We need to know, otherwise, we’re consistently comparing apples to oranges.
The April TREB numbers were released last week, and the number being thrown around the most is “12.4%.”
That’s the average decrease in home price in the GTA, April-over-April.
But what if we look at what’s happening outside the central core, and compare the two areas?
Let me start off this blog post by speaking directly to some of the market bears and/or dissenters: you’re right.
You’re right to suggest that my constant complaining about the media using the worst numbers they can possibly find to show the market in a worse light, all in the name of selling newspapers, is offset by the media also using the best numbers they can possibly find, to show the market in a better light, when they feel like it.
It all depends on what you’re trying to sell.
Are we selling mania today? Or are we selling doom-and-gloom?
I guess the moral of the story is, there’s no point in selling the absolute truth when you can sell a better, sexier, wilder truth. Right?
Ever since I saw the CBC headline showing “Toronto Home Prices Drop 35%” two months ago, I’ve been keeping a closer eye on the headlines.
When sales dropped 35% from February of 2017 to February of 2018, the media pounced on this number, and clearly wanted to make the dip in the real estate market worse than it was. Call this a Freudian slip, or call it a mistake, but either way, the agenda is obvious.
But a lot of the TRB readers are right. When the market was red-hot last year, the media was pumping the tires of the market. Not quite Pitbull, Sylvester Stallone, & Alex Rodriguez up on a stage with laser-lights, but if you were a layman, you might come to the conclusion that the Toronto real estate market was heading to the moon and never coming back.
So now that the media has switched gears, and are giving us headlines with things like “…….lowest in 30 years,” forgive me if I’m looking to cut through the fluff, and look at what’s really going on.
I’m not Donald Trump; I don’t consider that “fake news.” In fact, I don’t blame the media; I blame the readers for not delving further into the story.
Case in point, if the headline reads, “The market declined 35% last month,” how many people will read the whole story, and realize that the “decline” was in sales, not price? Call me a pessimist, but whether it’s smart-phone users browsing headlines on Facebook feeds, or passer-byers looking at the front cover of a newspaper, I really don’t know if people want to know what’s going on out there.
That’s not to take anything away from you folks. The TRB readers on here? The people who post daily comments? You guys are collectively in the 96% percentile of general real estate knowledge. But what about the rest?
I just got off the phone with a young agent looking to start her career, and asking to pick my brain. She said, “I don’t know if now is a good time to start, with the market being so bad and everything.”
She was honest, and said that all the headlines she reads are awful, and all her friends in their early 20’s are lamenting that they can’t afford what they want. But market realities, headlines, and millennial-wants in 2018 are three VERY different things.
The GTA average home price this past month was down 12.4%, year-over year. That’s an average of $804,584 this April, compared to $918,184 in April of 2017.
But to suggest that this represents “Toronto-proper” is inaccurate.
I think a quick refresher on the GTA is prudent here, both for those that know it, but can’t picture it, and for those that pretend to know…
We have five areas:
1) City of Toronto
2) Peel Region
3) Halton Region
4) York Region
5) Durham Region
Ironically, “Toronto-proper” is the smallest of the regions that collectively make up the GTA.
It’s important to note that Simcoe County and Dufferin County are also a part of TREB, so while they aren’t part of the GTA, they are part of the “GTA-price.”
The City of Toronto is the most dense of the five regions of the GTA, and home to the most people. I might offer that it’s the most……..important(?) area to examine in a discussion of the overall Toronto real estate market, but try telling that to somebody who lives in Scugog…
So when we discuss Toronto real estate, what exactly are we talking about?
What would you guys think we mean?
Do we mean the GTA, or do we mean the city of Toronto?
To be quite honest, I would put Burlington in a different hat. I certainly would put Hamilton in a different hat, so where do you the draw the line?
I think a lot of the readers would agree, to some extent. Simcoe County, Clarington, Caledon, Milton – we’re not really talking “Toronto.”
But Vaughan? Mississauga? We’re kissing-cousins!
Where do you draw the line?
That’s why I think it’s so important to break free of these blanket-statements made by most people that simply refer to the average-GTA sale price.
And today, I want to look at the GTA as a whole, and then as individual parts, and then break down Toronto’s market even further.
So first and foremost, where is the Toronto market at the moment?
Take a look:
Recently I’ve been looking at both month-over-month statistics, as well as year-to-date.
Consider the YTD to essentially be a moving-average.
In this case, both tell essentially the same story: prices are down 12.3% YTD and 12.4% in April, and sales are down 34.4% YTD and 32.1% in April.
But that’s GTA-wide.
What about the regions?
