Toronto and GTA Markets in February 2022

This is the recently released report of the Toronto Regional Real Estate Board concerning the February 2022 results:

“March 3, 2022 – February home sales were down compared to the all-time record in 2021, but represented the second-best result for the month of February in history. New listings dropped, but by a marginally lesser annual rate than sales, pointing to a modest move to a slightly more balanced market. Competition between buyers, however, remained tight enough to support double-digit price growth year-over-year.

Greater Toronto Area (GTA) REALTORS® reported 9,097 sales through the Toronto Regional Real Estate Board’s (TRREB) MLS® System in February 2022, representing a 16.8 per cent decrease in the number of sales compared to February 2021. The supply of listings for low-rise home types (detached, semi-detached and townhouses) was also down year-over-year, but not by as much as sales. In the condominium apartment segment, particularly in Toronto, new listings were up in comparison to February 2021.

“Demand for ownership housing remains strong throughout the GTA, and while we are marginally off the record pace seen last year, any buyer looking in this market is not likely to feel it with competition remaining the norm. Many households sped up their home purchase and entered into a transaction in 2021, which is one reason the number of sales were forecasted to be lower this year and a trending towards higher borrowing cost will have a moderating effect on home sales. Substantial immigration levels and a continued lack of supply, however, will have a countering effect to increasing mortgage costs,”

said TRREB President Kevin Crigger.

The MLS® Home Price Index Composite Benchmark was up by 35.9 per cent year-over-year in February. The average selling price for all home types combined was up by 27.7 per cent to $1,334,544. The pace of price growth varied by home type and region, but there was relative parity between low-rise and condominium apartment growth rates.

“We have seen a slight balancing in the market so far this year, with sales dipping more than new listings. However, because inventory remains exceptionally low, it will take some time for the pace of price growth to slow. Look for a more moderate pace of price growth in the second half of 2022 as higher borrowing costs result in some households putting their home purchase on hold temporarily as they resituate themselves in the market,”

said TRREB Chief Market Analyst Jason Mercer”

TRREB always compares things to exactly one year ago. Sometimes that provides rather odd comparisons. That’s why I don’t do that in this report.

REVIEW

Here are the average sale prices as reported by TRREB for single family homes of all types in the GTA, including houses, townhouses and apartments starting at the beginning of 2018 until now:

Average Prices    Month
 

2018
 

$734,837              January 1st

$735,874              January 31st

$767,801              February    

$784,514              March

$804,926              April

$803,440              May

$808,066              June

$781,918              July

$765,252              August

$796,814              September

$807,538              October

$787,741              November

$749,019              December

2019
 

$749,019              January 1st

$747,175              January 31st

$779,791              February

$788,133              March

$820,373              April

$838,248              May

$831,882              June

$806,971              July

$792,134              August

$842,421              September

$851,877              October

$843,307              November

$838,662              December

2020

$838,662              January 1st

$838,087              January 31st

$910,068              February

$902,788              March

$820,226              April

$863,563              May

$931,131              June

$943,594              July

$951,219              August

$960,613              September

$968,535              October

$955,889              November  

$932,297              December

2021

$932,297              January 1st

$966,068              January 31st

$1,044,957           February

$1,097,351           March        

$1,090,584           April

$1,108,124           May

$1,088,991           June

$1,061,724           July

$1,070,140           August                   

$1,135,035           September

$1,155,609           October

$1,163,281           November

$1,157,584           December

2022

$1,157,584           January 1st

$1,242,760           January 31st

$1,334,544           February

For those following these numbers on a monthly basis, please note that some of the recent sales numbers in 2021 and 2022 have had to be restated. A few transactions may have fallen through and not closed as originally scheduled. Consequently, TRREB deletes them and re-enters them in the proper month. That will throw the average prices off by a few hundred dollars if you are looking back at previous monthly reports for consistency. Changes are more likely for the most recent months.

You will notice that the market is now at $1,334,544 which is now the all time peak.

What usually happens each year? The market starts off in January, rises in February, gains momentum in March and April and reaches its peak for the year in May. The market declines in June, declines in July and then bottoms out in August. In September, it reverses itself and rises once again, and in October, it reaches its second peak for the year. In November, the market declines, as it does again in December, and the cycle repeats itself the following year.

For 2022, we’ re off to a predictable start. The market got going in January, and rose again in February.

Let’s undertake an analysis with respect to the rates of return achieved over the last several years. The purpose of this calculation is to smooth out the returns over a longer time period to produce more accurate results. This avoids the rise and fall in a month or two and notably the reference to the exact same month a year ago, which may not be a particularly relevant calculation. You will notice that TRREB refers back 12 full months for comparison purposes. The results should always look reasonably good, because after all, that was a year ago. As you go forward, there should always be good news to report. On the other hand, you would clearly see the ups and downs of the market if you looked at the monthly results. Hence, this report provides you with all those numbers.

The market has declined substantially a few times. Within the last three decades, there are three examples: 1990, 2008 and 2017. The first two are largely historical now.

We will start with 2017 which was a year with a peak in the market and the sudden drop.

