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Mortgage stress test and low inventory influence November 2018 market activity

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Mortgage stress test and low inventory influence November 2018 market activity

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November 2018 saw a 14.7 per cent drop in sales compared to November of 2017. Lower sales activity for the month year over year was anticipated as the looming imposition of new mortgage stress-test in January 2018 fueled a spike in sales activity at the end of 2017 from buyers wanting avoid the tougher rules. 

With the number of active listings down by 9.8 per cent year over year and a drop of 26.1 per cent in new listings for the period, lack of inventory continues be a key market influencer, pushing home prices up by 3.5%.

Sale prices for semi-detached properties improved the most, although lower-priced housing options such as condos and townhouses continued to show steady increases as influenced by the mortgage stress test restrictions and higher borrowing costs.

If you would like to find out what these statistics mean to you, or if you are curious to know how much your property is worth today or how much you can afford to buy, please reach out. 

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April Market Report  |  Which Headline Tells the True Story?

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April Market Report | Which Headline Tells the True Story?

Average Selling Price for Homes in the GTA up 9.2% Year to Date, OR

Average Selling Price for Homes in the GTA down 12.4% in April Year-Over-Year?

Well, both are true actually.  But which one is more relevant?

I believe the first headline is more relevant, because it tells us what is happening in the current real estate market.  We already know that the GTA real estate market reset from its historical highs (in April, 2017 the GTA recorded the highest ever average selling price) after the introduction last year of the foreign buyers tax in Q2, followed by the more restrictive mortgage qualification rules introduced at the beginning of 2018.  Add to those measures the 2 successive increases in interest rates by the Bank of Canada and the market cooled down considerably.

Headlines are meant to grab the reader’s attention.  And one could argue that negative headlines tend to attract more attention than positive ones.  But the facts are that the GTA real estate market is trending positive, despite being off its historical highs.  Take a look at these statistics for the first 4 months of 2018:

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Unit Sales and Active Listings have increased in each month.  Average selling price is up 9.2% in four months.  Days on the Market have gone down by more than a third, and Average Selling Price to List Price is stable.  These are all signs of a healthy real estate market.

But the GTA real estate market is really a tale of 2 cities.  As reported by TREB in their latest Market Watch:

“The year-over-year change in the overall average selling price has been impacted by both changes in market conditions as well as changes in the type and price point of homes being purchased.  This is especially clear at the higher end of the market.  Detached home sales for $2 million or more accounted for 5.5% of total detached sales in April 2018, versus 10 per cent in April 2017.”

The differences in the composition of the current GTA real estate market can seen by looking at the following statistics broken down by major home type:

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There is roughly a 3 month supply of detached homes for sale in the GTA, whereas there is only a 1 ½ month supply of condominium units for sale. As well,  the increase in Average Selling Price for Condominiums, at 10.2% for the first four months of 2018, is outpacing the rate of increase for Detached homes, at 6.1%, as there is obvious pressure at the lower end with Condominiums in short supply.  TREB expects that “once we are past the current policy-based volatility, home owners should expect to see the resumption of a moderate and sustained pace of price growth in line with a strong local economy and steady population growth”.

If you would like to find out what these statistics mean to you, or if you are curious to know how much your property is worth today or how much you can afford to buy, please reach out.

If you found this article helpful please hit "Like" and "Share".

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GTA March Housing Stats – a stark contrast from 2017

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GTA March Housing Stats – a stark contrast from 2017

Toronto Real Estate Board Director of Market Analysis Jason Mercer perhaps sums up the Q1-2018 Greater Toronto Area housing market best:

“Right now, when we are comparing home prices, we are comparing two starkly different periods of time: last year, when we had less than a month of inventory versus this year with inventory levels ranging between two and three months.  It makes sense that we haven’t seen prices climb back to last year’s peak.  However, in the second half of the year, expect to see the annual rate of price growth improve compared to Q1 as sales increase relative to the below-average level of listings.”

Now look at this chart, which shows those two “starkly different periods of time”.   What the chart shows is the huge run up in prices in the first half of 2017, followed by a reality check, as prices declined rapidly in Q3, after the introduction of government measures to cool the market.  Prices rebounded somewhat in Q4, as some buyers and sellers accelerated their property ownership decisions prior to the introduction of the more stringent lending guidelines which came into effect in January, 2018.  And now, we are back to some period of relative normalcy, with modest price appreciation in Q1-2018.

So it doesn’t really matter that units sales were down by almost 40%, from 11,954 units in March, 2017 to 7,228 units in March, 2018, or that prices were down on average by 14.3%, from $915,126 to $784,558 because these results cover two starkly different periods of time, and are, therefore, not comparable.

What is meaningful, however, is that the number of active listings in March, 2018 was 103% higher than the level in March, 2017 and that the average time it took to sell a home in March, 2018, at 20 days, was roughly the same amount of time it took back before the market went crazy in Q1-2017, when the average time it took to sell a home in the GTA was below 10 days.  And the average selling price has actually increased in each of the last 3 months.  I’ve said it before and it bears repeating that we are in a balanced market, one which TREB believes is poised for stronger growth later in 2018, particularly in the condominium market where prices have been steadily on the rise and inventories have become ever more scarce.

If you are curious to know how much your property is worth today or how much you can afford to buy, please feel free to reach out; and if you found this article helpful please hit "Like" and "Share".

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