • Reply
      carlton 2 weeks ago

      I agree entirely, only people who have skin in the game would disagree. Why are people paying these ridiculous prices for 400 sq ft. (prior to this madness banks wouldn’t even give mortgages on 400 sq ft properties) Its similar to buying a stock, you really have no control, if the building is on the down swing (25 years or older) maintenance will only go up. There are places that I service that the maintenance is the same price as renting the unit. If the building has several irresponsible owners / renters and isn’t well kept, your perfect condominium will be priced similarly no matter how nice your condominium is compared to crap neighbors. If you were detached you would have more control (painting the entire structure, landscaping, new garage doors, fixtures etc.) I know quite a few people that are paying more in maintenance than was estimated by builder. Who in there right mind pays $1000 dollar a square foot for a closet?
      https://www.theglobeandmail.com/real-estate/toronto/most-toronto-condo-fees-higher-than-initial-estimates-review-finds/article37785758/

      • Reply
        Condo X 2 weeks ago

        I agree paying $1000 per sqft for a box is crazy in today’s market. However, where can you buy a house for $400,000? Many of these buyers are forced into buying these over priced condos because they have no other choice if they want to get into the market. The right decision would be not to buy at all. If everyone followed this rule then the developer would have to drop their prices but good luck convincing the foreign buyers and hungry uninformed agents.

        • Reply
          Justin Thyme 2 weeks ago

          Ummm, anywhere outside of Vancouver and metropolitan Toronto?

      • Reply
        Tommy 2 weeks ago

        There are condos that are 25 years old that have maintenance fees in line with condos built in the last 5 years.

    • Reply
      Condo X 2 weeks ago

      So you’re basically saying all the condo owners in HK, New York, Seoul, London & etc. are screwed… you are foolish to think that just because you’re used to living a certain way that everyone is as well. Many people around the world have never lived in a detached house before nor want to. Personally I think it’s a pain in the ass to live in a house.

      • Reply
        carlton 2 weeks ago

        I thought we were discussing homes in Toronto not Monaco or New york or Hong Kong. If condos in Toronto are worth what there being sold for I am sure the value will be retained, no one will lose a cent. This would explain why banks are reluctant to give mortgages for 500 square feet or less.
        http://www.sonofabroker.com/get-mortgage-small-condo

      • Reply
        Justin Thyme 2 weeks ago

        Basically, yes, that is exactly the message. It could not be any clearer.

  • Reply
    Agents Sounding Alarm Over Budget, Home Prices Are Lower YOY 2 weeks ago

    […] Toronto Real Estate Gets First Median Price Decline Since 2009 (Better Dwelling) […]

  • Reply
    Yeah Right 2 weeks ago

    For detached, the January sales figures taken together with the massive downward trend in prices since the peak in 2017 are not consistent a “soft landing” being touted by the realtor community. If february is as bad as jan, the term “market crash” will likely make it’s way into the mainstream discussion.

    Toronto Sellers sitting on languishing listings should take some advice from the Vancouver real estate board president that was offered a few days ago. “Buyers in the detached market are facing less competition and have much more selection to choose. For detached home sellers to be successful, it’s important to set prices that reflect today’s market trends.” if its not selling, your house is not worth what you are listed for.

    • Reply
      bluetheimpala 2 weeks ago

      ‘if its not selling, your house is not worth what you are listed for’ …RE agents who read this blog, time to draw a line in the sand. Your legacy will be built on how you guide your clients through these next couple of years.

    • Reply
      carlton 2 weeks ago

      My goodness, I’ve found the truth network!

      it’s important to set prices that reflect today’s market trends.” – if you want to sell that is, (damn good advice for panicked sellers)

      if its not selling, your house is not worth what you are listed for. – Make sense, some second phases are selling for 75g to 90g less.

      http://www.cbc.ca/news/canada/toronto/volatile-housing-price-drop-1.4501010

      • Reply
        Mario 2 weeks ago

        1 out of 10 sellers is a panicked seller… but all you need is one person to devalue the other 10 in the neighbourhood.. when home prices trend down phsychology and momentum builds and new standards/realities are set. It works the same on the way up.. regardless of keeping a home on the market for months at a time. HODL wisely!

        • Reply
          Joe 2 weeks ago

          “It works the same way up..”

          Yep, and if only 5% of all buyers are foreign, who are willing to bi and buy real estate blindly, they end up effecting the other 95% of buyers in the market. The difference being, when long time speculators get out of a market, they keep their early gains and write off losses, while non speculators, who live in properties, bear the brunt of a downturn.

  • Reply
    David 2 weeks ago

    Tracking the median price for a two bedroom condo is important for Toronto. The spread between two bedroom condos and smaller sized houses is a good stat to see how the market is moving. Young families would likely prefer a small sized home but they are usually priced out without some help from the bank of Mom and Dad.

  • Reply
    gatiezalapin 2 weeks ago

    Facts are that nobody in their right mind will pay more than 2-350k for a 3/2 1200 sqf in GTA. This is a fact. Realtors who try to fool people by trying to convince them of the opposite are being expose to be accused of scamming.

  • Reply
    Justin Thyme 2 weeks ago

    Realtors sell the sizzle, not the steak.

    Investors buy the steak, and add the sizzle,

    Smart money buys the cow and cuts it into steak.

    Developers are the key to understanding trends, not investors.

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