The Answer You’ve Been Looking for Is “26.9%”


5 minute read

May 6, 2016

Now see if you can guess the question!

Yes, kind of like Jeopardy!  Whoever thought up the idea for a game show where you provide answers instead of questions?  The first producer on the receiving end of that pitch probably thought the idea was insane…

So 26.9% is the answer to what question?  Well, how about, “What statistical reasoning do you have for why the Toronto real estate market has increased so dramatically in 2016?”

Now what does 26.9% actually refer to?  You’ll find out…


Do you watch Jeopardy?

Do you ever feel bad for Alex Trebek?

I mean first of all, pretending you know the answer to every question has to get old.  And even Alex must have a burning conscience sometimes.

Every time somebody gets an answer wrong, Alex always plays coy and says, “Nooooo……sorry, it was twenty-one-eighty-one B.C., not twenty-one-ninety-one,” and he has that oh-so-kind, sympathetic look on his face.

Oh sure, Alex!  Easy when you got them cue-cards in your hands!

But worse than that, don’t you think his job has become mundane at this point?

He’s almost robotic when it comes to his responses to correct answers:

“That’s it!”
“That’s the one!”
“Got it!”

How many different ways can he acknowledge a correct response?  He has about 10-12 responses, and he just mixes them up, over and over, throughout the show.

Let’s see…

Alex Trebek has been hosting Jeopardy since 1984, so that’s almost 32 seasons.

The show is on Monday to Friday, assuming they do some re-runs, and take time for holidays and vacations, let’s call it 46 weeks per year, which is 230 episodes per year.

Each episode has 60 questions.

Maybe five questions per game go unanswered or incorrect by all participants?

So Alex is giving a “Yes!” or a “That’s it!” 55 times a day, 230 days a year, for 32 years.

That’s over 400,000 times he’s pretended to be excited about somebody getting a question right.


And you thought your job was the “same thing, over and over.”

So if we can break down the numbers for something as simple as Alex Trebek’s responses on Jeopardy, why don’t we try something more difficult, like answering how the heck Toronto’s real estate market continues to climb.

I don’t want to get into the big-picture thinking today.  The increase in population, the city being historically undervalued, the city growing globally, the commerce in the city that isn’t linked to one industry like oil or fishing, etc…

Today, I want to look at one simple reason; something I’ve talked about so many times, that it must seem repetitive by this point.

But sometimes, the most complicated questions have the simplest answers.

It’s supply and demand, folks.

That’s it.  It’s that simple.

As I’ve said before, the heat of Toronto’s housing market can be traced back to that “X” that your Grade-12 economics teacher put on the blackboard on the first day of the semester.

He put a “P” on one axis.

And he put a “Q” on the other.

He put an “S” on one of the lines, and he put a “D” on the other.

He pointed out the centre of that “X” and said that when the “S” line crosses the “D” line, you have equilibrium, and that this is when all things work out perfectly, for the buyers and sellers, the price and the quantity, the supply and the demand.

But few markets are in equilibrium.

If most of what we learned in school was theoretical, then this idea of “equilibrium” certainly takes the cake.

I don’t want to take this analysis too far and start talking about products with inelastic demand, and so on.  So let’s just suggest that at the very basic level, when it comes to the real estate market, if there was more supply than demand, then prices would fall.  If there was more demand than supply, then prices would rise.

And that very, very simple concept, is what is fueling the Toronto market.

So far in 2016, we’ve seen a dearth of listings, and that, combined with higher demand from buyers, is what is causing prices to rise.

But can we put numbers to this?

Is there quantifiable evidence to back this up, other than every real estate agent in every office throughout the city constantly looking at a colleague and saying “there’s nothing out there.”

Yes, there is.

Let’s look at the sales, and the listings, through the first four months of the year.

January of 2016 saw a decrease in active listings of 14.1% over January of 2015, and an increase in sales by 8.2%.

