Is the Toronto housing market finding it's balance?
In this report, I'll be breaking down the November stats provided by the Toronto Regional Real Estate Board (TRREB). They are specifically for the City of Toronto which includes Etobicoke, Central Toronto, North York, East York and Scarborough.
What happened in November?
Toronto's housing market activity continued to be influenced by the impact of higher borrowing costs. Sales were down compared to the same period last year, following a trend that began with the commencement of interest rate hikes in the spring.
Last year's hyperactive market was a tough act to follow, and the steady hike in interest rates has put the brakes on many potential buyers and sellers. While seasonality may be contributing to the slump in sales month-over-month, it's clear that the real culprit is the changing economic landscape.
The average sale price in the City of Toronto has seen a minor decrease compared to both the previous year and the previous month.
Sellers are being forced to adjust their expectations in light of the changing market, as prices and competition have declined since the peak selling prices observed in early spring. This shift may require sellers to reassess their pricing strategy and become more flexible in order to compete in a market that is no longer as favourable to them as it was earlier in the year. At the same time, buyers may find that they have more bargaining power and can negotiate more favourable terms in their purchases.
The number of new listings also decreased compared to both the previous year and the previous month. November was the second lowest month after January for new listings in 2022.
This trend suggests that the housing market is slowing down, whether due to seasonality or to sellers choosing to hold off on listing their properties until they have a better sense of market conditions.
This slowdown could impact both buyers and sellers, as they may have to adjust their expectations and strategies in order to succeed in the current market. For example, buyers may find that they have more bargaining power and can negotiate more favourable terms, while sellers may have to be more flexible in their pricing and be prepared to accept lower offers than they would have in a hotter market. Overall, it's important for both parties to be aware of the changing market dynamics and to adapt their approaches accordingly.
Understanding key real estate market metrics: sales to new listing ratio, days on market, and months of inventory
The sales to new listing ratio tells us how many of the newly listed properties are being sold in a certain time frame. If the ratio is around 50%, it means the market is balanced. But if it goes above 60%, that's when we start to see a seller's market, where prices tend to rise. So, the higher the ratio, the better it is for sellers and the more competitive the market becomes for buyers.
The average days on market refers to the average amount of time that it takes for a property to be sold after it is listed for sale. This can be a useful metric for understanding how quickly homes are being snapped up in a particular area.
Lastly, the months of inventory ratio is a measure of the amount of time it would take for all of the currently listed properties to be sold, based on the current rate of sales. It's a useful metric for understanding how much supply there is relative to demand in a particular area. For example, if there are 100 properties currently listed for sale and 20 of them are sold each month, it would take 5 months to sell all of the properties (100 / 20 = 5).
2022:
2021:
Based on these metrics, it looks like the tides have turned for real estate in Toronto! The sales to new listings ratio has dropped 25% from last year, which means there's more of a balance between the number of properties being listed and the number that are actually being sold. It's a much more even playing field now for both buyers and sellers.
The higher number of days on market and months of inventory tell us that buyers are less eager and the market is less competitive. This is in line with the current market conditions, which have seen lower sale prices and fewer sales overall.
The real estate market in the City of Toronto may be cooling down, but it's still looking pretty steady! These metrics show that things are moving at a slower pace than before, but that's not necessarily a bad thing. In fact, it could be a sign that the market is finding its balance So, while it's not exactly a hot market right now, it's definitely not a cold one either.
If you have any questions or would like more information on recent home sales in your specific neighbourhood, don't hesitate to give me a shout at 416.856.1937 or by emailing me at Suzanne@suzannelewis.ca.