I think a lot of you have been waiting for this; both the numbers, and my response to them.
The short of it is: the bears were wrong…..for one month, at least.
The long of it is: time could prove the bears right….because nobody knows what lays ahead.
Let’s look at September’s key real estate metrics, and I’ll share some of my own experiences from the past month, trying to navigate the difficult Toronto real estate market…
Sometimes, that’s how I feel when trying to make sense of the TREB numbers; like Matt Damon in front of a blackboard, attempting to solve a complex math problem.
I actually have no idea what the heck those symbols are. They look like asterisks to me. Actually, they look quite a lot like a map of airport terminals.
I think it’s been about 15 years since I had to find a derivative, or anti-derivative.
And it’s definitely been 20 years since I drew a parabola, or knew what sine, cosine, and tangent were.
Secant, cosecant, and cotangent?
My brother did a 5-year Hons. B.Math at the University of Waterloo, and I remember the textbook for one of his courses was twenty pages thick. Twenty pages. For an entire year. I guess you’d spend an entire week trying to solve one problem.
There are no Fibonacci sequences in the September TREB numbers, which you can read at length HERE.
But there are a few statistics that make little sense, or that only confuse where we are in the market.
Recall my “Predictions For The Fall Market” blog post from September, which spawned a TRB-record, 202 comments.
I made one bold prediction, that I stuck to even as contrarians fumed: that the average sale price in September would be higher than that of August.
And honestly, how in the world is that to be considered “bold?”
As I said in September’s post, “This is a no-brainer.”
The average sale price couldn’t possibly dip from the $732,292 low that resulted in August. It would have been impossible, in my mind.
Having dropped from over $920,000 in April, it just didn’t seem reasonable, in my mind, that we would see a fifth straight monthly decline in the average sale price, especially when you consider that, a) August is slow, b) September is busy.
The average sale price in September, in fact, increased by 5.6%, from August.
Recall that I took a lot of flak from people for that “Predictions” post after Labour Day, with comments like these:
No, this isn’t an “I told you so” moment, but rather I wanted to highlight another ongoing theme in this current real estate market, one that is gaining serious momentum: anger.
Read any newspaper article online in the Globe & Mail, National Post, or Toronto Star. Any columnist who has the audacity to write a positive article about real estate gets absolutely eviscerated by the commenters.
Why are people so angry about real estate?
I have a theory, as you know. And it’s one that a lot of you won’t like.
It’s that most market bears do not own real estate.
The folks championing this 30-40% market decline? Most aren’t home-owners, I’ll tell you that.
The ones attacking newspaper columnists online, and hating anybody who has anything to do with real estate? They don’t go home to their $2,000,000 detached in Playter Estates at night, I’ll tell you that too.
I suppose you could argue the opposite – that I sell real estate for a living, and I’ll continue to argue that the market is healthy, and will trend upwards, even though I’ve reiterated many times that I will sell real estate in markets up, down, and sideways.
But I’m not vicious. The online comments for real estate news articles are downright nasty! Why are people so mad about the direction of the real estate market, and why are they so spiteful and malicious at anything shining a positive light?
In any event, there are three key numbers I’d like to examine from this past month’s TREB numbers.
While we could look at a host of different statistics, these are the ones I find the most interesting:
1) Average Sale Price, Toronto
2) Average Sale Price, Condominium, 416
3) New Listings, Toronto
Let’s start with the one that gets the most attention…
1) Average Sale Price
As previously noted, the average sale price increased 5.6% from August to September, which I really don’t find surprising at all.
I think a lot of us realized that the August figure was artificially low, partially because it’s the second-slowest month of the year, outside December, and partially because the ratio of condos to houses increased dramatically as the spring went on (you can read more about this in my September 11th post – “Making Sense of the Drop In Average Home Price”)
Let’s see where things stand, compared to my post in September:
The 5.6% increase stops a 4-month trend in a declining average sale price.
And the decline from April to September is now less pronounced at -15.77%, whereas this number had reached -20.5% in August.
