Toronto

Toronto Real Estate Is Seeing A Massive Flood of Inventory

Toronto Real Estate Is Seeing A Massive Flood of Inventory

Toronto real estate has been cooling down, but it’s hard to tell how much without some context. Numbers from the Canadian Real Estate Association (CREA) give us that, showing how it compares to the rest of Canada. Toronto is seeing the largest decline in sales to new listings in the country, as sales struggle to keep up with the city’s huge inventory growth.

Source: CREA.

Toronto Saw Over 16% More Listings This Year

Toronto’s new listings are showing massive increases. In fact, listings are growing at the second highest rate of any city in Canada. Toronto saw 115,475 new listings year-to-date as of the end of July 2017, a 16.3% increase from the same time last year. The only place with a higher growth is Hamilton-Burlington. The Toronto suburb  saw 13,108 new listings, a 17.5% increase from the same time last year. New listings is pretty useless without looking at sales, so let’s look at the sales to new listings ratio.

Source: CREA.

Oh Yeah, Sales To New Listings… What’s That Again?

In the grand scheme of things, the number of new listings aren’t as important as the number that are sold. To give that number better context, we’ll look at the sales to new listings ratio. It’s a Canadian real estate term, that serves as a proxy for absorption.

It sounds fancy, but it’s not. It’s just the ratio of sales compared to the number of listings. It helps to give an idea of how much inventory will carry over to the next month. The lower it is, the more inventory gets carried over. More inventory usually provides less pricing pressure, which is better for buyers. The higher it is, the less inventory gets carried over. This provides more pricing pressure, which is better for sellers. The closer it gets to 50%, the more balanced the market is.

Toronto Sales To New Listings Dropped The Most In Canada

Toronto is seeing the largest decline in sales to new listings ratio across Canada. The current year-to-date ratio is 52.8%, an 18.1% decline from the same time last year. That puts the city pretty close to a perfectly balanced market – if it can stay there. You won’t see more balanced pricing if the ratio makes a temporary stop on the way lower. Ditto if it just bounces back up again.

Source: CREA.

The only other region close to this decline is Hamilton-Burlington. Hamilton-Burlington has a sales-to-listings ratio of 69.2% year-to-date. This is a 13.6% decline from the same time last year, and the second largest decline in Canada. The number remains very high, but it’s been dropping fast.

Toronto is coming off of a low for inventory, so numbers are expected to grow. Growth this quickly however, with stagnating sales may soften prices. Over the next few months, expect the market to find better footing, as people play the game of price discovery.

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12 Comments

  • Reply
    Beh G. 4 weeks ago

    For all intents and purposes, the bubble burst 4 months ago but those with vested interests have been telling everyone that tens of thousand of buyers will suddenly appear out of nowhere after Labour Day weekend to absorb the inventory… and consequently prices will go up again.

    Of course, the irony in all that is that many people have been holding off on listing their homes for this exact reason… so a huge uptick in listings in early September is very likely… Will tens of thousands of buyers dying to invest in a city with failing infrastructure and rising crime rates suddenly storm the field in a free-falling market?

    I guess we will know for sure in the next few weeks, but real investors aren’t generally as dumb as the industry is hoping… uneducated speculators maybe, but it’s safe to assume the 20% drop so far has been sobering enough.

    • Reply
      Tim 4 weeks ago

      Couldn’t agree more. I am in commercial and shocked at the prices being demanded. BTW they are sitting on the market a lot longer and now we have choice….too early for major price drops however. BTW, grapevine is saying land values have hit the ceiling……..noticed a few POS to this effect too…. =)

      and the sellers coming back to list, look at the front lawns with the posts still in the front but no sign. There are dozens in my hood (Markham).

    • Reply
      Gabriele Di Bernardo 3 weeks ago

      It’s sad really. People who might have got out of the market and lost a little bit at the beginning will now lose a lot cause of their wait and see attitude and listening to others all the while hoping for a turn around. This correction has only just started. Royal Bank came out with their prediction and they have stated (and I believe it’s a conservative prediction) that prices will drop by 40%. I am more inclined to believe Prem Watch of Fairfax financial who stated up to a 65% reduction in home prices though… only just because it will reduce home prices down to a level where the price to income ratio is in line historically (at 4 or 5-1 instead of 20-1 which is ridiculous). A lot of people are going to get hurt badly.

  • Reply
    Mr. Burns 4 weeks ago

    Excellent!

    The same SJW-Hipster-Yuppie ‘social Marxists’ who turned low-income areas into Starbucks cafes, pushing out the poorer ones into homelessness will feel the Bern called Karmic Justice!

    These Yuppies preach “equality” in Toronto, yet they look down on anyone who doesn’t live their lifestyle. They are very judgemental & they secretly hate the working and poor classes of Torontonians.

    It’s about time that these Toronto snobs feel the bern of rising interest rates, negative equity, foreclosures, asset seizure and stress!

    It’s the Yuppies and well-off Millennials who are feeding into the Toronto real estate Bubble…The truth is that over 50% of local working age Torontonians do not earn above 40k a year, and Toronto is the Child poverty capital of North America!

    Yuppies and SJW elitists are the ones who are perpetuating income inequality in Canada….I don’t care if they have to live with a lower value on their condo or mansion, or if they have to pay an extra $100 on their Mortgage (while they plan a 5 star vacation in Cancun or Dubai or Monaco)

  • Reply
    Mike Zafar 4 weeks ago

    Thanks for Statistical analysis. Will appreciate a timely update of August numbers. If possible add a 2015 Bar. Thanks ever so much. Mike

  • Reply
    Frank 4 weeks ago

    Sorry, no crash is going to happen. Economy still too strong. Rates still too low.

  • Reply
    Real2real 4 weeks ago

    Like someone mentioned above. These articles have to start using better data. New listings is an irrelevant number while inventory is the real number and the inventory this year is just slightly higher than last year. The market has levelled off and sales are slower. That’s about all the excitement sorry guys.

  • Reply
    Konrad 4 weeks ago

    Any chance you can break down the figures by condo vs SFH?

  • Reply
    This week's real estate news: flood of inventory, prices below $1 million 3 weeks ago

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