Toronto and GTA Markets in February 2020
This is the recently released report of the Toronto Real Estate Board concerning the February 2020 results:
TORONTO, MARCH 4, 2020 –
In line with the forecast contained in the Toronto Regional Real Estate Board’s recently released Market Year in Review and Outlook Report, TRREB President Michael Collins announced a very strong year-over-year sales and price growth in February 2020. Greater Toronto Area REALTORS® reported 7,256 residential transactions through TRREB’s MLS® System in February 2020, representing a 45.6 per cent increase compared to a 10-year sales low in February 2019.
However, February 2020 sales were still below the 2017 record result. Year-over-year sales growth, for the GTA as a whole, was strongest for ground-oriented home types. After preliminary seasonal adjustment, February 2020 sales also exhibited positive momentum, up by 14.8 per cent compared to January 2020. New listings amounted to 10,613 in February 2020, a 7.9 per cent increase compared to February 2019.
This moderate annual growth rate was much smaller than that reported for sales, which means market conditions tightened considerably over the past year.
As market conditions tightened over the past year, competition between buyers has clearly increased. This resulted in a further acceleration in year-over-year price growth in February. The MLS® Home Price Index Composite Benchmark was up by 10.2 per cent.
The average selling price for all home types combined was up by 16.7 per cent to $910,290. Double-digit average price growth was experienced for most major market segments, including detached houses and condominium apartments.
Here are the average sale prices as reported by TREB 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
$734,837 January 1st
$735,874 January 31st
$749,019 January 1st
$747,175 January 31st
$838,593 January 1st
$839,111 January 31st
For those following these numbers on a monthly basis, please note that some of the recent sales numbers in 2019 have had to be restated. A few transactions may have fallen through and not closed as originally scheduled. Consequently, TREB 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. Changes are more likely for the most recent months.
The first observation is that the average price at $910, 290 is quite close to ythe all time peak of the Toronto market.
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 in December, and the cycle repeats itself the following year.
Be cautious! That doesn’t always happen. Look at 2017, where the market peaked in April and dropped substantially after that which caught many consumers and professionals “off-guard”. In 2018, the market peaked in June, and in 2019, the peak was October.
Let’s undertake an analysis with respect to the rates of return achieved over the last several years.
We will start with 2017 which was the year with the peak of the market and the sudden drop. 2017 started with $730,472 and we are now at $910,290, that’s an increase of $179,818 which is a 24.62% increase over the thirty eight (38) month period. Expressed over 12 months, that’s a 7.77% annual increase.
2018 started with $734,837 and we are now at $910,290, that’s an increase of $175,453 which is a 23.87% increase over the twenty six (26) month period. Expressed over 12 months, that’s a 9.18% annual increase.
2019 started with $749,019 and we are now a $910,290 , that’s an increase of $161,271 which is a 21.53% increase over the fourteen (14) month period. Expressed over 12 months, that’s an 18.45% annual increase.
Why don’t we try the short term numbers for just 2020? 2020 started with $839,111 and we are now at $$910,290, that’s an increase of $71,697 which is a 8.55% increase over the two (2) month period. Expressed over 12 months, that’s a 53.3% annual increase. However, just because we can actually do the math doesn’t make it statistically significant. It will not increase at the rate of 4.27% for 12 months in a row. It never has, so it won’t this year either.
So, what’s the percentage rate of increase?
From 2017 7.77% calculated
From 2018 9.18% calculated
From 2019 18.45% calculated
From 2020 51.31% for two months, annualized estimated
The most accurate number here is the 7.77 % 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! This is a fairly consistent pattern.
The market peaked in the early Spring of 2017, so this figure takes into account both the rise and fall in 2017. This is the market performance since the beginning of 2017.
The numbers to avoid are the very short term numbers. So, that would be what’s happening right now in 2020.
For curiosity sake, the peak was April 2017 at $919,614. The drop to today at $910,290, is $9,324, which is a 1.01% decrease. Actually, this was the target number for a full recovery in 2020, however, with at least three strong months to go, the 2017 peak should be exceeded.
Volume of Sales
Month 2019 2018 Trend
January 3,968 3,987 down
February 4,982 5,148 down
March 7,132 7,188 down
April 9,006 7,742 up
May 9,951 8,402 up
June 8,826 8,024 up
July 8,555 6,916 up
August 7,682 6,797 up
September 7,795 6,414 up
October 8,455 7,448 up
November 7,064 6,206 up
December 4,381 3,746 up
Total 83,8295 78,015 up
Month 2020 2019 Trend
January 4,481 3,968 up
February 7,256 4,982 up
You will notice that there were more transactions in 2019 compared with 2018.This trend put the pressure on prices. Buyers have obviously chosen to enter the market rather than continue to sit on the sidelines.
More transactions without a corresponding increase in Listings will continue to place an upward pressure on prices.
The slowing of the global economy due to infectious disease has prompted Central Banks to ease up on interest rates. If Buyers can access more money at lower rates of interest, then, they can spend more on real estate.
This looks like an attractive and balanced market for both Buyers and Sellers. Lightening up on the stress test (mortgage qualifications rules) and extending amortization periods will permit Buyers to get more house for the money they spend.
If you would like to discuss the market, please give me a call.
Brian Madigan LL.B., Broker