I’ve never been sky-diving.

Or bungee jumping, for that matter.

Once upon a time, sky-diving was a feat reserved for very few.  Those dare-devils with a death wish who loved to live on the edge.

My old man was an avid sky-diver.  He showed me his “log” back when I was a kid, and it looked exactly how you’d expect it took: leather-bound, tattered, ball-point-pen blue ink marking up the thick white pages on the inside.

My dad explained the steps involved in successive sky-diving jumps: how on the very first jump, the chute pulled automatically, like paratroopers jumping in World War II, and how the jumper had to make it to five, ten, fifteen, and twenty jumps as “thresholds” to achieve the next steps.

“Once you got ten jumps under your belt, my dad told me, “You qualified for a true free-fall.”

“Three seconds,” he told me.

“I worked my way up to five seconds, but I never got any further.  I finished my career with twenty-three jumps,” my dad would tell me.

This was explained to me in the 1980’s.  The jumps were in the 1960’s.

Fast forward to the late-1990’s and “Sky Surfing” was an event featured at the X-Games.

I remember watching with my dad as he said, “In 1965, people thought I was nuts for jumping out of an airplane with a parachute.  Now you have guys doing tricks and flips on a damn snowboard at 20,000 feet, hurtling toward the earth at terminal velocity.”

Fast-forward to 2009, and I remember watching a buddy’s video of him skydiving in tandem with an instructor, filmed from the instructor’s wrist-camera, featuring a sixty-second freefall!

Somewhere along the way, wingsuits were invented, allowing mankind to come as close as ever to being an actual bird.

As time goes on, there seems to be no limit to what a person can accomplish in the sky.

What once was impressive and thought to be a feat is no longer.

The Toronto real estate market seemingly has no ceiling, no sky, and no limit therein.

“The sky’s the limit” seems to be an understatement, since we can’t accurately measure the real estate stratosphere.

Exactly two years ago, we found ourselves addressing a worldwide unknown in the form of a dangerous virus that was about to affect our lives in ways we couldn’t possibly understand, and cause us to alter our day-to-day interactions and routines in a way that our society would never think necessary.

Looking back now, I don’t think anybody could have ever foreseen this having a positive impact on the real estate market, and when we were sitting in the middle of April, 2020, with sales down 80% and everybody hiding at home, cowering from the unknown, we never could have imagined the average price of a Toronto home increasing 63% by March of 2022.

But that’s what happened.

And while many market bears, ripe with frustration about a real estate market that’s detached from historical indicators, might have suggested that “an act of God” would surely be needed to cripple the market, even that would prove insufficient.

The average home price in the city of Toronto sat at a mere $821,392 in April of 2020.

Within one year, it had increased to a whopping $1,090,992.

But the run up in prices in the last two months is the true story of our market, as we sit here, in March of 2022, even though the “true story of our market” was a completely different tale only two months ago.

In December, we were touting a strong 2021 that saw the average home price increase some 20% through the course of the year.

Now, here we are in March, not even talking about that old news.

Because the average sale price of a Toronto home is up 15.3% in two months.

That’s the story of our market, today.  And it will be tomorrow, and the day after that.

The average home price in Toronto increased by 7.4%, month-over-month, from $1,242,793 in January to $1,334,554 in February

That’s almost six-figures in a month.

And it’s on the heels of a month-over-month increase of 7.3% from $1,157,849 to $1,242,793, December to January.

While many would be tempted to suggest this is merely “on paper,” I think the stories I’ve shared on TRB, the experiences that buyers and sellers have had, and the media attention thus far in 2022 have surely confirmed that these are real gains.

I have no shortage of stories, and with “offer nights” on four properties this week, I’m sure I’ll restock the cupboard of titillating tales moving forward.

For now, let’s look at the data.

A quick refresher on the TRREB average home price:

Yeah, I know.  I had the same reaction…

We’re up 7.4% month-over-month and 27.7% year-over-year.

Now, what of the individual market segments on a month-over-month basis?

416-Detached broke the $2,000,000 barrier for the first time.

416-Condo broke the $800,000 barrier for the first time.

It was certainly a month of new records all around.

I do find it rather curious that 416-Semi only moved 1.9%, because from what I’m seeing in the central core, these properties are moving 5% per month so far this year.

Now, you know I always provide month-over-month statistics with an accompanying grain of salt, since there’s volatility.

So let’s compare the fall “peak” of September to February:

This feels a little closer to reality, with less of a delta between detached and semi-detached, although it makes condos look like they haven’t moved as much as we all know they have.

One of the more surprising stats this month came with respect to the appreciation by district.

Consider that the average GTA house increased in value by 7.4%.

But what happens when we break it down by Toronto, Halton, Peel, York, and Durham?

Recall that through the past two years, the areas outside the core have all out-appreciated the 416.

But this past month, that trend turned on its head:

This is a rare feat!

Pretty much every stat by district over the past two years has shown Toronto-416 trailing.

Halton and Durham led the way, but month-over-month at least, we see Toronto making a huge comeback.

Now, is this an aberration?

Let’s compare February to September to find out:

Uh, yes.  That looks about right!

Halton and Durham are back in the lead, and Toronto-416 is trailing the pack once again.

