May numbers are out and at first glance, they look pretty ugly don’t they? 🙂
Units sold are down 22%. Days on Market is up 82%. Active listings are up 13%. And Average price is down 6.6%. A stat to make note of is that New Listings were DOWN 26.2%. I’ll explain why this is key shortly.
Now let’s drill down on the stats. As we’ve been saying since last June, let’s not compare numbers to the ultra-hot market in the first five months of 2017. Let’s just look at 2018 to start, which is a more relevant, apples to apples comparison.
Looking at Units Sold from January 2018 to May 2018, we see a consistent increase in Sales Activity from month to month.
In April of 2018, the Toronto Real Estate Board saw 7,779 sales take place. In May, there was a slight increase to 7,834 units sold. Although this represents less than 1% of an increase, it does show that sales are trending up. We will be able to look at 2017 numbers from June 2018, since the markets will be similar and comparable. June 2017 had 7,893 Sales. If the trend continues as it has for the past five months of 2018, we will surpass June ’17 totals in June of this year. This will boost consumer confidence, and bring people out of their holding pattern while they speculated that sales would decline causing price depreciation. That speculation, along with the uncertainty that an election year brings, caused a bit of panic and we are starting to see consumer confidence return. Remember that New Listings stat I mentioned would be key earlier? It’s about to come in to play. Wait for it. 😉
Before we get into that, I just mentioned that people were waiting for prices to fall. When you compare historical data to current data, it’s tough to get an accurate read on pricing. Let’s again only look at 2018 for a realistic look at what’s happening to price. Headlines this week had price “dropping” by 6.6%. Not a lot that stat does for the market, except set false expectations for buyers and sellers. The average price has continued to increase from January to May. Take a look at the chart below:
In January 2018, the Average price was 735,793. Let’s even go back one month further. The average price in December of 2017 was $735,149. January showed a slight increase over that. The upwards trend for Average Price has continued through the first five months of this year. The percentage change between April and May was negligible, yet an increase nonetheless. If you were holding off buying from January because the reports were saying price will fall, you’ve reduced your buying power a bit. The Average Price has shown a 9.45% increase from January to May 2018.
Okay, now let’s go back to look at the reason a 6.6% Price Drop was reported this week. With all the crazy rule changes, and the Provincial Government’s reluctance to solve the supply issue yet come out with ways to throttle demand and take away the dream of home ownership from Canadians, we saw them introduce regulations to stunt affordability. This caused a shift in the property types that buyers could purchase. There was a sudden decline in the detached homes market, a 4% decline to be exact. This was the price point that was keeping the Average Price high. So where did purchasers go to? A 2.5% increase in Condominium Apartments and a 1% increase in Townhomes was where most of these people went. What does this do for average price? See, the average price for a detached home is around $1.15M. If you lose some of these buyers and they go to the segments that have an average price around $497k, this is what creates the decline in Average Price and the PERCEPTION that price is falling. In reality, it’s just a shift and not a price drop.
Finally, Days On Market. We are at 20 days right now. Most cities/towns would love to be under 90 days on market. We were spoiled in Toronto when for about six months we sold properties in 12 hours. :). The average Days On Market is usually 45-60 days, and we are doing very well when it shows as 20 days on average. Don’t let the increase from last year scare you. The Days On Market is the same as last month, and down a few days from March. Another sign that the market is starting to rebound.
What can you expect in the next three months? If you’re wanting to get into the market at a reasonable price, your window is closing quick. Remember that key stat? New listings were down a whopping 26.2%! The gap in active listings is closing fast. Price is continuing to increase. Your buying power is decreasing. Now that the uncertainty around the election will end, and consumer confidence continues to build, the housing market will be in full rebound mode in a few weeks. Get out and get into the market while you can still get a good bang for your buck.