You know those parents who feel the need to tell their kids, “Don’t dive into the pool!” for fear that maybe their child will do so in the shallow-end, or have an otherwise untimely accident?
When my mother used to tell me that, “I’d laugh.”
I was the last person the world that my mother needed to worry about in that regard.
Not a chance.
I’m 40-years-old and I still plug my nose when I jump in the pool.
Yes, I’m that guy. I mean, how do you all avoid the water flushing up your noise and wetting your brain?
Diving. Geez. I never saw the appeal.
When I was 6-years-old and my father sent me to Camp Kawabi, with all the other 7-year-olds, they were all diving from the “Tower.” You know that 10-foot wooden rig on the dock that would sway wildly on windy days? The one that looked like it was eighty-feet-tall when you were 6-years-old?
Yeah, that one. Well, all the kids were doing it, and a part of me wanted to know what it was like.
I had no intention of diving head-first, of course. That was just ridiculous and failed the risk-reward equation miserably. What sort of enjoyment could there be from diving head-first from a tower? Huh?
If I close my eyes, I can still picture the water below as I stood on the edge of that tower on a July day in 1986. The ripples in the water seemed to be a different colour than the water itself, and the sun was reflecting ever-so-slightly.
One thing I can honestly say that I do not remember is exactly how long I stood on the edge before I finally stepped off and jumped. A minute? Five minutes? My memory fails me here.
But I do remember jumping, unintentionally, with the “pin-drop” method, and my feet touched the bottom of the lake. I swear, I never thought I was going to reach the surface of the water. I pumped my little arms and legs frantically for what seemed like an eternity but was realistically only six or seven seconds. When I hit the surface, I thought I had escaped death.
I was 6-years-old.
I’ve never jumped off a ten-foot tower since.
I also don’t believe I’ve ever truly dove into the water. But that’s more on account of how hard it is to do while plugging one’s nose…
In a very sad way, unless you work in the math department at Waterloo and happen to be reading this, I was oh-so looking forward to the TRREB numbers being released this week.
It’s not because I knew what was going to be present in those numbers, but rather for the exact opposite reason: because I didn’t.
I have a good feel for the market, like any active agent. I’ve sold enough properties so far this fall; both houses and condos, with buyers and sellers, to know what’s going on.
But at the same time, I want to know if what I’m feeling is lining up with what the data says. It’s just never a certainty that the market “feel” lines up perfectly with the market data, so I was excited to dive into the TRREB numbers as soon as they hit.
The media is running with one stat today, and it’s the biggest one:
Sales are up 42.3% year-over-year; from 7,791 in September of 2019 to 11,083 in September of 2020.
But is that the story?
Sales, and only sales?
And what does this tell us about the market?
The Globe & Mail added that “prices” were record-setting, which is also true. But this merely refers to the average GTA home price.
So let’s start there first, and then look at what other stories could be told…
In my eNewsletter last month, I wrote the following:
“Personally, I expect a very busy fall, and the stats will show this as we finish September. Remember I said that, and check back here next month for me to pat myself on the back.”
I also added the following:
“I expect house prices to rise, condo prices will recover slightly, and by the time we hit November, the average home price in Toronto will be approaching $1,000,000.”
Now how much of this ends up being true, remains to be seen.
Certainly, the GTA average home price increasing last month shows us that, in fact, the price is approaching $1,000,000.
In August, we saw a then-record price of $951,404, which beat out the then-record price of $943,710 in July, which, of course, beat out the then-record price of $930,869 in June. We talked about this a lot in the summer, since the previous high of $920,791 from April of 2017 wasn’t expected to fall by most market onlookers.
So was it surprising to see the GTA average home price further increase to $960,772 in September?
Not if you’d asked me!
In fact, I told most people that the average home price in October would be higher than September. But as we look at the data that follows, I’m 50/50 on whether I revise that prediction.
Simply put, it starts and ends in the condo market, where we’ve spent a lot of our time on this forum over the past few months.
On a micro level, let’s just look at the following:
August, CO1: 342
September, C01: 361
August, C08: 170
September, C08: 169
Those numbers are completely aligned.
In C08, which is the area south of Bloor that is east of Yonge, we saw almost perfect alignment in the sales data from August to September. One sale is all that kept these from being identical.
In C01, we saw a modest 5.6% increase in sales, from 342 to 361, or what many could call a “rounding error.”
Now, what of listings?
August, CO1: 1,178
September, C01: 1,474
August, C08: 609
September, C08: 745
Here is where the data goes off in a completely different direction.
