GTA REALTORS® Release June 2023 Stats
“July 6, 2023 – Home sales and the average selling price in the Greater Toronto Area (GTA) in June 2023 remained above last year’s levels. Seasonally adjusted sales dipped on a month-over-month basis. The seasonally adjusted average selling price and the MLS® Home Price Index (HPI) Composite benchmark were up compared to the previous month.
“The demand for ownership housing is stronger than last year, despite higher borrowing costs. With this said, home sales were hampered last month by uncertainty surrounding the Bank of Canada’s outlook on inflation and interest rates. Furthermore, a persistent lack of inventory likely sidelined some willing buyers because they couldn’t find a home meeting their needs. Simply put, you can’t buy what is not available,” said Toronto Regional Real Estate Board (TRREB) President Paul Baron.
GTA REALTORS® reported 7,481 sales through TRREB’s MLS® System in June 2023 – up 16.5 per cent compared to June 2022. The number of listings was down by three per cent over the same period.
The year-over-year increase in sales coupled with the decrease in new listings mean market conditions were tighter this past June relative to the same period last year. The average selling price was up by 3.2 per cent to $1,182,120. The MLS® HPI Composite benchmark was still down by 1.9 per cent on a year-over-year basis – the lowest annual rate of decline in 2023. On a month-over-month basis the seasonally adjusted average price and MLS® HPI Composite benchmark were up.
“A resilient economy, tight labour market and record population growth kept home sales well above last year’s lows. Looking forward, the Bank of Canada’s interest rate decision this month and its guidance on inflation and borrowing costs for the remainder of 2023 will help us understand how much sales and price will recover beyond current levels,” said TRREB Chief Market Analyst Jason Mercer.
“GTA municipalities continue to lag in bringing new housing online at a pace sufficient to make up for the current deficit and keep up with record population growth. Leaders at all levels of government, including the new mayor-elect of Toronto, have committed to rectifying the housing supply crisis. We need to see these commitments coming to fruition immediately, or we will continue to fall further behind each month,” stressed TRREB CEO John DiMichele. “In addition to the impact of the listing shortage, housing affordability is also hampered on an ongoing basis by taxation and fees associated with home sales and construction as well as the general level of taxation impacting households today. Going forward, we need to look at all of the factors influencing the household balance sheet and people’s ability to house themselves,” continued DiMichele.”
This is the monthly indication of the average sales prices of single family homes (all property types) in the GTA:
$932,297 January 1st
$966,001 January 31st
$1,157,837 January 1st
$1,242,407 January 31st
$1,334,021 February (all time peak)
$1,298,705 March down
$1,250,704 April down
$1,210,372 May down
$1,145,796 June down
$1,073,213 July down
$1,078,999 August up
$1,086,456 September up
$1,087,590 October up
$1,079,420 November down
$1,051,409 December down
$1,051,409 January 1st
$1,037,113 January 31st down
$1,096,157 February up
$1,108,163 March up
$1,153,500 April up
$1,195,929 May up
$1,182,120 June down
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.
The overall market peak took place at the end of February 2022. Then, we had a series of significant increases in the Bank of Canada rate.
The Buyers out there have the same amount of money that they had before, however, now more money will be going to the Banks for interest on mortgages than to the Sellers.
You will notice that there was a considerable price decline, which has been reversing since August 2022. Buyers wanted to wait until the market had bottomed out. So, they waited. In January, the Bank of Canada increased raising interest rates and also stated that the process was now complete (at least, for now).
All the governments seemed to be focused on lowering prices. There were all kinds of new taxes imposed by federal, provincial and municipal governments. None of them worked. But, raising interest rates worked magically and reduced prices by as much as 20% since February 2022. In February, March, April and May 2023, prices increased. The slight drop in June is quite predictable on an annual basis.
Buyers have been sitting on the sidelines until the Bank of Canada stopped raising interest rates. Obviously, it’s time to jump back in again. We are likely to see increasing prices going forward, subject of course, to the annual predictable fluctuations.
Sellers are holding back, not prepared to enter a falling market, so, we have a shortage of listings.
Bank of Canada Rates
These are the rates as of 7 June 2023:
|Date*||Target (%)||Change (%)|
|June 7, 2023||4.75||+0.25|
|April 12, 2023||4.50||—|
|March 8, 2023||4.50||—|
|January 25, 2023||4.50||+0.25|
|December 7, 2022||4.25||+0.50|
|October 26, 2022||3.75||+0.50|
|September 7, 2022||3.25||+0.75|
|July 13, 2022||2.50||+1.00|
|June 1, 2022||1.50||+0.50|
|April 13, 2022||1.00||+0.50|
|March 2, 2022||0.50||+0.25|
|January 26, 2022||0.25||—|
|December 8, 2021||0.25||—|
*As of 2021, a change takes effect the day after its announcement.
Second Thoughts about Selling at the Peak
The market peaked at $1,334,021 in February 2022. Obviously, that was the best time to sell. Maybe and maybe not!
Closings are typically 60 to 90 days. Very short, 30 days or a little on the longer side, being 120 days. However, many February closings stretch out to close 31 July. The price at the end of July was $1,073,316, that’s a decline of $260,705 or 19.54%. Their properties appraise at $260,705 less than they need to close their deals.
For many purchasers, it simply meant that they didn’t have sufficient funds to close their deals. For the Sellers, this likely means a lawsuit to recover their losses. And, if they were using the funds to buy something else, their own purchases might have fallen through too! So, that means two lawsuits. So, a February high priced sale might be quite risky!
It’s usually best to avoid risky time periods.
The Market has Bottomed out and we are on a Rise Again
Buyers are back to bidding wars and Sellers are gradually starting to return Both listings and home sales were up in June.
Two Simultaneous Market Trends
At the present time we have two trends in the market both working at the same time:
- rising interest rates bringing the prices down, and
- supply shortage bringing the market up.
The rising interest rates effectively worked from February 2022 to August 2022, but now that is over and we are now back to rising prices. If you recall the ‘70’s and ‘80’s, rising real estate prices were fuelled by inflation. We haven’t seen that for a while, but if it returns, it’s better to own real estate than being in a position where you are attempting to buy it.
Long Term Performance
It’s unfortunate, that the media hasn’t written about this yet. Over the longer term, real estate has proven to be an excellent investment. They will in time.
Here are the annual returns if you owned property from the following dates:
1 January until 30 June 2023
The 24.86% is at the halfway mark throughout the year. Prices are not expected to be higher at the end of December, so, this “performance” would drop in half to 12.43% if prices continued to hold.
If you would like to discuss the market, please give me a call at 647-404-8150.
Brian Madigan LL.B., Broker