The average home price is now back up over January’s level, however the big question in my mind remains: where does it go from here?
Look at the fall of 2016 for a moment.
We saw a 6.0% increase from August to September, which is exactly in line with this year’s 5.6% increase – yet another reason why I figured the average home price increasing in September was a no-brainer.
But after that big jump, we saw only a 0.9% increase in October, and then a 1.8% increase in November, before the yearly drop-off in December – a whopping 6.3%.
It bears mentioning here, just to get sidetracked if for only a moment, that a December drop-off is normal. That doesn’t mean your home is worth 6.3% less in December than it was in November, but rather there are very few, if any, luxury homes sold in December, and the ratio of condo sales to home sales increased dramatically.
So back to the question at hand – what do we expect for October and November?
As I predicted after Labour Day, I do expect the average home price to increase 10% this fall, which would bring it back up over $800,000.
Not quite the same “no-brainer” as the average home price increasing from August to September, but I do think it’s going to happen.
We need only see the average home price increase another 3.1% to get to $800,000, and I think that could happen in October alone, let alone by the end of November.
2) Average Sale Price – 416 Condominium
Raise your hand if you haven’t heard at least once this past month, something to the extent of, “The condo market is holding steady.”
Had I made any sort of prediction in the past few months that the housing market would outpace the condominium market, as it always does, and should, I would have been dead wrong.
Another one of my bold predictions from the past was, “Fifty years from now, only the city’s elite will own freehold properties.”
I still stand by that prediction.
Simply put, there will never be any more freehold properties built. Maybe tearing down a bungalow on a wide lot, and building two semi-detached homes on its place gives you another one home. But as a percentage increase, specifically in the central core, we’ll be trending pretty close to 0.00% from here on out.
About 99% of “new” housing in the core will be in the form of condominiums.
And it doesn’t take Good Will Hunting to do the math, and see how the supply-and-demand equation will affect house values.
Having said all that, the numbers for the condo market are shocking.
Let me show you the average sale price for condominiums, specifically in the 416, and compare the monthly increase/decrease to that of the overall average sale price:
As you can see, the condominium market has been far less volatile.
But the decrease has also been far less pronounced.
The December-to-April increase in average sale price was 23.9%, in line with the 26.05% we saw in the overall average sale price in Toronto.
But the decline of the latter was 15.77%, as shown in the first chart, compared to a much smaller 4.19% decline in the average 416 condo sale.
Who would have ever predicted that the condo market would outpace the housing market in 2017?
What I’m seeing out there in the condo market right now is shocking.
Not to name names, but I showed a unit to investors on the weekend – east-side, 495 square feet, original 2004 finishes, priced at $399,900. That’s already $808/sqft, with no parking, and no locker.
But wait – there’s a hold-back on offers, and the listing agent told me on Saturday night, “I might be getting a bully offer, or two, tomorrow.”
So what does that mean? $425,000? $450,000?
Are we really going to see a 2004-condition condo, no parking, no locker, break $900/sqft?
Whether it “only” gets $808/sqft, or whether it breaks $900, the activity is just insane.
And it can all be traced back to the lack of product available on the market, which, of course, the TREB numbers do not show…
3) “Increase” In Listings
This is where things get really interesting.
It’s also where many people, bullish or bearish, can be seen to “make numbers say anything they want.”
The September TREB number show:
New Listings +42.9% from August
New Listings +9.4% from September, 2016
Active Listings +15.8% from August
Active Listings +69.0% from September 2016
So first of all, what’s an active listing, and what’s a new listing?
“New Listings” are exactly as you would assume – a count of all the new listings that month in TREB, including those for properties that have already been listed, regardless of month. The “New” listings does not sort, filter, or clean the data – it’s just all new listings.
“Active Listings” refers to the number of listings on the market on the last day of the month.