Combined, we saw an increase in sales from 512 in August to 530 in September, or a 3.5% increase.
But combined, we also as an increase in new listings from 1,787 in August to 2,219 in September, or 24.2%.
You don’t need to be a math professor at Waterloo to identify that 24.2% is substantially higher than 3.5%.
And you don’t to be stats major to deduce that, in the context of supply and demand, a 3.5% increase in demand and a 24.2% increase in supply is going to cause a surplus.
Any economics student will tell you that this will, in theory, put downward pressure on price.
Did that happen?
Average Sale Price, C01, August: $759,830
Average Sale Price, C01, September: $772,246 +1.6%
Average Sale Price, C08, August: $719,257
Average Sale Price, C08, September: $695,038 -3.4%
Average Sale Price, 416, August: $673,174
Average Sale Price, 416, September: $686,191 +1.9%
We can chalk up the C01 and C08 numbers to suffering from small sample size, but the same can’t be said of the 416 numbers.
Once again, my note from last month about “condo prices recovering slightly” rings true.
So how in the world is this possible?
And how dire do the inventory numbers actually look?
That’s where this gets all the more amazing.
The condo absorption rate, on the heels of a record-low 28.7% in August of 2020, dropped even further last month – to 23.9%:
To be fair, the condo absorption rate has dropped from August to September in both 2018 and 2019 as shown. It seems to reason that with more inventory typically hitting the market in September, the respective increase in sales doesn’t usually catch up.
But we still can’t deny where this grey line sits on the chart above.
And for those who want the actual data, I give you the following:
Pre-pandemic, the condo market was absolutely on fire. And the data shows why.
With a 43.2% absorption rate in January of 2019, you can see how a 58.0% rate in 2020 caused prices to shoot up. This continued well into February when the absorption rate was a decade-high for February at 69.0%.
Have you ever seen anything like it?
Another area of exploration in the past couple of months has been with respect to the condominium lease market, which has been extremely slow.
Perhaps to nobody’s surprise, the condo lease market did not get any better last month.
C01 & C08 – New Lease Listings:
C01 & C08 – Leases:
So while we did see 60 fewer new lease listings, we saw 332 fewer condos leased.
The absorption rate dropped from 51.9% in August to 44.3% in September, and yet amazingly, compared to the condo resale market, these numbers look good!
But alas, we must compare apples to apples, and thus comparing September of 2020 to September of 2019 and 2018 is prudent.
Here is where condo lease listings stand, compared to previous years:
And here is condos leased:
Lastly, the absorption rate:
So let me propose an interesting question in the spirit of our two good friends, the chicken, and the egg:
Is the saturated lease market slowing down the condo resale market, or is it the other way around?
Some surmise that the would-be investment condo buyers are on the sidelines because they see the weak rental market and fear vacancies.
Others believe that the rental market is slow as a direct result of increased resale listings, from unsold condo inventory.
And when I said that “most” of the media have the story wrong here, I didn’t mean all of them…
This is year-over-year inventory, of course, and if sales were to keep pace, then it’s a moot point.
But sales haven’t kept pace, as we noted. So while numbers like 215% are misleading, since there’s no context here, it’s fair to say that the condo market is weaker today than it was in September of 2019.
But is it weaker than it was in August of 2020?
It depends on what metric you used.
To suggest that the condo market is stronger:
1) 416 average condo price up 1.9% from $673,174 in August to $686,191 in September.
2) C01/C08 sales up from 512 in August to 530 in September.
To suggest that the condo market is weaker:
1) SNLR down from 28.7% to 23.9%, August to September
2) Condo lease absorption rate down from 51.9% to 44.3%, August to September.
Those would be the two arguments, and in the end, I suppose price is still the be-all and end-all.
So in the midst of Bloomberg showing a headline about “weakness in the condo market,” and touting a year-over-year increase in new listings of 215%, does the modest increase in 416 average condo price carry weight?
My “gut” on this tells me that, despite the increase in 416 average condo price, the downtown condo market is weaker in September than it was in August. We can make numbers say anything we want, and as I’ve shown above, we can create both bullish and bearish arguments with ease. But in my gut, it feels slower out there. And while units are still selling, we’re seeing the odd “offer night” actually work (crazy, right?), and I’ve actually lost in competition on a condo with a buyer, I’m still feeling a bit of weakness out there.
But then, what of the freehold market?
Eek, I think I’m at my word count here.
Pick this up again on Friday?Back To Top Back To Comments