May Toronto Real Estate Board Stats Show Very Busy Market: Can It Be Sustained?

Strong Seller’s Market In May With Some Price Recovery

Wow, what a month. Sales hit 9,589 houses and condos, UP 1.9% from 2008 and better than any May this decade except for 2007!

Inventory of homes for sale was the lowest it’s been since 2002 and down a dramatic 21.1% year-over-year. The sales-to-listings number for May was at a high sellers market ratio of 44.6%.

Just as a reminder… a neutral Toronto real estate market has a sales-to-listings ratio of 24-28%, below 24% is a buyer’s market and above 28% is a seller’s market.

So what’s this telling us? First, the move-up market is not as strong as it might be in normal economic circumstances. The lower number of listings indicates that fewer home owners are venturing out to sell and move to a larger home. Their resistance might be a function of job confidence or perhaps a loss of investment equity in the stock market.

This lower listing inventory is putting upward pressure on sale prices and causing the dreaded multiple offer scenarios to unfortunately reappear.

The May average sale price on the Toronto Real Estate Board was $395,609, down just 0.64% from May 2008 although the year-to-date average of $369,648 is still 4.4% below last year’s number.

Houses are taking a slightly larger proportion of the market so far this year, probably because they’ve become more affordable with the price declines we saw last fall and early winter. Condo sales were 28.9% of the market in May, down from 30% 12 months ago.

Lest anyone think this is the end for the condo market, think again. All four TREB central districts showed strong, above 50% ratios of sales-to-listings seller market stats.

Although it’s a seller’s market, the average sale prices were down in the C01, C08, C14 and C07 districts indicating that first-time buyers are taking advantage of lower per-square-foot suite costs.

South Of The Border Activity Is Up But Price Declines Are Expected To Continue

Sales of previously-owned homes were up 6.7% in April and May’s sales are expected to be up over 2008 as well. This was the third straight monthly increase and the largest month-over-month jump since October 2001.

Helping to drive this US real estate market activity is the Obama $8,000 tax credit for first-time buyers and low interest rates.

However the Case-Shiller monthly index of US house prices still predicts declines in home values. Even the US government predicts home prices to drop thru 2010.

The stress tests carried out on big US banks projected a total fall in housing prices of 41 percent from 2006 through 2010 with a ‘worst-case’ scenario of a 48 percent decline — suggesting that important housing ratios, like price to rent, and price to construction cost — would fall to their lowest levels in 20 years.

The Impact On Canada – Probably Not Very Much

Knock on wood but our Toronto economy, although hurting, hasn’t been dramatically affected by the chaos down south. Our market is definitely being driven by consumer confidence and historically low interest rates.

Those rates bumped up last week to about 4.09% for a fixed 5-year term – still low but indicating a trend upwards in the bond market. Now every $1,000 of mortgage will cost a borrower about $4.46 per month with a 35-year amortization and $5.30 per thousand for a 25-year amortization.

Recent CMHC stats for new construction suggest that Canadian housing starts might be finding their bottom. Click here to read the TD Economics Commentary on the CMHC report.

Expect to see an increase in house and condo inventory over the next several months as existing home owners gain confidence in their employment and their stock portfolios recover somewhat.

Mortgage interest rates may continue to edge up as the bond market shows ongoing concern about the effects of government spending on future inflation.

To browse through the entire Toronto Real Estate Board May MarketWatch Report, click here.

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