Toronto Area Market Takes A Breather

After more than two years of steadily declining inventory, the total number of active listings in the Toronto area increased significantly last month, bringing the supply of homes for sale up from 0.7 months to 1.1 months, roughly in line with last April. While this is still very deep in sellers’ market territory, the increase in supply will hopefully take some of the extreme craziness out of the market.

Inventory_April_2017_001

Prices also moderated somewhat in April. After posting an eye-popping 33% year-over-year increase in March, the April average price was ‘only’ 24% higher than last April. Does this mean that the bubble is bursting and prices are now going to fall like a rock? Hardly. There was a tremendous amount of hype and ‘bubble talk’ around the 33% price increase last month, and this likely encouraged many sellers to move up their plans to list out of fear that the end was nigh and they’d better get their home on the market quick. The Ontario government’s ’16 point plan’ didn’t help, as it further fed the fear that prices were about to drop, even though there was nothing in the plan that (rationally) should impact prices in any significant way. The predictable result, more homes for sale for buyers to choose from, led to fewer bidding wars, especially outside the City of Toronto, and a temporary (at least) moderation in price increases. Now that a lot of supply has apparently been pulled forward, it will be interesting to see if there is a reduction in inventory next month and another jump up in price. Much depends on buyers’ psychology at this point. If buyers generally feel that ‘the tide has turned’ and there will henceforth be much greater selection for them, they may tend to hold back and not be so ready to engage in crazy bidding wars. In turn that could lead to more houses remaining longer on the market, which will further increase inventory and further reinforce buyers’ sense that there are lots of homes for sale and… well, you get the picture.

Prices_April_2017

Ironically, it is mostly single family homes that saw a moderation in supply and prices last month. While prices for detached and semi-detached homes rose about 24% year-over-year, prices for condo apartments rose by 32%! Who woulda thunk a couple of years ago that condo prices in 2017 would be rising more quickly than detached homes?