Let’s look at the YTD stats for all of the areas that make up TREB’s “Average Toronto Sale Price,” as well as the sales volume:
Interesting stuff, n’est pas?
With only 165 sales YTD in Dufferin, we could scrap it. Same goes for Simcoe County, as neither are technically part of the GTA. But it would skew the overall TREB data, and I don’t think their inclusion in the data changes the picture, so we’ll leave it. The only thing I will say is that the 4.9% drop in average home price, based on 165 sales YTD, doesn’t have the same foundation as something like 7,000+ sales would.
These are in order of %Chg, and as you can see, York Region has been hit hard.
A 20.6% YTD decline in average home price, which is actually worse than the 12.3% YTD decline in the GTA.
On the other hand, Toronto and Peel Region come out well ahead of the GTA figure, down ‘only’ 6.6% and 7.7% respectively.
So if my Toronto-bias were showing, I’d suggest that this 12.4% decline in average sale price in “Toronto” that the media is touting this month, after the 14.4% decline they touted in March, is not accurate in the context of what most consider to be “Toronto.”
At the very least, it’s prudent to distinguish between the GTA, and the City of Toronto.
Because I have the odd client that purchased in March or April last year, who asks me, “Is my home really worth 12.4% less than it was last year?”
My clientele is more astute, and thankfully only a handful are prone to taking a headline at face value, but no, their homes aren’t worth 12.4% less than last year. On paper, overall, on average, they’re worth 6.6% less, taking the Jan/Feb/March/Apr “moving average” that is the YTD sales.
But what if they’re in a semi?
What if they’re in a condo?
What if they’re in the once-holy, now-declining detached?
Worry not, I use those descriptions of detached homes facetiously, since the detached home is, and always will be, the Holy Grail of houses, and I don’t actually believe what the declining numbers say (more on this in a bit).
But now that we’ve established that the decline in “Toronto average home price” is essentially double that of “City of Toronto” properties, let’s break it down by house type.
Here’s the April (note we’re not using YTD here) average home price for each of the four major property types: detached, semi-detached, row/townhouse, and condominium, put up against the GTA average home price on the left, and then the HPI (416) on the right:
Here’s where the fear sets in for many detached owners.
That’s worse than the 12.6% GTA average decline, or even the 12.4% YTD!
But once again, you can filter by area, and see what is really going on.
For this experiment, I went straight to MLS as I wanted to break things down by location and property type, which TREB Market Watch does not do. I also enjoy pouring over thousands of lines of data in Excel…
I looked at C06, C07, C14, and C15 together, which is essentially Dufferin, Steeles, Victoria Park, & Hwy 401. Reason being, we know how York Region has done, but what about the northern-most part of the City of Toronto?
What I found was quite honestly exactly as I had expected:
The average price of a detached home, albeit in a smaller sample size, is down 21.4% since the same period last year.
I was showing these stats to a colleague today, saying, “It’s only 234 sales, the sample size is small, and the 21.4% number could be way less, who knows.”
My colleague replied, “True, but there’s an exactly equal chance that it’s way more.”
So while the Toronto-416 detached home price is down 14.2%, if you look at some areas of the city – in this example, north of 401, south of York Region, we can see that some areas were much harder hit.
Average that out across the various neighbourhoods of the City of Toronto, and I’ll think you’ll find there are some areas where detached prices are only down 3-4%, in the face of much steeper numbers. Ask active buyers, and buyer-agents, and they might argue there are some areas where prices are flat.
Shifting gears in two ways now – looking at semi-detached, as well as an example of where the decline is much lower, let’s look at the east side.
E01, E02, E03, collectively “the east side,” and let’s hone in on a very specific property type: semi-detached, 3-bedroom houses.
Sure, the sample size is smaller when we hone in. But I’d argue that eliminating 2-bedroom and/or 4-bedroom semi’s is going to give us a better feel for the market.
Keeping in mind that the average Toronto-416 semi-detached price is down 7.4% in April, here’s how things look in E01, E02, E03:
That’s effectively a rounding error, and two points on either side brings you to yet another modest 4%, or even par.
I think you get the picture here.
My conclusions are the following:
1) The decline in GTA average home price, being applied to the “City of Toronto,” is extremely inaccurate.
2) The further you are from the central core, the softer the market.
3) Within City of Toronto, some areas are flat, some are worse than the 416-data shows. Once again, it’s all about the core.
4) Most property types and/or neighbourhoods in the central core of Toronto (save for condos, which are up) have seen only a modest decline, if any.
5) As we all know, 416 condo prices are up 4.0%, while the GTA average is down 12.6%. I didn’t even touch on this today, since I’m pretty sure most in the know are aware.
So have at it, folks.
I welcome your feedback.