I suppose I could have titled this entry, “The Inevitable April Stats Blog,” but what fun would that be?
Plus, you all know that each and every month, I write a post about the TRREB stats and what they mean for the market, so pointing out the inevitability is moot.
Knowing that this blog post will arrive in short order, some readers are eagerly anticipating the entry, and some aren’t.
It depends on where you lay on the bullish-bearish spectrum.
Appraiser is licking his chops. I mean, an average home price of almost $1.1M? All of his comments are suddenly justified!
But the TRB market bears (and y’all know who you are…) aren’t going to want to read the following. It’s getting harder and harder to justify those “over-heated market” comments, the crash-talk, and the bums that are sore from sitting firmly on the sidelines when we look at the stats from the past month.
I’d be remiss if I didn’t point out, however, that not all of the market bears can be labeled as perennial-renters, or true sideline-sitters. In fact, many of the readers who are bearish on the market, critical of industry practices, or just downright sour on real estate in general are actually home-owners! So let’s not paint everyone with the same brush. It’s very easy, and very reasonable, to be critical of real estate while still owning your own home, or even if you own multiple investment properties.
There’s a lot more to being bullish than simply owning real estate. We’re talking about fiscal and monetary policy, government intervention in a free market, personal finances, city planning, and a host of other topics that go hand-in-hand with the real estate market.
So while I understand that many existing home-owners want the market to roll because the value of their largest asset is increasing, I also understand the existing home-owners that aren’t afraid to say, “This is nuts.” Whether or not those existing home-owners add, “This cannot continue” remains to be seen.
Where do you want to start this week?
How about with the average home price?
The average home price increased 5.0% month-over-month from February to March; from $1,045,488 in February to $1,097,565.
That’s a 21.6% increase, year-over-year.
Let’s take stock, once again, of the average 416 home price dating back a while:
I showed you this same chart last month, only without March’s price. At that time, the $1,045,488 average sale price from February looked monumental. It was the only seven-figure data point in the chart.
Well, now I suppose it’s up, up, and away, is it not?
Interestingly enough, if we looked specifically at the 416 last month, we would see that there was not a record price. In fact, the $995,201 average sale price in Toronto-416 in February was 3.5% lower than the peak of $1,031,721 in August of 2021.
That changed in March, however…
For those of you playing along at home, that’s an 8.9% increase, month-over-month.
Month-over-month data is not the most accurate measure of the market, so let’s not make this into something it isn’t. The February 416 average home price wasn’t in line with the GTA’s, and it seems like it’s caught up in the month of March.
All told, we’ve seen record prices in both the GTA and the 416 in March.
But those aren’t the only records.
The TRREB “Home Price Index” is supposed to be a smoother, less-volatile measure of pricing than any of the averages. Over time, this price is going to increase with the market, but at a much slower pace.
If you graph the TRREB HPI from the same time period as we’ve charted above, it looks exceptionally smooth – until 2021:
I know this is the most boring chart of all time, but humour me here. For an index that’s supposed to be “smooth,” it is, until we hit 2021.
See that tail on the right-hand side? I’d call that a spike as far as a moving-average goes.
But the most noteable increase when it comes to the bevy of price increases this month, in my opinion, has to be with respect to condos.
The average 416 condo price is up 4.6% month-over month, from $676,837 in February to $707,835 in March.
Recall that condos were a really tough sell in the fall of 2020.
In fact, I gave interviews and told clients, “This is the worst condo market I have ever seen,” and I stand by that.
Consider this: I had a condo listed in early-December for $799,900 and I couldn’t even get a showing, let alone an offer. Not even a lowball! But then in February, we sold it for $850,000.
Here’s how the condo market has roller-coastered of late:
Wow, what a ride!
I haven’t been to Canada’s Wonderland since 2003, so forgive me if I don’t know any of the cool, new rides. But this kind of reminds me of The Bat. Remember when that was all the rage? For all I know, it’s been torn down or something. I got a season’s pass in 1992 with my buddies and we went there every P.A. day, but I digress…
Up, down, up, down, up…
Compare that chart with any other from the same time period, and it’s definitely the outlier.
Ask any Toronto real estate agent which market segment is usually the most volatile, and you’d typically be told it’s detached. It’s not uncommon to see the 416-detached prices bob-and-weave, even in red-hot markets.
But when we look at the average detached price on the same chart as above, and compare it to 416-condos, it may as well be a straight line!
In case it’s not obvious, the $1,750,518 average detached price in March of 2021 is also a new record, up 4.0% from the $1,684,073 in February, which served as the previous record.
So everything is up, right?
We’ve got record prices for GTA, 416, 416-Detached, and HPI in both TRREB and the 416.
The 416 average condo price is not a record, but on average, the price is up 13.3% from January to March, and is now within 2.1% of the peak in February of 2020.