There was a lot of volatility with the 416 average home price in the last few months, specifically January when the other four TRREB districts all saw significant increases and Toronto was up only modestly.

Of course, prices are always determined by the interaction between buyers and sellers, or more specifically, the relationship between sales and new listings.

Sales were down from February of 2021, but so were new listings; 16.8% and 6.6% respectively.

But if you know what the spring of 2021 represented, from an all-time standpoint, then you know that being “down” doesn’t mean what it sounds like.

Here’s the last fifteen years of sales:

Yes, sales are down by 16.8%, year-over-year.

But 9,097 sales is the second-highest total in the history of TRREB, and 45% higher than the average number of sales from 2008 through 2020.

So while 2021 was a record-setting February, any headline reading “Sales Down 16.8%” is not going to convey what’s actually happening in the market.

The same can be said for New Listings:

Again, we’re coming off a record February of 2021, and new listings are down 6.6%.

So if we look at the relationship between sales and new listings, notably that sales are down 16.8% and new listings are only down 6.6%, it should mean that the “Sales to New Listings Ratio” has also declined.

If we’re going to see price relief or at least a less-absurd rate of appreciation, we need to see new listings outpace sales.  It doesn’t matter whether listings and sales are up or down; it only matters that if sales increase, then new listings increase at a higher rate, and if sales decrease, then new listings increase at a lower rate.

The SNLR stood at 70.6% in January and declined to 64.3% in February.

What’s interesting is that year-over-year, the SNLR for February doesn’t look all that bad:

So here we are lamenting how tough the market is, with everybody saying, “there’s no inventory,” and yet new listings in February were the second-highest of all time, and the SNLR trails 2021, and is light years from the epic 2017 market.

In fact, the SNLR in February actually trails 2020, which was a busy market but rarely gets mentioned in the same breath as 2017 and 2021.

So how does the historical change in SNLR from January to February look?

This is very, very surprising…

It’s more than surprising; it makes no sense.

This chart is basically telling us that the market “tightens” every year from January to February, and only in the past two years has it not.  Furthermore, the decline in SNLR from January to February of this year is dramatic.

If you looked at this and didn’t know anything about prices, you’d probably think that the average home price declined last month, or at least remained flat.

I can’t make sense of this, other than to say inventory seems to be at more than reasonable levels, and buyers are spending more money regardless.

So is it a district issue?

Let’s examine.

Here’s the year-over-year change in SNLR by district:

Again, looking at this chart, I would think that the 416 is ice-cold compared to 2021, and yet we know that’s not the case.

What I’m finding really fascinating about this data is that it’s not supporting what we’re seeing out there.

Ask anybody in the market what the “problem” is and they’ll say, “there’s nothing for sale.”  We hear about how many agents have inventory “trapped” because they would have a property to sell if only their clients had something to buy!  We constantly find ourselves competing in multiple offers.  And yet the data shows that this market isn’t nearly as tight as it was at the same time last year.

For what it’s worth, the 416 average home price increased 14.9% from January to February of 2021, whereas it increased 12.8% in the same period this year, with a lower SNLR.

That makes sense, but I still feel as though the data and the reality of the market are not coinciding.

So what does this mean?

Are buyers “overpaying” relative to what’s going on?

Are buyers panicking?

I’m honestly not sure.

Perhaps as prices increase, price sensitivity decreases.

That too goes against the grain, completely defying logic and common sense.  But I mean that if “only” two buyers are vying for that $3,000,000 house, maybe a $10,000 bid increment from ten years ago has turned into a $100,000 bid increment today.  If it were me, and I was buying my dream-home, forever-home, for $3,000,000, if I had to pay $3,100,000 to get it, or $3,200,000 to lock it in, and move my family, I would do it.  And so too would a lot of folks out there.

That’s what I mean about price sensitivity decreasing.

A client emailed me over the weekend about an east-side condo sale for $999,999.

I told him that this was a bully offer and, based on that number, $999,999, it’s obviously somebody who lacks the 20% down payment necessary to buy for $1 Million and up.  But how did they come about determining “value” for that condo?  What made them settle on $999,999?

I think they likely realized that there’s no real difference between $960,000, $970,000, $980,000, $990,000, and ultimately $999,999.  They just said, “Screw it,” and went for broke.

Why?

Because the monthly mortgage payment, at a 30-year amortization and 1.35% variable rate, on a $960,000 purchase price with 7.5% down is $3,098.  But on $999,999 it only rises to $3,227.  So for $129 per month, these guys made their decision.

That’s what I think.

And that’s part of the reason, in my opinion, why prices are rising the way they are, in spite of seeing the second-highest amount of listings in TRREB districts in any month of February in history (accompanied by the second-highest amount of sales, of course).

I can personally attest to the idea that there’s a “lack of inventory” out there since I have a dozen highly-active buyers clients who would buy the right property today if it were only available, and that’s irrespective of price.  There’s just “nothing out there,” as we all continue to say.

But the data isn’t backing it up.

So who’s right: the TRREB stats or the agents out there working in the trenches?

That’s not rhetorical, folks.  This market is confusing as ever.

But there is one thing I know for certain, and I’ll end today’s blog post with a rare prediction: the TRREB average home price will not increase another near-six-figures in March as it did in January and February.

Why?

Because it can’t.

How’s that for objectivity?