Toronto & GTA MLS® Home Sales - February, 2017: No Relief in Listing Inventory

Average price for Detached tops $1.5 million in T.O.; $1.1 mil in “905”

Toronto, Ontario, March 3, 2017 - Realtors® in Toronto and the Greater Toronto Area today released the February, 2017 Toronto Real Estate Board [TREB] MLS® sales numbers showing good growth in the number of sales combined with very strong growth in average sales price - both of those statistics being heavily impacted by continuing extremely low inventory levels. Chart - Toronto & GTA Home Sales & Average Price by Major Home Type 2017-02

The Board, via its MarketWatch publication, showed that 8,014 residential transactions were reported in February, up 5.7% from the same month one year earlier, and up 54.5% from January, 2017. The report also notes that, 2016 being a leap year, there was one less day this February. While price growth was strong across the board, once again the strongest growth came in the low-rise sector [Detached, Semi-Detached, and Townhomes]. All figures are year-over-year comparisons unless otherwise noted.

In another continuing trend, one of the most important statistics in the report is that Total Active Listings figure which stood at 5,400 homes for sale. That's a 50.5% drop from one year earlier. What that means is, based on the monthly number of sales [8,014], we have an indicated forward inventory of two-thirds of a month… Just under 3 weeks of supply. And that’s with the Spring Market comin’ up fast.

To give the situation a little more perspective, here’s an observation from our blog post of one year ago: “Obviously that tight Total Active Listings number [10,902] contributes strongly to competition amongst buyers due to lack of supply. Taking that figure and dividing it by the total monthly sales of 7,621 gives an “indicated forward inventory” of just 1.43 months: very tight by historical standards.” Hmmm… 1.43 months is about 6 weeks of forward inventory. That was "very tight". Today we're less than half that. The shelves are nearly bare. Then what? Where's the breaking point?

The Board’s Director of Market Analysis, Jason Mercer, puts it: “The listing supply crunch we are experiencing in the GTA has undoubtedly led to the double digit home price increases we are now experiencing on a sustained basis, both in the low-rise and high-rise market segments. Until we see a marked increase in the number of homes available for sale, expect very strong annual rates of price growth to continue.”

Toronto & GTA Home Prices Spike over $100k...in one month

The overall average selling price this February was $875,983, up 27.7% - or nearly $200,000 - from last February. That’s for all home types and all areas. That average was $769,339 last month. A $106,644 jump in one month.

Here’re those February average sale prices broken down by the major home types: Chart - Toronto & GTA Home Sales Year-Over-Year Summary @ 2017-02.png

In Metropolitan Toronto - “the 416” [area code] - the average sale price for a Detached home was $1,573,622, up 29.8% [up over $360k]. Not to be outdone, Detacheds in balance of the GTA - “the 905” - spiked 35.4% [nearly $300k] year-over-year to easily crack the million dollar mark at $1,106,201. There were 793 Detached homes sold in Toronto, down 6.8%. The balance of the GTA saw 2,928 sales in the Detached group, a 6% gain.

Comparatively…
Semi-Detached Homes: 199 sales in Metro Toronto, down 16%, at an average sale price of $1,085,484, up 27.6%; 452 sales in the balance of the area, down 6.2%, at an average sale price of $712,276, up 33.2%.

Townhomes: 257 sales in T.O., up 2.4%, at an average price of $671,243, up 15.7%; 908 sales in the balance of the GTA, up 7.7%, at an average of $653,584, up 32.4%.

Condo Apartments: 1,632 sales in Toronto, up 14%, at an average $515,424, up 18.2%; 728 sales outside The Big Smoke, up 20.3%, averaging $404,460, up 23.6%.

To nobody’s surprise, homes sold “38.1%” faster at just 13 days on the market this February versus 21 DOM one year ago.

Bubble, Bubble...?

With home prices in hyperdrive, naturally some are predicting corrections of varying degree.Chart - Toronto & GTA Home Sales Historic Annual Stats to 2017-02

Gordon Pape, who's been around the block a couple of times and writes a "Building Wealth" column for the Toronto Star - among others - says in a column this morning, "Now, I don’t claim to be an [expert] on real estate, but I know a bubble when I see one and the Toronto housing market is in one now.” and, “…let me remind you that it has happened before. Between 1989 and 1996, Toronto house prices fell by 40 per cent, adjusted for inflation. It can happen again and probably will. It’s just a matter of time.”

Mr. Pape also cites BMO Capital Markets Chief Economist Douglas Porter who used that same “B” word in a recent note to investors, and “Toronto and any city that is remotely within commuting distance are overheating, and perhaps dangerously so." In an email to BellMedia's BNN yesterday, Mr. Porter said, “[Toronto] is not a market operating normally” and “My biggest concern here is that speculation will now take full command and the market will absolutely run out of control, eventually ‎leading to a serious correction,” Porter added. “Better for policymakers to take steps to cool things now, before conditions completely get out of hand."

Whew... We'll be taking a closer look at some of the varying opinions and time frames in the coming days and weeks. Can demand stay this high? Or interest rates this low? Can inventory get any lower? What if it does? Do buyers say, “Forget it - prices are too high - gonna wait ’n’ see.”? Do sellers say, “Sell - we’re gonna take the money and run.”? Interest rates? Foreign investment? Raw speculation? Time, as it always does, will tell. Don’t touch that dial… Drop us a line here if you'd like to be notified of new blog posts.

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