Toronto and GTA Markets in April 2020
This is the recently released report of the Toronto Real Estate Board concerning the April 2020 results:
“TORONTO, ONTARIO, May 5, 2020 –
Toronto Regional Real Estate Board President Michael Collins released the following key housing market statistics for April 2020:
Home Sales and Listings
• Greater Toronto Area REALTORS® reported 2,975 residential transactions through TRREB’s MLS® System. This result was down by 67 per cent compared to April 2019. Weekday sales remained within a relatively steady range during the month, averaging 130 per day.
• New listings amounted to 6,174 in April 2020 – down on a year-over-year basis by a similar rate compared to sales (-64.1 per cent).
• The average selling price for April 2020 transactions was $821,392 – up by 0.1 per cent compared to the average price of $820,373 reported for April 2019. The semi-detached and townhouse market segments experienced annual average price growth above the rate of inflation. The condominium apartment and detached segments experienced year-over-year price declines on average.
• The trend for the MLS® Home Price Index Composite Benchmark, which had been on an upward trajectory since the beginning of 2019 flattened in April. On a year-over-year basis, the Benchmark was up by 10 per cent.
• The MLS® HPI indices represent prices for typical homes with consistent attributes from one period to the next. The fact that the MLS® HPI was up year-over-year by a greater rate than the average selling price suggests that the share of higher end deals completed in April 2020 versus April 2019 was down.”
Here are the average sale prices as reported by TRREB 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
$838,649 January 1st
$838.958 January 31st
For those following these numbers on a monthly basis, please note that some of the recent sales numbers in 2019 and 2020 have had to be restated. A few transactions may have fallen through and not closed as originally scheduled. Consequently, TRREB 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 for consistency. Changes are more likely for the most recent months.
The average price of $902,680 achieved in March is not that far off the all-time peak of the Toronto market in April 2017. However, look at that drastic dip in April 2020 to $821,392. You will notice that it’s overlooked for comment in the TRREB report which focuses on the market one year ago, rather than last month.
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. This decline caught many consumers and professionals “off-guard”. In 2018, the market peaked in June, and in 2019, the peak was October.
This year will undoubtedly be different due to the COVID-19 pandemic and the consequent global recession. The first part of March started with a major upswing due to pent up demand. The last part of March slipped sharply because of the lack of showings and interruption of the general marketplace. The underlying statistics for March 2020 still looked relatively good. Sales were up and prices were up, yet we really only had the first half the month contributing to the good results. March was relatively “hot” and would have even been better had it not been for COVID-19.
Let’s undertake an analysis with respect to the rates of return achieved over the last several years. The purpose of this calculation is to smooth out the returns over a longer time period to produce more accurate results.
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 $821,392, that’s an increase of $90,920 which is a 12.44% increase over the forty (40) month period. Expressed over 12 months, that’s a 3.73% annual increase. Last month when we reported, we had 7.25%. What a difference one month can make! We lost almost one half of the rate of return by going from 39 months to 40 months.
2018 started with $734,837 and we are now at $821,392, that’s an increase of $86,555 which is an 11.78% increase over the twenty eight (28) month period. Expressed over 12 months, that’s a 5.04% annual increase. Last month, this calculation was 10.15%.
2019 started with $749,019 and we are now at $821,392, that’s an increase of $72,373 which is a 9.62% increase over the sixteen (16) month period. Expressed over 12 months, that’s a 7.25% annual increase. Last month, this was 16.41%.
Why don’t we try the short term numbers for just 2020? 2020 started with $839,111 and we are now at $821,392 that’s an decrease of $17,719 which is a 2.11% decrease over the four (4) month period. Expressed over 12 months, that’s a 6.33% annual decrease. However, just because we can actually do the math doesn’t make it statistically significant. It will not decrease at this current monthly rate for 12 months in a row. It never has, so it won’t this year either. And, that’s before the COVID-19 interruption. When we did this actual calculation last month we expected a positive 30.30% annual return, and now we are negative 6.33%.
What a difference one month can make to our numbers month
So, what’s the percentage rate of increase?
From 2017 7.25% 3.73% calculated
From 2018 10.15% 5.04% calculated
From 2019 16.41% 7.25% calculated
From 2020 30.30% -6.33% annualized estimated
The most accurate number here is the 3.73 % 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. But, we saw quite a drop in the one month numbers due to COVID-19. Is this just temporary? Is it a pause in the market? Or, possibly an indicator of where we are going in the market?
As for TRREB, they want to effect a comparison to April of 2019. That’s specifically, those 12 months. My comparison was to the commencement of the calendar year, which took into account 16 full months, and then expressed that as a 12 month rate.
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. All our rates of return were cut in half when we added the month of April.
For curiosity sake, the peak was April 2017 at $919,614. The drop to today at $821,392 is $98,222, which is a 10.68% decrease. Actually, this used to be the target number for a full recovery in 2020. With the strong March performance in the first half of the month it looked like this mark was going to be achieved. Now, with the significant interruption due to COVID-19, that number may not be reached this year. We will have to wait and see. There is a lot of “pent up” demand.
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 9,005 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 7,792 6,414 up
October 8,446 7,448 up
November 7,056 6,206 up
December 4,367 3,746 up
Total 87,762 78,015 up
Month 2020 2019 Trend
January 4,556 3,968 up
February 7,223 4,982 up
March 7,994 7,132 up
April 2,975 9,005 down
You will notice that there were more transactions in 2019 compared with 2018.This trend put the pressure on prices. Buyers obviously chose to enter the market rather than continue to sit on the sidelines. Then, we had the big drop in sales from mid-March until the end of April
We are now into the third month of our emergency crisis on account of the COVID-19 pandemic. While the number of transactions have dropped substantially, we just saw a drastic drop in prices that no one really wants to talk about, because it would be quite upsetting.
It might require a more critical analysis, drilling down through the numbers. Fewer higher priced homes are selling, so that affects the average price. Perhaps we should be looking at the median numbers instead
It’s still much too early to predict the prices for the rest of this year, but as you might appreciate, there are indeed some bargains out there now, so, those buyers who are interested should act now.
If you would like to discuss the market, please give me a call.
Brian Madigan LL.B., Broker