By Sheila O’Hearn, Zoocasa
The difference a month can make for supply and demand of real estate is startling. In April, the price of Toronto-area homes rose to 24.5 per cent to $920,791 as the average for many types of housing, despite the 33.6 per cent growth of resale listings during the spring market. These figures translated to more choice for home buyers and vigorous sale prices for sellers, according to realtors.
In May, however, the GTA’s housing market continued to slow down, despite the flood of new listings. As a result, the prices in May have declined for the first time in years, the Toronto Real Estate Board (TREB) reports.
The TREB May resale numbers show that GTA sales dropped 20.3 per cent year-over-year to 10,196 units with detached homes, and the condo market down 6.4 per cent. Active listings, or the number of properties available for sale at the end of May, were up by 42.9 per cent, compared to the record low one year earlier.
While home prices rose 14.9 per cent year-over-year, they declined by 6.2 per cent between April and May, the first full month-long period since the implementation of the Ontario Fair Housing Plan rules. The average sale price is now $863,910 in the region, compared to $752,100 in May 2016.
What remains to be seen is if the increased choice for buyers is due to sellers cashing out of a cooling market or it’s a shift spawned by the new provincial real estate policies to stabilize red-hot housing prices, the TREB report indicates.
Summary of Toronto MLS Sales and Average Price May 1 – 31, 2017
|Sales||Average Price||New Listings||Sales||Average Price||New Listings|
|City of Toronto (“416”)||3,926||899,728||8,451||4,612||782,551||6,745|
|Rest of GTA (“905”)||6,270||841,483||17,386||8,178||734,927||10,611|
Without a doubt, home buyers definitely benefited from a better supplied market in May, when compared to the same time last year and the first four months of 2017. Even with the healthy increase in active listings, however, inventory levels remain low. “At the end of May, we had less than two months of inventory. This is why we continued to see very strong annual rates of price growth, albeit lower than the peak growth rates earlier this year,” TREB President Larry Cerqua states.
Selling prices continued to increase strongly in May, compared to the same month in 2016. The MLS® HPI Composite Benchmark price was up by 29 per cent year-over-year. The average selling price for all home types combined for the TREB Market Area as a whole was up by 14.9 per cent to $863,910. Year-over-year price increases were greater for Toronto condos and Mississauga condominium apartments in comparison to low-rise home types. This contrast likely reflects the the low-rise market segments that benefited most from the increased listings.
“The actual, or normalized, effect of the Ontario Fair Housing Plan remains to be seen,” states Jason Mercer, TREB’s Director of Market Analysis. “In the past, some housing policy changes have initially led to an overreaction on the part of homeowners and buyers, which later balanced out. On the listings front, the increase in active listings suggests that homeowners, after a protracted delay, are starting to react to the strong price growth we’ve experienced over the past year by listing their home for sale to take advantage of these equity gains.”
While TREB’s year-over-year numbers reveal that Toronto real estate is still historically strong, the month-to-month data illustrates the slowest spring performance since 2013.
While the market always experiences a flood of listings between March and April, available homes for sale rose 27 per cent during that time period this year, before increasing a further 19 per cent from April to May. Sales, meanwhile, fell four per cent from March to April, and 12 per cent last month, respectively.
The detached market is experiencing the effect, with listings surging 32 per cent in April, before lessening to a softer, but still high, 18 per cent in May. The last time the detached segment fluctuated this drastically was in 2013 when listings grew 28 per cent and 6 per cent. Not unlike current events, the 2013 market was dramatically impacted by hefty changes to mortgage qualifications. These alterations knocked many first-time buyers especially out of the market, while sellers hurried to list.
The difference between 2013 and today, however, is that sales kept pace, increasing 31 and five per cent, respectively. In contrast, sales fell three per cent in April, and 17 per cent in May of this year, with prices down by five per cent.
The condo segment, while not as dramatically impacted, has still seen some softening, with 15 per cent new listings in May, five per cent fewer sales, and prices down by two per cent across the GTA region.
Cerqua notes that, although buyers have greater choice with recent increases in inventory, the GTA market still remains firmly in sellers’ territory. Given buyers’ move-in-ready expectations, however, “Buyers are less likely to overlook things they would later fix post-sale,” says Zoocasa CEO Lauren Haw. “The seller needs to focus on greater preparation of the home, and great marketing, to net a great sale result.”
Zoocasa is a real estate brokerage based in Toronto.
Sheila O’Hearn is a freelance and creative writer, and has worn many hats throughout her career, from general staff reporter to magazine editor. She has a keen interest in business entrepreneurship and currently writes for several outlets. Visit her at LinkedIn for more info.
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