The sky is falling on the Toronto Real Estate Market ... or is it?
The Toronto Real Estate Board released May 2017 numbers today and talk about the Real Estate Market has once again come to the forefront. May 2017 sales saw a year over year decline in units sold by 20.3%. Of note, price was up 14.9% for the same period, despite the decrease in units sold.
At first glance, it appears the sky is falling. Government intervention, coupled with the inclement weather, contributed to a huge decline in units sold. Now what does that mean for buyers and sellers? First, lets remember that 2016 was a record breaking year for units sold. 2016 beat the previous record set in 2015 by 11.7%. Note that we are comparing this May to a record breaking year. However, let's look a larger cross section instead of just 31 days. Sales in 2016 for January to May totalled 47,288. Can you believe that? There were FORTY SEVEN THOUSAND TWO HUNDRED AND EIGHTY EIGHT homes sold in the first five months alone of 2016. That is more homes sold in five months than the entire years for 1971 to 1995.
Those first five months outperformed 25 years! Now let's look at the first five months of 2017. The first five months of this year have seen 46,940 homes sold. Not too shabby is it? 348 homes less than at the same point last year. So now, let's revisit this 20.3% decline. Taking into account the number of homes sold in the first five months last year and comparing it to this year, 2017 is down a miniscule 0.73%. Yes, we are down LESS THAN ONE PERCENT! So, why the big fuss?
Now we also are hearing some arguments about price dropping. Price is not dropping, it's just not appreciating at a rate as high as when inventory is limited. This is a perennial event. Take a look at the 2016 and 2017. The time sellers receive the highest return on their investment is when inventory is limited - late winter/early spring, or in the fall. Spring/Summer is generally when inventory spikes and sellers have competition. There is always a bit of a calm that hits the market in terms of price appreciation at this time of the year. For the year, the average price sits at $882,937. For 2016, the average price finished up at $729,821. The increase YTD is 20.9%. As spring numbers come in, you'll see this come down a bit as it always does. Don't forger that May of last year, the average price was $752,100. Again, these are not new phenomenons that we are seeing. This is normal activity for an active Real Estate Market.
What happens next? What we've seen over the last three weeks is a bit of a pause in the market. As mentioned above, the new rules implemented by the government plus the record rain fall in May contributed to buyers going into a holding pattern last month. Demand is still out there. The buyers haven't given up their desire to purchase a home. They will be back out soon, and if they have proper representation they are being told this is a perfect time to buy. The 'hold' on the market will be released and this year buyers will be going strong into the fall to get into their homes. The pause in the market didn't shut it down, it just prolonged the spring selling season and will send it well into the fall. You will see July to September units surpass 2016 sales, and we will remain on pace for a record year for sales once again.
When trying to get a read on the Real Estate Market, remember that it is impossible to do off of stats that reflect a few weeks, or one or two months for that matter. There are many contributing forces that can affect the number of units sold in a particularly short period of time. In the end, it all evens out.
The sky is not falling, it's just a bit of rain. Dance through it and the sun will come out again very soon.
Are you looking to buy a property? If you like, I can tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much I could save you right now if you have an existing mortgage.
Until next time,
Your mortgage expert Evgeny Kamenskiy