2017 started with $730,472 and we are now at $1,334,544, that’s an increase of $604,072 which is a 82.70% increase over the sixty two (62) month period. Expressed over 12 months, that’s a 16.33% annual increase.

2018 started with $734,837 and we are now at$1,334,544, that’s an increase of $599,717, which is a 81.62% increase over the fifty (50) month period. Expressed over 12 months, that’s a 19.59% annual increase.

2019 started with $749,019 and we are now at $1,334,544, that’s an increase of $585,525, which is a 78.17% increase over the thirty eight (38) month period. Expressed over 12 months, that’s a 20.57% annual increase.

2020 started with $838,662 and we are now at $1,334,544, that’s an increase of $495,862, which is a 59.13% increase over the twenty six (26) month period. Expressed over 12 months, that’s a 27.29% annual increase.

2021 started with $932,297 and we are now at $1,334,544, that’s an increase of $402,247, which is a 43.15% increase over the fourteen (14) month period. Expressed over 12 months, that’s a 36.99% annual increase

So, what’s the percentage rate of increase to the end of February?

From 2017             16.33%               calculated

From 2018             19.59%               calculated

From 2019             20.57%                calculated   

From 2020             27.29%                calculated 

From 2021           36.99%                 calculated

The most accurate number here is the 16.33% annual increase from the beginning of 2017. It’s the longest time period, and is therefore the most steady and accurate. Historically, over one thousand years of history we have seen increases of over 5% per annum. So, this is certainly not new! Typically, for the GTA we might expect 6.5% annually in terms of increases. This is a fairly consistent pattern. Right now, we are double that, or for the very short term, quadruple that number.

We do run into a substantial difficulty with many buyers from 2017. If you bought in April 2017 at the peak, you paid $919,614. That property is now worth $1,334,544, that’s an increase of $414,930 which is a 45.12% increase over the fifty eight (58) month period. Expressed over 12 months, that’s a 9.34% annual increase. You can appreciate what a significant difference is made by using a different starting point for the purposes of the calculation. Just four months, and we either have 16.33% (January) or 9.34% (April).

It does speak to the decision for those who faced closing in 2017 after paying the high prices. They actually broke even in June 2020, while those who failed to complete have suffered substantial losses, with no property at all to show for it. In some cases, they lost hundreds of thousands of dollars. They are now well ahead of just having their money sit in the bank. The message is clear: if you can close, do so, and hold on, because at some point the market will reward you. Those who closed have now achieved a positive rate of return. Those who failed to close have simply lost all of their money, without anything today to show for it.        

Volume of Sales

Here are the sales over the last number of years. It’s important to be aware that potentially, there is a great deal of interest. It was only when the market skyrocketed and then plunged in 2017,  that many prospective purchasers were frightened to participate. To a certain extent they have returned but there is very limited supply. That makes it a “super-sellers’ market”. As more and more inventory arrives, the market is likely to transition, but in all probability it will remain a “sellers’ market” until the end of 2021.

2015                     101,214

2016                     113,040

2017                     92,340

2018                     78,018

2019                     87,750

2020                     95,066

2021                     121,712

You will notice that there have been a great many transactions. The market is “hot” and relatively, there is little to no inventory. It’s a Seller’s market.  We were at 121,712 transactions for 2021 which breaks the previous record in 2016.

The reasons seem straightforward:

  1. Interest rates are low, and
  2. Buyers are optimistic about the market.

Here are the current sales:

2022

January       5,622                     

February      9,097

2021

January       6,888

February     10,929

We are down slightly from last year. There are still lots of Buyers, but the market lacks inventory. That places an upward pressure on prices. At a certain point, the Buyers back off. They become reluctant to surge ahead with higher and higher Offers in order to outbid their competition. This happened in the Spring of 2017 and it looks like we will see a repeat.

At that time, many pointed fingers at the Liberal Government and blamed the foreign buyers’ tax. But, really, it was just a coincidence. Every so often the market pauses, and then goes down or sideways, waiting for everyone to catch up.

In early February, we would often see 20 bidders per house; that dropped down to 10, and now to just a few.

It’s important to appreciate that we will not see a balanced market until we see about 5 month’s worth of inventory on hand. Right now, we are still at about one month’s inventory.

COMMENT

Some market trends that we have been seeing:

  • Increase in the demand for cottages,
  • Increase in demand for properties with backyards (semis and detached)
  • Increase in demand for properties in the suburbs and outlying areas
  • Toronto based families looking to relocate to the 905 and 519 areas
  • 905 based families looking to relocate to 519, 705 and 613 areas
  • Baby boomers staying in place rather than downsizing
  • Renewed interest in downtown condos

It’s impossible to predict the future, but we can certainly observe the current trends in the marketplace to give us some guidance.

Predictions

It looks like the impact of Covid is over, at least when it comes to residential real estate. There will still likely be an affect once the moratorium on commercial tenancy evictions is lifted, which will not take place until April 2022. Many commercial premises should become available at that time.

If you would like to discuss the market, please give me a call at 647-404-8150.

Brian Madigan LL.B., Broker

www.iSourceRealEstate.com

www.OntarioRealEstateSource.com

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