So what is causing all this upward pressure on price?
I’ll give you a hint: it’s a good friend of mine.
It’s somebody I know, near and dear.
Somebody I talk about all the time, and somebody I’ve tried to introduce all of you to, even though some of you aren’t willing.
Yup, it’s our old friend, supply and demand.
It’s not interest rates, or immigration. It’s not evil real estate agents, or public policy. Sometimes, the truest answer is also the easiest, and there are simply way more people looking to buy real estate than are looking to sell.
March of 2020 was a “record month” in many ways, as noted above with respect to prices across the board.
But do you know what record stood out to me the most?
Do you want to guess what the previous record was?
Was it 15,500?
Or, like, 14,900?
It had to be over 14,000, right? We can’t imagine a record being broken by like 1,500 – 1,600.
Except that it was!
And then some!
The most sales recorded in a single month, before March of 2020, was a mere 12,790 back in May of 2016.
If that statistic doesn’t shock you, then you’re probably decorating cookies while watching Texas Chainsaw Massacre.
This statistic is positively mind-blowing. The record wasn’t just broken, it was shattered! That’s a 22.4% increase, and if I had to look back at the previous records and what the increases were, it would look nothing like this. Case in point: we saw a record number of sales in May of 2015 at 11,706. That record was broken one month later with the 11,992 sales recorded in June. That’s an increase of 2.4%.
Do you grasp the sheer insanity of this figure now?
Here are the Top-10 biggest months in TRREB history:
We’ve seen a lot of outliers so far in 2021, but this might be the largest.
Call me a stats nerd, but I looked at this and could immediately picture something similar in my mind’s eye.
Check this out:
I’m not wrong, am I?
You’ve got four guys in the 14,000’s, four guys in the 15,000’s, one guy up there at 17,000+, and then Jerry Rice in his own damn world!
I can’t possibly overstate how wild those 15,652 sales were last month.
And when you consider this was done in March, it’s even more impressive. Note that from the list above, we see April three times, May twice, and June twice. March and September had only made the list once previously. March is typically a busy month, but nothing compared to April, May, and June.
Looking back only at the month of March, we see that 2021 is even more of an outlier:
The talking heads will note that sales are up 97.0% in the month of March, year-over-year, but consider that the market came to a halt in the third week of March last year due to COVID, so we can’t really look at the 97.0% increase at face value. However, we can certainly look at the 7,187 sales from 2019, or the 7,188 sales from 2018, since those months weren’t affected by a worldwide pandemic. So all told, we’re seeing double the action of what the last three years delivered, and we’re actually 30% higher than the epic month of March in 2017 when the market was gangbusters.
Demand is at an all-time high, folks. There’s no mistaking that.
So just how tight is supply?
Oh, well, that’s interesting…
I think this is the part where most of you believe I was going to say, “Supply is at an all-time low.”
Right? It would have to be, in order for prices to be skyrocketing!
But what if I told you that supply was also at an all-time high, or pretty close to it?
In March of 2021, we saw 22,709 new listings in Toronto, which is a 57.3% increase over the 14,434 new listings we saw in 2020. Sales were up 97.0%, and new listings were up only 57.3%, so that explains the 21.6% increase in prices.
But how do those 22,709 new listings stack up, historically?
As I said, pretty close to an all-time high.
We just experienced the second-most new listings in any month in the history of TRREB, and yet we complain that we have an “inventory problem.”
How can this be?
There were sixteen offers on a run-of-the-mill 1-bed, 1-bath condo listing I had last week.
I just lost a bid for a house on Whistle Post Street as I was writing this blog; there were seven offers!
So what’s pushing the prices up if we have near-record inventory?
It’s something we’ve already noted: supply and demand. In this case, it’s the interaction between supply and demand, and not just one versus the other.
Let’s look at those “Top Ten” months above one more time, but we’ll compare sales to each of these top months for new listings:
The “record” month of May, 2017, saw a mere 39% absorption rate.
The average of the other nine months on this list is 50%, so once again, we find ourselves staring down a market outlier in the month of March.
Yes, we saw the second-most new listings of all time. But we also saw the single-most sales in any month too.
So here’s what I think is going to happen: we’re going to see the April average home price come in around the same as March, and then we’ll see a modest pullback in May and June. When the average home price declines from $1,097,565, or whatever it comes in at in April, to, say, $1,040,000, the market bears will say, “See, the market is dropping!” while ignoring the massive gains made since the fall of last year.
An average home price declining like that does not mean homes are worth less, and I don’t think that you’ll pay less for a 3-bed, 2-bath semi either. In fact, I think you’ll pay more.
But the average home price fluctuates, month-to-month, from season to season, and this year will be no different.
It just remains to be seen if people will celebrate a 2-3 month decline after a twenty-year run as the bubble popping…Back To Top Back To Comments