Below is my latest Toronto real estate market update video for October 2017.
Now that we are into autumn, are prices rebounding? Is inventory dropping, or is the market swimming in listings? Would you believe that the average Downtown condo is selling for $120,000 more than last year? And what's with the bidding wars in Leslieville and Riverdale?
Filming this month was at the awesome Underpass Park.
If you are wondering how this market report affects your situation, connect with me at 416.357.1059
Hi, I'm Rebecca Laing, Toronto Real Estate Broker, and welcome to my October market update for the City of Toronto. Whether you call it River City, The Canary District, or the West Don Lands, I'm here at underpass Park because it's dark and rainy outside. But don't let that scare you, because we are now well into the fall real estate market, which has been anxiously anticipated by those hoping to see signs of a rebound from the recent downturn. Autumn is usually a strong selling period, but a myriad of factors this year have made this autumn anything but normal. The effects of two recent interest rate hikes, the springtime market cooling initiatives introduced by the province, a slowing of cash flowing from overseas, and even the mortgage rule changes from 2016 have all contributed to the drag in performance. While today there are some indications that homebuyers are regaining confidence and that the correction might be short-lived, it’s a bit premature to assume that sunshine, unicorns, and a return to double digit price increases are just around the corner. What I hope we are entering is a Goldilocks market that is not too hot, and not too cold. Unfortunately, steady state markets of flat growth tend not to actually exist in practice, so the way that balance is likely to manifest itself is with fits and starts, which are sure to include some negative tidbits that make the doom and gloom naysayers feel triumphant. I recommend those thinking of buying or selling who are worried by the constant barrage of analysis that show the market pulling in opposing directions to not lose focus on more personal, pragmatic considerations, or in other words, keep an eye foremost on what makes sense for their own needs and financial position.
In terms of what is happening in the market, the number of listings is up about 20% from the low that we saw towards the end of the summer. September finished with 5732 active listings, which is close to what we saw in July. Now that we are halfway into October, the numbers have nudged up to just over 6000. I’m not concerned by this further increase, as we are in the week after a long weekend, which is normally associated with a small surge. Active listings are also up close to 20% compared to last year, however, last year we were very much undersupplied. Total September sales came in at 2510 homes, and when you divide the active listings by the sales, it shows we have an almost balanced level of just under 2.5 months of inventory. Thus far in October, this ratio is still hovering around the same level. When you look at the composition of what is on the market, there are a couple of things to note. First, a disproportionate number of these additional listings are for detached houses, which means the condo apartment segment is still very tight. Second, although there is an improving selection of houses available, I am personally not seeing as many high quality homes being listed as I would typically see at this time of year, and in particular there are not nearly enough listings in the core neighbourhoods and segments that are most in demand. It is as if every homeowner who has a decent home in a decent hood with any flexibility in their need to sell is choosing not to make a move right now. Unfortunately, I’m not aware of any researchers tracking this kind of seller sentiment, so my second comment will simply have to rest on my subjective observations.
In terms of listing strategy, offer dates are in fashion again this fall in those core neighbourhoods I was just alluding to, from The Beach to High Park, and up through Midtown and Uptown encompassing neighbourhoods like Davisville Village and Bedford Park. The greatest prevalence of offer dates is in the east end and at the lower price points. So, if you spot a new listing near The Danforth priced under $1.2 million, it probably has an offer date, and is underpriced. The ubiquity of this strategy is showing in the stats, with detached homes in Leslieville and Riverdale selling for an average of 9% over list. That translates to an average premium of close to $100,000 above the asking price. As you get into higher price points and/or out to the inner suburb neighbourhoods, offer dates are certainly not as common, but are still sporadically being attempted. Parts of Toronto are still very conditioned to expecting offer dates, and it’s a bit of a unique feature of our market that even when activity is tepid and buyers are cautious, sellers can’t resist underpricing and delaying offers to generate a bidding war. For the right homes in the right areas, this still seems to yield the best results for sellers.
