TREB released the sales data on Monday for the month of May, and by the time the evening news rolled around, you would have sworn the apocalypse had begun.
The numbers confirm what I, and what many of you, already knew: listings are up, sales are down, and prices have cooled since the insane February/March market.
But having watched the news reports, and read the newspaper articles, I feel as though the media is reporting half the story.
Let’s look at the May numbers in more detail, and delve deeper than just price, shall we?
The TREB numbers were released on Monday morning.
And by Monday afternoon, I had already received three emails and phone calls from media outlets.
The first was a request for a buyer/seller “who had purchased in the spring, and was now having trouble selling his or her home.”
The second was a request for a buyer “who has decided to put his or her search on hold.”
The last was for a buyer “whose appraisal for the property they bought, came in below what they paid.”
Whoever said that the media decide what they want to report, before they start reporting it…
I’m not naive; I get it. Negativity sells.
If it bleeds, it leads.
Nothing has changed since I started in this business in 2004, and even though the market has been strong every year, and every month, since then, there have been far more stories about the bubble, the peak, the collapse, et al, then there has been about John & Jane buyer purchasing a property and living happily ever after.
The saying, “You can make numbers say anything you want” applies to all of us, not just the media. But I’ve long-maintained that the media, if they want to tell a particular tale, will choose one of either: a) sales, b) prices, to prove their point.
Let’s say that prices are up 15%, but sales are down 2%. That’s when we get the headline: “Toronto Market Down In August.”
Is the market down?
Prices are up, right? Sales are down, but who cares about sales?
Well, if you’re trying to prove a point, and you’ve decided what you want to say in advance, then you simply find a number to back up your sentiments.
So today, let’s look at everything to do with the market, and not just ONE number that can prove a certain point.
I want to look at:
1) Average Price Was Up 14.9%, Year-Over-Year
Sounds great, right?
Yes, and no.
Most people who are in the know with the market will say, “Average price is only up 14.9%?”
That’s because the first four months of the year, showed us the following year-over-year percentage increases:
So to see the average home price “only” up 14.9% in May, is somewhat disappointing.
In fact, the average home price is actually down 6.6% from April to May.
The average home price in April was $920,791.
The average home price in May was $863,910.
So you could argue that “the market has cooled” and you would not be incorrect.
But it should also be noted that the average home price coming into the year was $730,472.
So despite the average home price dropping 6.6% from April to May, it’s still up 18.3% since the end of 2016.
And while I don’t want to seem like a real estate cheerleader, and I certainly don’t want to sound biased, I do want to point out that while the media is reporting that the sky is falling, the average price in Toronto is still up 18.3% goddam percent in five months…
I think I speak for most market participants when I say, “This is a good thing.”
It’s good for everybody but sellers with “FOR SALE” signs on their lawns right now.
And I say this while I have three active listings, and four more coming out this month.
But I’m being honest with my sellers. I’m telling them, “The market is down since April, but you’re still up significantly since January 1st.”
And one of my sellers, who has owned his property since 1987, told me, “You can’t predict the market year-to-year, so what makes you think you can do it month-to-month?”
But somebody who paid $128,000 for their house, which is now going to sell for $1,050,000, rather than the $1,100,000 it might have sold for in February, isn’t as price sensitive.
But back to my point that, this is a good thing.
A balanced market is a good thing for all involved, short-term, medium-term, and long-term.
With listings down 50% at the start of 2017, the market was chaotic. Not just in terms of the price gains, but the way business was being conducted.
Now about those listings…
2) New Listings Are Up 48.9%
This number is staggering.
For your reference, new listings in the first four months:
“New listings” are different from active listings, keep in mind.
TREB defines new listings as: “listings entered into the TREB MLS system between the first and last day of the month/period being reported.”
So if a property is listed for sale on May 9th, at $699,900, with offers being reviewed on May 16th, and after not receiving the price they want, the sellers terminate that listing and re-list at $879,900 on May 17th, then that counts as TWO listings.
And herein lies the problem with the “New Listings” statistic.
TREB does not track double-listings or re-lists. Perhaps they should. God knows we pay them enough in yearly dues…
So when you see that new listings are up 48.9% in May, you have to take this with a grain of salt.
You might suggest that “double-listings and re-lists have always existed,” and you wouldn’t be wrong. But in April & May of 2017, as I have noted in previous blogs, the market changed. The process of how we buy and sell real estate in Toronto changed dramatically.
No longer were there 10-12 bidders for every home up for sale. And as most sellers and listing agents were either late to recognize this, or simply refused to, they were forced to re-list their properties after the under-listing and “holding back offers” strategy failed.
The end result was a massively inflated number of “new listings” in April & May.
A truer measure of listing activity is “active listings.”
3) Active Listings Are Up 42.9%
This number is crazier than the last one.
And unlike the last one, there’s no disputing this number.
This number, in fact, is “the” number that people need be most concerned with.
For your reference, the first four months of 2017 showed the following year-over-year percentage changes in active listings, which is the number of listings available for sale on the last day of each month:
Unlike the “new listings” measure, there’s no disputing the accuracy of this data, and the interpretation.
Listings were down in the early months of 2017 by numbers that boggled the mind.
And that picked up on a trend from the fall of 2016, when active listings were down across the board:
So what’s the “reason” for the massive spike in active listings?
A real estate bear will suggest that somehow sellers are running for the exit, trying to get out while they still can.
Personally, I think that we just had one year when listings were down massively, and that was in 2016.
If you look at the “active listings” in May from the past five years, you see 2016 as an outlier:
Active listings are up in May of 2017 by 42.9% because they were so incredibly low, historically, in 2016.
In any event, we can dispute what a “normal” level of listings is.
Or we can simply conclude that no matter how you look at the inventory levels last month, there’s a lot more for sale than usual!
Forget about year-over-year. Just consider how many active listings there were (and by that I mean how few), before last month:
January, 2017: 5,034:
February, 2017: 5,400
March, 2017: 7,865
April, 2017: 12,926
May, 2017: 18,477
There was 3 1/2 times as much on the market at the end of May, than compared to the end of January.
That is the biggest take-away from this month’s market watch. Not price. But inventory…
Sales were down 20.3% in May. That’s a big number too.
The trend for sales follows the inverse of the trend for active listings:
Listings have increased.
Sales have decreased.
Is it any wonder we’re finding ourselves in a more balanced market?
As a result, is it any wonder why the average home price is down, month-over-month?
As I wrote on my blog in May, the month of April was an odd month.
With the Easter/Passover break, a lot of buyers weren’t active. And while some commenters suggested that this is a misnomer, and that I was somehow mistaken, I would state unequivocally that buyers were not nearly as active during this time period. I know from my own experience, and from that of my colleagues.
We had the Home Trust scandal, the Liberals’ announcing the Ontario Fair Housing Plan, and all-in-all, April was slow.
But who thought this would continue into May? Raise your hand.-
So what’s the conclusion here, folks?
Where are we in this market right now, and where are we headed?
Because if you watch the news, as was the case on Monday night, it’s all doom-and-gloom. They’re not reporting that prices are still up 18.3% this year, despite the 6.6% April-to-May drop.
Although with sales down 20%, they’re well within their right to suggest that there are some buyers “on the sidelines,” waiting to see how things shake out.
If Toronto is set to follow Vancouver’s lead, then perhaps we’ll see another few slow months before things pick back up again…