Toronto Real Estate sets pace to break $1M average selling price in 2021
The Toronto Real Estate market was off to a thundering start this January as home sales were up 52% compared to last January with growth across all major segments. New listings were up 20% on a year-over-year basis in January, but not by the same annual rate as sales.
From a month-to-month perspective, new listings were up 60% from December to January. Sounds like a lot, right? Not when you compare it to last December-January when new listings were up 122% and the year before that 119%.
This lack of inventory has buyers finding themselves in competitive offer situations, driving up the average selling prices of homes in the City of Toronto and surrounding GTA regions.
We can see the result this high number of sales combined with low inventory in the double-digit growth rate of average selling prices. The average selling price was up 3.8% from December 2020 and up 15.5% from last January to $967,885.
In TREBB’s Outlook Report they noted that the average selling price is set to hit over $1,000,000 this year. The crazy thing? If the month-over-month increase was 3.8% and if this trend continues, a $1,00,000 home now would be worth $1,250,000 in June. An increase of $38,000 a month!
January Sales to New Listing Ratio (SNLR):
The "sales to new listings ratio" or SNLR is the ratio between the number of homes sold and the number of new listings entering the market. This is a strong indicator of what's happening between sellers and buyers, essentially, supply and demand.
The SNLR ratio is normally 50% during a balanced market while a higher ratio implies a seller's market and a lower ratio implies a buyer's market. In a seller's market, you may see sold prices go up as there are more buyers than there are homes for sale. Alternatively, in a buyer's market, you may see sold prices drop as buyers have more options to choose from.
As you can see in the chart, year-over-year the January market has been mainly balanced, except for 2017 and 2021 where we can see the highest ratio in the last 8 years, 73%. If you recall, 2017 was the last time we saw prices sky-rocket in the period of just a few months with demand falling significantly during the second half of 2017 due to worsening affordability and the introduction of a foreign buyer tax.
What does this mean for 2021? With lower lending rates and the eagerness of buyers to get a foothold in the Toronto housing market, now is a great time to sell for top dollar. However, if this trend continues and home prices continue to rise, we may see the federal government step in as double-digit price increases can quickly deteriorate housing affordability.