June 2017 Toronto Real Estate Market Watch
Government regulations, media doomsday, crazy market statistics.
What is happening in the real estate market?
As always, the media has a habit of jumping every time the market slows down – early summer and late fall. Funny how the bubble is always about to burst when we have historical, seasonal slow downs.
The government chose to announce new coming regulations in the peak of the spring market – when it would have the most dramatic effect.
When you compare the numbers to 2016, the stats are definitely more dramatic.
But let’s reflect for a moment how crazy the market has been in the past couple of years – 25-30% year over year growth in home values and historically low inventory levels.
Here’s why the market is still healthy:
1) High Demand: The Toronto Real Estate Market conducted a study with Ipsos Reid which showed 35 per cent of households surveyed indicated that they were very likely (13 per cent) or likely (22 per cent) to purchase a home over the next year. That’s not even considering population growth in our city.
2) Low Interest Rates: While there is an expected .25% rate hike by the Bank of Canada on July 12th, rates are still historically low. We have always said that interest rate hikes that would have a major market impact will be like a mack truck coming at you at five kilometers an hour – you’ll have plenty of time to get out of the way.
3) A Strong Economy: The Financial Post just reported yesterday that Canadian trade data shows economic strength ahead of the rate decision; Export Development Canada Chief Economist Peter Hall said eight of the 11 main export sectors had grown for three months in a row. “This is really strong evidence of a broadly based increase,” he said. “It gives us confidence that there is real muscle behind this.”
Even after the 2008-09 recession, the housing market corrected by only 10%. Buyers should enjoy this rare slow down in price increases and not fall for the crowd mentality of ‘wait and see’. The fall will be very telling once that passes.
As per RE/MAX Hallmark:
Contrary to some recent headlines, the Toronto real estate market remains strong with average prices increasing by 14.9% at the end of May 2017 compared to end of May 2016. According to the Toronto Real Estate Board, the average price reached $863,910 compared to $752,100, respectively.
“Average price will continue to increase at a healthy rate, albeit, at a more moderate pace than the first quarter of 2017” says Ken McLachlan, Broker-Owner, RE/MAX Hallmark. “This lower increase is a result of an influx of inventory in April and May.”
Inventory levels were at approximately one month worth of sales or less for each month of the year until May. At the end of May inventory levels stood at 18,477 homes which represents about 1.8 months of the sales in May of 10,196 homes. Traditionally, in the real estate industry, months of inventory value of up to 4 months has been considered a seller’s market. As buyers had more choice in May, compared to the prior four months of the year, they were taking a little longer to make their buying decision and accordingly the number of homes exchanging hands decreased by 20% from the all-time record set in May of 2016.
“We are still in seller’s market territory and that is why prices increased double digits in May compared to last year” says Debra Bain, Broker-Owner, RE/MAX Hallmark. “Based on what we are hearing from our REALTORS ®, inventory levels are expected to increase slightly approaching the fall months, however we are expecting to stay in seller’s market or balanced market territory for the foreseeable future.”