Mortgage stress test and low inventory influence November 2018 market activity

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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Signals of a Healthy GTA Real Estate Market Continue

There were a total of 7,118 residential sales reported through TREB’s MLS system in October, compared to 9,715 transactions a year ago.  Even though the number of transactions was down by 26.7% year-over-year, the jump of almost 12% in residential sales reported between the months of September and October in 2017 was more pronounced than usual compared to the last 10 years, a clear signal that market momentum is picking up.

Active listings were 78.5% higher than a year ago, an indication that supply and demand are continuing to balance out as inventories settled at 2.6 months of supply in October, down marginally from the 3.0 months of supply in September, but still much healthier than the scant 1.1 months of supply experienced in October, 2016.  There is, however, a continuing lack of quality listings in core GTA neighbourhoods and there are early indications that offer dates are reappearing as homes are being underpriced to generate bidding wars, although this has yet to manifest in the overall selling price to list price ratio which is currently holding at 98%.

While the average selling price for October transactions was $780,104 – up by 2.3% compared to the average of $762,691 in October 2016 -  the continuing low supply of, and high demand for, condominiums fuelled a 21.8% increase in prices in that segment of the market.

Expectations are that market activity will pick up further in the next 6-8 weeks as buyers rush to obtain mortgage pre-approvals and submit offers before the new stress tests announced by OSFI last month are implemented at the beginning of 2018, further reducing buying power as the pre-qualification hurdle rate increases to the higher of the 5-year benchmark rate published by the Bank of Canada or your negotiated contract borrowing rate + 2%.

Do you remember the story of Goldilocks and the Three Bears?  When Goldilocks arrived at the bears’ house in the forest there were three bowls of porridge on the table and she was hungry. The first bowl of porridge she tried was “too hot”, the next one was “too cold”, but the third one was “just right”.  Well, this just might be a “Goldilocks” moment in the GTA housing market!

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".

More Inventory Starting to Attract More Buyers

IT LOOKS LIKE THE WORST IS OVER FOR THE TORONTO HOUSING CORRECTION

Last month I spoke about how the Greater Toronto Area Real Estate Market is beginning to change shape and return to balance. Well, the evidence is in, as the number of new listings entered into The Toronto Real Estate Board’s MLS® System amounted to 16,469 in September – up by 9.4 per cent year-over-year.  But the real story is that total active listings stood at 19,021, a whopping 69% increase year-over-year.  TREB suggests that the improvement in listings in September compared to a year earlier is a sign that home owners are anticipating an uptick in sales activity as we move through the fall, or put another way, more inventory is starting to attract more buyers back to the market.

TREB announced that Greater Toronto Area REALTORS® reported 6,379 sales through TREB’s MLS® System in September, roughly the same amount as in August, but 35 per cent lower than September of last year.  In a balanced market, buyers take longer to make up their minds, as there is more product available to choose from.  Likewise, sellers need time to get adjusted to the new market reality.  Remember, the last few years were anything but “ordinary”.

Think of it this way.  Last year at this time, inventory (the number of active listings on MLS®) stood at approximately one month of sales.  So, on average, every home on the market was selling within a month or less, with multiple offers driving up the price paid due to the scarcity of supply.  Now that inventory is closer to 3 months supply, what this means is that 1 out of every 3 houses on average is selling within the month, and price is no longer being dictated by the frenzy we saw when homes were in such short supply.  So it makes sense to see that sales are about a third lower in September 2017 than they were in September of last year.  All of this is happening against a backdrop where average prices are still increasing, albeit at a lower rate than we saw during the run up.  The average selling price of a home in the GTA in September 2017 was $775,546 – up 2.6 per cent compared to September 2016.

However, the exception continues to be the condominium apartment market segment, where average prices were up on average by 23 per cent compared to last year. TREB reported in September that “tighter market conditions for condominium apartments follows consumer polling results from the spring that pointed toward a shift to condos in terms of buyer intentions”. In fact, condos accounted for almost 30 per cent of all MLS home sales across the GTA during the month of September, whereas detached homes – the most expensive market segment on average - accounted for a smaller share of overall transactions this year compared to last.

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

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