The January numbers are in. In the 416, detached home prices are down 3.9% year-over-year, and in the 905, they’re down 12%. Active listings are up 136% from January of last year; right now, we’ve got about 12,000 listings on the market. Some people find those numbers alarming – I’m just waiting for media sources to start publishing all kinds of doom and gloom about the state of Toronto’s housing market, how prices are down and a glut of listings will make them drop even more.
But I see those numbers a little differently. For me, they aren’t a sign of an unhealthy market. I think they’re showing us that the market is normalizing. And here’s why.
WE NEED TO COMPARE APPLES TO APPLES
Last year’s housing bubble was NOT normal, so it doesn’t make sense to compare today’s market to early 2017. But measure it against early 2016 or 2015, and things start to look a little more positive. The numbers are similar, which is a sign that the marketplace is becoming more balanced. I know the next few months will seem even more alarming because of where things were last year, but if you compare apples to apples, you’ll see it differently.
In the core 416, bidding wars on choice properties are becoming more commonplace again. In other neighbourhoods, confidence is returning, albeit a little more slowly. People are still cautious. If there are multiple offers in the outer 416 and in the 905, they tend to be under asking or not much over. I recently had a listing in Don Mills that had two offers, both under asking. A year ago, that would have been unheard of.
CONDOS ARE STILL HOT
However, the condo market continues to steamroll. In the 416, sales are up 15.1%, and in the 905, by 11.3%! There is a wide, and troubling, gap between resale and pre-construction condo prices. Roughly speaking, resale condos in the downtown core can be found in the $850/sf range, whereas new construction projects are selling well over $1000/sf. Clearly there is better value in the resale market at the moment, however be patient and focus on choice buildings.
THE NEXT FEW MONTHS
So where will things go from here? Well, I can say with some certainty that they won’t go back to the way they were this time last year. Interest rates are climbing, and we haven’t yet seen the impact of the new mortgage rules (most current buyers were likely preapproved before January 1st). But I do predict we’ll see a more sustained increase in prices by Q3 – historically, we usually see about a 6.5% increase each year.
Yes, we saw much higher jumps than that last year. But as I said, those prices weren’t normal, and as we’ve seen, they were unsustainable. Remember, real estate is a long-term hold. If we think in those terms, properties will climb in value over time. After all, we have a healthy economy, interest rates are still very low, immigration is up and our population is growing.
CONFIDENCE IS GROWING
What you’re hearing in the media is different from the reality on the ground. Yes, the numbers are lower than last year. Dramatically. But last year was skewed, and as I mentioned, it simply isn’t the right comparison.
Of course, we have to adjust for micro-level trends and nuances. A renovated semi in Leslieville will still attract multiple offers and go for a high price, while a detached house in Aurora will take longer to sell. The laws of supply and demand continue to apply. But if you look at the housing market over a longer period of time, you’ll see it’s healthy – and getting healthier each month.
Do you have questions about the Toronto market? Need to know more about the numbers we’re seeing in your area? Let’s talk.