Hang in there because real estate in Toronto will be even wilder than normal over the next few months. Data from the Toronto Regional Real Estate Board (TRREB) shows home prices jumped in March. Other price indicators fell, with the board noting that prices are “bucking” the seasonal trend. Home sales fell 3 times the rate of new inventory, bringing Toronto back to a balanced market.
Toronto house price growth is slowing
Composite benchmark prices, or the typical price of a home, have risen significantly over the past month. The benchmark TRREB reached $1,376,000 in March, up 2.69% ($36,000) from the previous month. Compared to last year, prices are now 34.81% higher ($355,304).
Metro Toronto Benchmark Price
The composite benchmark price of a house in the Greater Toronto Area.
Source: TRREB; Live better.
In the City of Toronto, the benchmark hit $1,365,700, up 4.39% ($57,400) from the prior month. Prices are now 28.00% ($298,700) higher than they were last year at this time. These numbers are at odds with other price indicators, but more on that in a few seconds.
Let’s first talk about the rate of price growth, which shows a deceleration. In March, the annual growth of 34.8% of the TRREB is around 1 point lower than the previous month. This is still a very high rate of growth, but the last slowdown was in August 2021. That was just before election promises to flood the market with silver kickstarted the trend.
GTA Benchmark Price Change
The annual percentage change in the reference price of the TRREB for all types of houses.
Source: TRREB; Live better.
As for the City, it has actually seen a further acceleration in price growth – although there is a catch. The annual growth rate jumped another 0.7 points in March, but a breakdown shows that this was due to condominiums. The other segments showed a deceleration in price growth. We’ll cover the breakdown by segment another day.
The average sale price posted an unusual drop for the season
Non-indexed price measures do not move in the same direction, which sends a confusing signal. The median sell price on TRREB fell to $1,165,000 in March, down 3.32% ($40,000) from the previous month. Similarly, the average price fell to $1,299,894 in March, down 2.60% ($34,650) from the previous month. A drop is odd for March when more expensive homes start to hit the market. “The average selling price was down slightly month-over-month, bucking the usual seasonal pattern,” TRREB said.
Toronto home sales fell much faster than inventories
GTA home sales fell and brought the market back to normal, at least for demand. Home sales fell to 10,955 in March, down 29.9% from a year ago. Meanwhile, new listings were 20,038, down 11.9% over the same period. Home sales fell at 3 times the rate of new inventory as demand disappeared faster than supply.
GTA Sales to New Listings
The number of homes sold in the GTA, compared to the number of new home listings for sale.
Source: TRREB, Better living.
The Sales-to-New Listings Ratio (SNLR) is used by the industry to determine if a market is balanced, or in favor of buyers or sellers. If the ratio is between 40 and 60%, the market is balanced. Above 60% is a seller’s market where prices are rising, and below is a buyer’s market where prices tend to fall. Last month, the ratio fell to 54.7%, landing right in the middle of a balanced market. In February, the ratio was 64.3% and in March 2021, it was 68.7%. From sellers to buyers in the blink of an eye. If demand does not increase with supply, house prices could undo some gains.
Prices go up and down. What’s the problem? The reference price is an index conceptually similar to an inflation basket. A typical house made of the various components of different types of houses. It is then modeled for qualitative and quantitative price changes for each component. It is not the real price of a house. At the same time, the median and the means do not normalize, which means that there are no quality adjustments. Although quality means less in a bubble, where amenities play a small role in price.
Some say a benchmark is behind, while others say medians and averages don’t appreciate complexities. Neither is the “wrong” number, and normally they move in the same direction. This one is a bit doozy and hard to get a clear picture of until more months of data arrive. However, home sales are falling faster than inventory as the market becomes “balanced”. It’s too early for the rate impact to have hit mortgages, so it’s likely a psychological impact.