Moving on to the average sale price for all homes types in the city of Toronto, it was $809,591, which is up 5.8% compared to September of last year, and up 11.4% compared to August. This jump compared to August is likely because of a greater proportion of higher-end homes being sold, so let’s break things down further by housing category. For detached homes in the City of Toronto, the average sale price was $1,355,234 which is a 4.7% increase compared to last year, and a 13.8% increase compared to August. Before getting too excited about this month-over-month increase, if you look at the Home Price Index, which tracks the value of the underlying characteristics that comprise a home, you will see that while it is up 6.6% compared last year, it is pretty much flat compared to August. Thus, average prices are likely being skewed upwards by the higher-end activity, while underlying values for detached home are sitting pretty level. The same goes for the HPI for the other home categories. Year-over-year they are up, but flat month-over-month, reinforcing that an overall leveling of underlying values is taking place. Moving on to semi-detached homes, the average was $935,467 up 5.4% over last year. Condo townhouses were at $608,492, which is up 8.4% compared to 2016. And finally, the average for condo apartments was at $554,069, which is a whopping gain of 24.1%.
Yet again, condos are the shining brightly in this market, especially, condos located downtown. As I stated last month, the average downtown condo is up over $120,000 compared to last year,
and the number of downtown condo listings is actually down more than 13% compared to last year. With just over a month and a half of listing inventory, the downtown condo market is the tightest segment in the GTA. To put the1.5 months of inventory in perspective, Richmond Hill is currently running with 6 months of inventory, which puts Richmond Hill very much in the category of buyers’ market. I realize I just broke my no-905-statistics rule, but I wanted to make the point of how differently the downtown condo market is performing. And if you are looking to rent one of these downtown units instead of buying, it is even tougher still. Not only are typical rents up over 10% compared to last year, but there is also stiff competition from other renters, and even offer dates with which to contend. In contrast, current downtown condo investors and dwellers hold an enviable position for the most part, and have various opportunities available to them. If you are currently a condo landlord who is tired of tenants and doesn’t want to put up with the further tightening of the Residential Tenancies Act, or perhaps you occupy a condo that you own and are finding that the condo bylaws are inhibiting your desires to have plastic tombstones and giant inflatable pumpkins outside your front door for Halloween,
then get in touch with me to find out how to best take advantage of today's market dynamics that are strongly in your favour.
Moving on to the topic of mortgages, we finally have official indications from the Office of the Superintendent of Financial Institutions that the expanded stress test will soon be unleashed. Starting sometime early next year, they are planning to require all mortgage borrowers to qualify for their selected mortgage based on an interest rate that is 2% higher than the actual rate they will be paying. It won’t matter if you have a good credit profile, are financially prudent, and have a 50% down payment, you will be forced to qualify on this artificially higher rate. Not only does this threaten to shut out lower income Canadians from the prospect of home ownership, it will potentially further concentrate the mortgage market into the hands of the big banks, while also pushing some borrowers into more risky forms of borrowing. Given the levelling off of housing prices, the other rule changes that are still being absorbed into the marketplace, and the very low rate of delinquencies on mortgages, it really seems like this is poor timing to introduce such measures. Various groups are raising alarm that this change should be re-examined; whether it will have an effect, we won’t know until the official pronouncement comes out later in October.
On that not very upbeat note, that just about wraps things up for this month. As always, please get in touch with me with any of your real estate questions. You can call or text me at 416.357.1059, or connect with me through rebeccalaing.ca.
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For that matter, if you want to post about why homes aren’t selling in the 905, or what the BOC should do with interest rates, or what you think the "real" stats are that I'm somehow holding back, I’ll welcome those comments as well.
Thank you again for watching, enjoy the rest of October, and don't leave your pumpkin shopping until the last minute when there's nothing left but $30 mutant pumpkins that won't even stand up by themselves. Until next time, I'm Rebecca Laing, Toronto Real Estate Broker.