And to this day, nobody can really figure out why or when one is higher than the other. Except Good Will Hunting, but he won’t tell us the secret…
I’ve always preferred to look at the “New Listings,” and while I know double-counting properties that have been listed more than once is the drawback, I find my buyer clients don’t care about an active listing that’s been on the market for 92 days; they seek new listings that hit MLS, which we need to see right away.
So the TREB numbers show massive spikes in listing, across the board. There are four “+” symbols above.
New listings are up 42.9% since August, which is an insane increase. But August is slow. It’s the second-slowest month of the year, behind December, in the minds of real estate agents (ie. the number of sales, listings, et al, notwithstanding).
New listings are up 9.4% from September of last year, which I find encouraging, since prices increased 6.0% in September of 2016, and the more listings we see, in theory, the lower the prices should be.
So where does the confusion set in? I mean, other than trying to understand how and why the “active listings” data is so far from “new listings,” and the increases have seemingly no correlation?
Well, if you were to ask any Realtor, “Are you seeing inventory out there?” the answer would be an emphatic, NO.
There’s no inventory, folks.
I don’t care what the numbers say. There is just nothing to sell.
I know that sounds crazy, given the TREB numbers, but I don’t work in an “on paper” market, nor do I work in a theoretical one. I work out there, in real market conditions, and whether I have a buyer looking for a house or condo, low-end or high-end, east or west, there’s just nothing to sell them.
I made fewer for buyer clients in September than in any month this year, and I have more buyers looking than any month this year. Do that math.
And no, it’s not because the buyers aren’t looking, or are waiting for the crash – my buyer clients are ready to buy, today, if the right property comes out. But we just aren’t getting the listings.
Let me show you last week’s listings from Wednesday and Thursday.
On every Realtor’s MLS home page, they can customize their “listings pane.”
Mine are broken down into the areas I find I work the most, which explains why you see the five groupings below.
Here’s a shot of Wednesday’s listings:
That’s right. On Wednesday of last week, in C09, C10, and C11 combined, which is Rosedale, Moore Park, Leaside, Davisville Village, and parts of Yonge/Eg, there were only eight new listings, and that’s for both houses and condos.
So let’s say that’s one house in Rosedale and Moore Park combined, one in Leaside, one in Davisville, then five condos at Yonge/Eg.
How many buyers are looking for houses in Leaside? How many price points do they represent? How does that one new listing for a house satisfy the market?
Here’s Thursday’s screen-grab:
From 28 “downtown” listings on Wednesday, to 49 on Thursday.
I’ve always told people that when the market is busy, you’re getting 60 per day.
When the market is really busy, you’re getting 80+.
When the market is crazy, you’re getting 100+.
And at certain peak times, on peak days, you can see 130-140.
So how in the world does 28, and 49, satisfy the market?
This is what I mean when I say, “There’s no inventory,” and yet we keep hearing about record inventory levels.
Let’s look at those inventory levels through the last year, and specifically look at the month-over-month increases, as well as year-over-year:
Again, if you look at the 42.9% increase in new listings month-over-month from August to September, it’s a big number. But last month’s new listings only represented a 9.4% increase from the same level last year, which is a better comparison.
Seeing where inventory levels were in January and February certainly explains the run-up in prices. You might argue the same for the 25,000+ listings in May.
But is 16,000 new listings “enough” to satisfy the market in a busy September?
And where are those new listings?
Why are we seeing such a dearth of new listings in the areas I track? Why are my buyer-clients without options?
When I decided to title this blog “making sense of the September TREB numbers,” it was mainly in reference to your own interpretation, and as an unavoidable response, your predictions.
But it’s also in reference to actually making sense of numbers like the new listings, because what I’m seeing out there completely contradicts what I’m seeing on paper.
“No product” has been the theme this fall.
Now, I certainly don’t expect to see another 202 comments on this blog post, but I do expect to see a healthy debate.
What do you guys think?
Was September and aberration? Will the new stress-test cut off the real estate market at the legs?
Do you think the October average sale price will be higher than September?
So many questions, so much to talk about.
And now you know why I left this blog for Tuesday…