The Toronto Real Estate Board released its market report for June 2018 vs June 2019. And I figure it’d be a great opportunity to give you insight on how the market is doing, and also to help you become a real estate market expert so you can answer the question I get asked a lot: “How’s the real estate market doing?” Let’s get started.
First let’s have a glimpse of June numbers. Sales are up 10.4% year over year, while new listings dipped slightly by 0.4% and active listings are down 5.7%. At first glance, the 10.4% increase might seem promising. It is certainly above June 2017 and 2018 sales levels, but it is still below June 2014 to 2016 sales. Do fewer sales combined with a decreasing number of homes available for sale contribute to a stable, healthy market? Or will we see a further decline? Time will tell.
Average price is inching up a little bit with a 3% increase. This is less than half of the average calendar year to year increase we’ve seen since the Toronto Real Estate Board started publishing these statistics in 1972. But we have to remember that previous years’ aggressive price increases have cooled, and we’re on the way to reaching those heights again albeit over a longer period of time.
Oh, by the way — condo sales in the 416 are dropping. They’re down 5.6%. The good news is, prices are still on the rise — up 5.1%. Condo sales outside of Toronto are also slowing down a bit, but compared to last year they’re down only 2.7%, while prices are up 7.7%.
A few things are contributing to this outcome. For one, condo prices have risen to the point that buying a freehold, whether a townhouse, semi or detached, is becoming a much better choice. The average price of a condo in Toronto is $636k. How much does it cost to buy a townhouse? On average, $810k. Less than $200k gets you from a condo to a townhouse. In the 905 areas, the average condo is $483k. A townhouse is $618k. Again, less than $200k gets you a much bigger home.
We may see sales of condos start to cool, but prices won’t drop right away. It takes time for the trend to build up but with price growth being steady, what can we expect this summer?
If you look at Toronto real estate market stats, the 2019 price curve is skirting just above 2018, signifying a consistency in the appreciation of prices this year. This is something to be confident about. Should the interest rates remain as they currently are when the government announces rate changes later this month (update: it has stayed the same), buyers will become more confident, sales will continue to increase, the number of properties available for sale will decrease — ultimately meaning prices will go up.
Buyers and sellers alike should expect a very busy summer leading into fall. Banks are getting competitive with their five year rates and many markets throughout the Greater Toronto Area continue to improve.
There are two indicators int the real estate industry we use to gauge how well the market is doing. One is the “SNLR” or the sales to new listings ratio, and the second is “MOI” or months of inventory. I want to explain these two you because understanding them will give you a strong idea of where the market is going. So the next time you ask me (or anyone for that matter) how the market is doing — you should know what kind of answer to expect.
Let’s talk about the sales to new listings ratio. The SNLR tells you how many sales happened versus the number of new listings that came to the market in a particular time period. If the SNLR is 50%, it means that 100 new listings came onto market for the month, while 50 properties sold. The closer the SNLR gets to 100%, the more active the market. When it’s closer to 0%, the slower the market is.
Here is what the SNLR looks like in select cities and regions throughout the GTA:
Milton – 58.4%
Oakville – 47.6%
Brampton – 55.2%
Mississauga – 58.2%
All of Toronto – 57.3%
Aurora – 39.0%
King – 25.7%
Markham – 44.5%
Richmond Hill – 35.9%
All of Durham – 51.6%
When you see the numbers above, the west end of the GTA and Toronto are pretty hot markets, while York is still lagging a bit behind. Breaking York down, you can see that homes for sale are moving faster relative to new listings coming to market in Markham, but slower in Aurora, Richmond Hill and King.
The SNLR is only one piece of the puzzle. It is useful in helping you figure out the activity trend of the market, but there’s certainly a difference between the number of sales happening to new listings being introduced, versus how much inventory (how many homes there are for sale) there is in a market. So let’s look at inventory and how we can gauge market activity based on it.
The indicator we’re going to explore is called Months of Inventory. Explained simply — based on current sales activity, if no additional properties are listed for sale in the market, how many months would it take for all properties to be sold? Experts call this the ‘absorption rate’ which is just a fancy way of saying how fast will all of the current homes sell if things keep going the way it is.
A balanced market is when months of inventory fall between 4 to 6 months. Anything less than 4 months is a sellers market, while anything above 6 months is a buyer’s market.
Using the same cities and regions above, let’s have a look at the months of inventory for each:
Milton – 1.8
Oakville – 3.3
Brampton – 1.9
Mississauga – 1.9
All of Toronto – 2.0
Aurora – 4.0
King – 9.5
Markham – 3.4
Richmond Hill – 4.7
All of Durham – 2.4
You’ll notice that the SNLR and MOI have a similar pattern but don’t necessarily match. That’s because the exact number of homes for sale in each city or region vary. Based on the above numbers, it would take a long time for King to sell out all of its inventory if nothing new got listed on the market, while the west 905, Toronto and Durham are hot markets.
Sounds a bit too analytical? Too technical? It is because you’re looking at black and white numbers and figures to describe what’s happening in the market. The next time the media, or your friend, tells you how slow the market is, or how hot it is, you’ll be able to explain to them (a) why you agree or disagree with them and (b) how you can prove you know what’s happening in the market.
Where do you get these stats? Go to www.trebhome.com and look for Market Watch. Or you can always reach out to me and I’ll bore you with a discussion about real estate. 🙂
Here is a snapshot of June 2019 numbers if you want to dig into your specific area:
How can you use these stats to benefit you?
As a buyer, knowing that a particular segment of the market is moving slow presents opportunities to negotiate the price and terms of your purchase. It doesn’t mean you should only buy in these specific markets. Yes, King is moving quite slowly right now, but the average price of a home in King is over $1 million. So if you’re looking for market conditions favouring buyers but have a lower budget, you’ll need to study the specific market you’re planning to buy in.
As a seller, when SNLR is high and months of inventory is low, the chances of you finding the right buyer who will pay the most for your home is much more favourable. It’s also indicative of rising prices — so if you’re planning to buy as well, keep this in mind when you’re strategizing.
There you have it — you’re on your way to becoming a real estate market expert. You now know what indicators to use to tell if a market is hot… or not. And also when your ideal time is to buy or sell.