February of 2016 saw a decrease in active listings of 21.1% over February of 2015, and an increase in sales by 14.8%.

March of 2016 saw a decrease in active listings of 20.7% over March of 2015, and an increase in sales by 16.2%.

April of 2016 saw a decrease in active listings of 26.9% over April of 2015, and an increase in sales by 7.4%.

And there it is, folks.

The craziest number I think I have ever seen.


Active listings in April were down a whopping 26.9% over the same month last year, and that, almost by itself, tells the story of the 2016 Toronto real estate market.

It’s crazy to think that in all four of these months, listings are down, and sales are up.

So even though there is less for buyers to buy, more buyers are buying it.

And as your Grade-12 economics teacher would explain to you, prices are going to increase as a result!

The crazy thing is – it’s not like the decrease over 2015 was because 2015 was some crazy high-point.

In fact, the April 2015 number of active listings also decreased year-over-year, by 10.1% from in 2015 over 2014.

And believe it or not, April of 2014 saw an 8.4% decrease in active listings over April of 2013.

So for all the market bears out there, answer me this: how the hell are prices going to level off, let alone DROP, when supply is falling and demand is increasing?

I mean, honestly: 26.9%.

That’s no small measure.

We’re in the hottest real estate market on the planet, and more than one-quarter of the inventory we would expect based on last year, has vanished.

So, as for the impact on price, that’s another story, another number, and while not as large, it might have a bigger impact.

The average house price in April of 2016 increased by 16.2% overall April of 2015.

Not as big a number as 26.9%, but far more significant.

This isn’t to suggest, however that your $1,000,000 house is now worth $1,162,000.  Or that your $400,000 condo is now worth $464,800 after a mere year of buying and holding.

It won’t directly translate into a 16.2% tax-free capital gain for everybody, but for some, it will.  And for others, more.

Folks, I will admit that three years ago, I was starting to go from bullish, not quite to bearish, but somewhere in the middle.  I wasn’t absorbing everything the bears were saying, but I was listening.

As things stand right now, with the demand where it is, unless we see supply levels not only increase to that of years’ past, but actually surpass them, we’re going to see double-digit increases into 2017, and then some.

I’m not making this market, but I sure as hell am not going to deny its existence.

Bears, by the time you can shout, “See, I was right!” you’ll have lost out on a tax-free capital gain that would take you the equivalent of ten or fifteen working years to get back.

I see no quantifiable reason left why this market is going to cool.

You just can’t argue with that 26.9%.

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

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  1. Formerly Frosty

    at 11:00 am

    David, I concede defeat.

    What do you say to people like me who have been waiting, aging, and hoarding cash? (After you’re done pointing and laughing and calling us losers, that is.) I am sitting on bags of my own hard-earned cash and there’s no effing way I’m using that to competing with locals and their funny-money loans or with the children of foreign oligarchs. Cash is king when no one has access to money, not in our current environment. Do I have that right?

    So now what? I know the standard answers: keep renting, move, slit wrists, go postal, vote Mike Ford, etc. Maybe I’ll have to stop worrying and enjoy life.

    See you on the rebound,

    1. Kyle

      at 2:49 pm

      I think the answer is simple. You have to figure out what it is that you want. Do you want a house to live in? Do you want a bag of cash? Do you want an investment? Or do you just want a really good deal?

      The “locals with funny-money and children of foreign oligarchs” are tropes and memes. The reality is they are few and far between. Primarily who you’re really competing against if you’re shopping for a house in this city are people who are selling a place they bought to live in, and are now looking to buy a better suited place to live in.

      1. Formerly Frosty

        at 6:33 pm

        Thanks Kyle. I appreciate your straight talk. I’ve learned a lot from your posts over the last few years (even if my reactions were sometimes intemperate and dickish).

    2. Kenisha

      at 10:52 am

      The paragon of undtrseanding these issues is right here!

