Summer Real Estate Market Offers Buyers More Options and Negotiating Power
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In this email, I'll be breaking down the August 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 August?
“More balanced market conditions this summer compared to the tighter spring market resulted in selling prices hovering at last year’s levels and dipping slightly compared to July. As interest rates continued to increase in May, after a pause in the winter and early spring, many buyers have had to adjust their offers in order to qualify for higher monthly payments. Not all sellers have chosen to take lower than expected selling prices, resulting in fewer sales,” said TRREB Chief Market Analyst Jason Mercer.
The steadiness of these lower sales figures throughout summer, despite changes in listing activity, could be the result of contrasting forces at play: increased supply due to more listings and subdued demand due to higher borrowing costs. This situation could create a delicate balance in the market, where the number of sales remains relatively stable while other metrics, like listing activity, exhibit fluctuations.
The average sale price in August was $1,005,945, which again, not a huge difference when compared to last year or last month.
The combination of the typical summer lull and a cautious stance among both buyers and sellers, driven by anticipation of developments in interest rates and overall market conditions, has resulted in a collective "wait-and-see" mindset.
Consequently, sellers find themselves in a position where they must recalibrate their expectations and, at times, acquiesce to the reality of accepting offers that align with this evolving affordability landscape.
In August, there was an upswing of 14.4% in new property listings when compared to August 2022. However, 15.4% fewer people listed their properties in August than July.
Taken together, these trends suggest a degree of uncertainty in the market. This uncertainty is leading to short-term fluctuations in listing activity, influenced by interest rates, seasonality, and market sentiment. Unless compelled by immediate circumstances, the prevailing sentiment appears to be a 'wait-and-see' approach.
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).
August 2023:
August 2022:
Very similar to last month's report, the sales to new listing ratio (SNLR) has shown a significant shift over the past year. In August 2022, it stood at nearly 60%, indicating a seller's market. However, in August 2023, it has transitioned to 49.3% down 0.5% from the previous month, dipping further into a balanced market.
Another compelling statistic is the 2.5 months of inventory recorded in August. It indicates that there is a larger supply of homes available compared to the demand from buyers. In other words, there are more homes on the market than there are buyers actively purchasing.
For prospective buyers, this situation offers a unique opportunity. With a higher supply of homes to choose from, buyers have more options and negotiating power. They may find a broader range of properties that meet their criteria, and they may also have the advantage of negotiating more favourable terms with sellers.
The recent decision by the Bank of Canada also plays a pivotal role in shaping the real estate landscape. After executing two interest rate hikes earlier this year, the bank opted for stability by holding its key rate at 5% during the September 6th announcement.
Looking ahead, if the trend continues and interest rates begin to decrease in the near future, we may anticipate a surge in market activity as the year draws to a close. This potential rate reduction could bolster buyer and seller confidence and contribute to a revitalized real estate landscape in the coming months.
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 simply responding to this email.
