“Inventory slump has markets in a slumber across Ontario.” “Toronto’s real estate market is imploding.” “Toronto-area home prices drop more than 12% in February as sales plunge.” “Real estate sales are cratering around the GTA. Is this a crash in the making?” Those are just some of the “doom and gloom” headlines we’ve been seeing lately. If you listen to the media, we’re facing a housing crisis like the one that crippled the US in 2008.
That’s a lot of scary hype. But it isn’t what’s actually happening. Yes, total sales from this time last year are down 35% and active listings are up 147%. The average price is down 12.4%. But as we mentioned in last month’s post, it only looks bad because in early 2017, the Toronto market simply wasn’t normal – it was off the charts. It was an unprecedented time in ANY market – our city was making headlines around the world because things were so abnormally hot.
Let’s compare apples to apples
By comparing this year’s numbers to last year’s, you’re really comparing apples to oranges. For apples to apples, look at February 2016 as a more accurate measuring stick. This time two years ago, the average price for a detached home was $685K. Today, that number is $787K. That’s up a very healthy 12% from 2016, which is line with Toronto’s historical average of appreciation of around 6.5% a year. It’s all about perspective.
Don’t let the numbers lead you astray
My colleague Shawn Beard had a client come to him with the intention of jumping on a bargain – after all, average house prices are down from last year. But the operative word here is average. There are homes that sell for much lower, and, of course, ones that go for much higher. Shawn’s client wanted a “deal” on a semi near the subway in the core – basically the holy grail of Toronto real estate. There are no deals on homes like that because there aren’t a lot of them coming on the market.
Last month, in E01, there were 15 semis sold – with only 10 listings left in early March. Low inventory in hot neighbourhoods is a breeding ground for bidding wars. People see a house listed for a relatively affordable $850K, make an offer, and get outbid by 15 or 16 other people looking for “deals.” The house ends up selling for $1.2M. So when you look at average house prices being down, remember that there are pockets that are performing well above the average. You won’t find a deal in a high-demand area.
Deals in the suburbs are starting to dry up too
In Whitby, the numbers are different than in the core – but that’s changing fast. Last month, the area saw 64 sales out of 164 active listings. That means great opportunities for buyers – for now. But the “deals” we’ve gotten used to seeing in the 905 are disappearing. Buyers are getting back out there, and the ‘burbs are starting to bounce back.
Two months ago, we had clients purchase a bungalow in Whitby for under $500K. I talked to them this week, and they’re so happy they bought when they did, because they would be paying a lot more now. Prices in that area are on the rise – a condo in Whitby with similar square footage just sold for well over $500K. Opportunities that existed in areas like Whitby are disappearing.
Condos in the 416 are super-hot
Condos weren’t affected by the market correction last year – the average price is up 11% from February 2017. This is due to their relative affordability. Most first-time buyers have been priced out of the house market, so there’s huge demand for them. Price per square foot is going up, we’re seeing multiple offers for properties in the core, and we’re running into an inventory issue; the supply simply can’t keep up with the demand.
Buyers looking for a deal are targeting areas like the one around the Scarborough Town Centre, where they’re buying up units in buildings that have traditionally been a tough sell. That demand is driving up prices in pockets with perceived “deals.” Prices are up, and units are selling fast. They aren’t generally going for over asking – buyers in those areas aren’t as aggressive as those in the core, but it may just be a matter of time.
Luxury sales are on the rise, too
One of the results of last year’s correction was a drop in sales of homes over the $1.5M mark. But that market is coming back as well. We just saw a $1.8M property in Cabbagetown sell for $325,00 over asking, and listings over $2M in popular 416 neighbourhoods are getting snapped up fast. This continued demand and multiple offers on luxury properties is an indication that the market has picked up and the lull is over – nothing is imploding, plunging or cratering, despite what the media is saying. It may not be back to 2017’s peak, but it’s definitely getting back to normal.
Wondering if now is the right time to buy or sell? Want to know more about what’s happening in the Toronto market? Let’s talk. We’re happy to answer your questions and share our insights with you.