  2. Libertarian

    at 11:22 am

    Nice number crunching David. Based on your experience in the industry, are declining numbers like that a sign of a healthy or unhealthy market? It seems that in the past, there were always lots of sellers for various reasons (moving up or down the property ladder, death, divorce, job relocation, etc.). Don’t these things still occur? I would imagine they do, so are people holding on to their homes for the sake of holding on to them as an investment? Are they all becoming landlords and renting out those houses? Have the number of houses for rent gone up?

    I am already a homeowner, so none of this is a complaint. I am just wondering what the future will look like if nobody sells their home anymore. I don’t see how that benefits us as a society. …not to mention the decreased opportunities for real estate agents! haha!

    1. Joe Q.

      at 1:45 pm

      I agree, these are good questions. Getting at the “why” of decreased listings is important for building understanding of where this city is headed (economically, demographically, etc.)

      The LTT issue gets trotted out by TREB to explain all kinds of phenomena in the housing market, and I see they’ve invoked it again to explain the dearth of listings. I personally don’t buy it — the LTT is paid by the buyer, it’s been around for a while now, and even in Toronto the LTT on a $1M home represents maybe 3% of the purchase price (almost a rounding error in this era of homes going several hundred thousand over asking.)

      Some have suggested that the sustained very large annual increases in house prices over the last while have started to “freeze” the property ladder — in that people have a hard time seeing how they could afford to move up to something bigger or better than what they have, so they just stay put, maybe renovate or something. Not being in the industry, I don’t know how much of a factor that is.

      1. JK

        at 2:44 pm

        Hello. Just from my own experience, we are staying put because of the double LTT. 10’s of thousands to the city just to move? Nope. We borrowed against the equity and are using the money we would have given the city to renovate and enjoy life. So far borrowing far less than the house appreciated/ is appreciating so all is good.

        To all the guys “patiently saving”, I offer this. By the best house you can afford. Forget about the area. Crap areas become good areas. A relative had an opportunity to buy a building in the 70’s but passed because of the shitty location…Peter and Richmond. Forget the crash. This is the correction. Prices going up is the correction. We do not have the supply.

        1. jeff316

          at 2:48 pm

          Really though? Is it the LTT? Or is that just the closest pinata?

          Because, in reality, real estate agent commissions cost more than the LTT. Year over year price increases exceed the LTT.

          If you’re really not moving because of the LTT, you couldn’t afford to move anyway.

          1. McBloggert

            at 3:08 pm


            I wouldn’t discount the impact of the LTT. Consider on a $2M purchase price, you’re looking at another $72K of equity you have to flush down the toilet. Does it mean you can’t afford to move? Absolutely not, but it is one of a number of factors that doesn’t make it enticing to re-enter the market.

            Imagine you wanted to do a lateral move – say you got bored of the Beach and want to try Humewood. And you have a $1.5M house and you buy a place for $1.5M – you are going to pay ~$52K in LTT and ~$75K for RE fees. Not to mention, legal, moving and other associated cost, including the likely higher tax assessment you’re getting in your new lateral purchase…So you are faced with ~$140K or so in lost equity to move into something more or less the same price as what you have now. Is it a deal breaker? No, but who the heck would do that? I think it plays a big role in why people are less inclined to move and can’t incrementally move up the ladder; when you move, you have to make a big move because the transactional costs will eat you up if you do it enough.

          2. JK

            at 9:30 am

            HAHAHA ok….I have been in the market in Toronto since the mid 90’s. At this point my mortgage is less than what you would pay for a one bedroom crack house apt. Yes, I can afford to pay the LTT, but no, I refuse to do so. What am I getting for this money? Did I get extra services? A pandering politician decides to stick it to the home owners and I have to pay? No thanks, staying put. My house isn’t available Toronto, sorry. Get rid of the tax, then maybe.

        2. Kyle

          at 3:13 pm

          I 100% agree with JK, Double LTT isn’t the over-riding factor, but it certainly is a factor. I’ve juggled the idea of selling my place and moving vs renovating but what deters me from moving:
          – I don’t see very many other houses that i want to buy. in a sense lack of supply begets more lack of supply.
          – My round trip transaction costs (including the TLTT) are going to be 8-10%. If i spend 8-10% renovating i get a lot more value.

        3. Joel

          at 4:10 pm

          I see so many people taking equity out of their homes in order to renovate or build additions. This has now become very common practice as you can add more house for 200K than you can get is you sell and purchase for 350K more.

      2. condodweller

        at 1:31 pm

        @Joe Q. Thinking that the LTT is a rounding error on a 1 million house is an error in judgement. Consider if the current house owner purchased the house 25 years ago for say $150k with a house-hold income of $50k which may be $80k today. Do you think this person would consider $30k a rounding error? I sure wouldn’t. Add another $50k for the realtor and all of a sudden the cost of moving is $80k which is more than 50% of the initial purchase price.

        Even if you purchased the house for $800k a few years ago and think $80k is a rounding error, please send me a cheque for the $30k next time you move.

  3. Mark N

    at 5:27 pm

    Moving up the housing ladder used to be an incremental process, now the costs are more exponential, and risks greater. Added to that, it is very easy to sell a home, but harder to buy, so why would you take the risk of selling your home to move up in a very uncertain market? The likelihood of finding something better may not materialize in time, and there is nothing between the rungs of a ladder but air…
    I am sure that this is keeping many homeowners from moving up the ladder, and hence contributing to the lack of inventory.

  4. Appraiser

    at 8:58 am

    Those who lament that people aren’t listing and aren’t moving are simply not paying attention. The number of sales are actually up over previous years – so people are listing and moving. In fact more than ever.

    Inventory is a function of demand. The inventory would grow if people didn’t buy. But they are buying, so the inventory doesn’t grow.

    Much like Vancouver, Toronto’s real estate market is demand driven and the demand appears to be unrelenting.

  5. m

    at 2:46 pm

    It seems possible to me that the decline in active listings is not due to fewer houses being listed, but due to fewer days on the market. That is, the supply of houses going into the pipeline may be the same as (or even more than) last year, but because they’re being snapped up so quickly, there are fewer active listings at any point in time.

    That would seem to explain why we could have both more sales and fewer active listings.

    Regarding not seeing a quantifiable reason why the market is going to cool, an interest rate hike would do that pretty quickly. Hard to say what specifically would lead to that, though Trump’s idea of defaulting on US gov’t debt would do the trick. A crackdown on Chinese money laundering might do the same.

    I’m not bearish enough to sell my house. But I sure wouldn’t want to be entering the market at this point.

  6. condodweller

    at 1:20 pm

    I think the reason for the low supply is the sum of all parts. The real estate fee + LTT(s)+moving costs+hassle of buying a new home. My problem with this is that the largest costs are a percentage of the house value which has drastically increased the costs with the house price appreciation. The LTT is even worse because it’s a graduated amount which increases with the house value. I’m not sure when it was implemented but I do remember the $400,000 threshold was determined by deeming anything over the amount a luxury house as the average house price at the time was around $200k. Now virtually every single house sold in the GTA comes with the luxury amount. The current LTT scale needs to be reviewed and re-adjusted to be fair again. Doing this would effectivele eliminate the double tax.

  7. Natrx

    at 10:03 am

    The reason why you went bearish a bit is that interest rates actually started rising! It did. Does anybody remember when the posted rate rose to 3.49%? It grinded the market to a halt! So you can say it’s simply Demand and Supply.. but it’s simply interest rates that is the driving force!

    Then it started going back down in the fall/winter of 2013, before notably dropping in early 2014 at which point the market has not looked back.

  8. lui

    at 9:26 am

    If you think about finding a nice semi in Toronto is hard try looking for a true hard loft that isn’t asking for a king’s ransom.

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