If you were reading the recent newspapers, you may get the wrong impression.
Have a look at the Marketwatch report by the Toronto Real Estate Board:
“Low-Rise Home Sales Drive August Price Growth
TORONTO, September 6, 2012 – Greater Toronto Area (GTA) REALTORS® reported 6,418 sales through the Toronto MLS system in August 2012, representing a year-over-decline of almost 12.5 per cent compared to 7,330 sales reported in August 2011. The number of new listings reported in August was down by 5.5 per cent compared to the same period in 2011.
Residential transactions were down in August compared to last year. Stricter mortgage lending guidelines, which came into effect in July, arguably played a role. In the City of Toronto, the additional impact of relatively higher home prices coupled with the upfront cost associated with the City’s Land Transfer Tax led to a stronger annual decline in sales compared to the rest of the GTA,” said Toronto Real Estate Board (TREB) President Ann Hannah.
The average selling price for August 2012 transactions was $479,095 – up by almost 6.5 per cent compared to August 2011. The annual rate of price growth was driven by the low-rise home segment in the City of Toronto, including single-detached homes with an average annual price increase of 15 per cent. The MLS® Home Price Index (MLS® HPI)* composite index, which allows for an apples-to-apples comparison of benchmark home prices from one year to the next, was up by 6.3 per cent year-over-year.
While sales were down year-over-year in the GTA, so too were new listings. As a result, market conditions remained quite tight with substantial competition between buyers in the low-rise market segment, said Jason Mercer, TREB’s Senior Manager of Market Analysis. The trends for sales and new listings are moving somewhat in synch, suggesting that the relationship between sales and listings will continue to promote price growth moving forward.”
This seems somewhat of a dismal report. But, sales are up and prices are up!
The Toronto Real Estate Board (TREB) reports statistics with respect to the trailing 12 months. And, it compares August of 2012 with August of 2011.
You can appreciate that most of the time, prices will be up when we are comparing one year to the next. That’s what happened this year and TREB noted a 6.5% gain in the average selling price in August 2012 compared to August 2011.
Generally speaking, if you were always to monitor price increases on an annual basis, and you ignored the fluctuations that occur in the intervening 11 months, you should be seeing a positive trend. However, by ignoring the short term results, you deny yourself the opportunity to spot changes to the overall direction or the real estate cycle when they occur. You’ll be 12 months out of date!
The interesting phenomenon this year is that the price turned upward in August. Usually, that doesn’t happen until September. The shortfall in listings may be the explanation.
We should also look at the sales. Now, if you are sticking with monthly comparisons, year to year, it will be difficult to deviate from that.
So, in the opening sentence TREB notes a 12.5% decline in sales from 7,330 in August 2011 to 6,418 in August 2011. That information is interesting, but is it all that important and does it reflect a proper view of the market?
Most buyers and sellers of real estate plan to do business in the “calendar year”. That means that they will decide to move sometime in 2012. Many like to close in June or the early Fall, but rarely does anyone say ,for example, that they want to buy in February or March or August for that matter.
So, the real question then, is: how are the sales going in 2012?
And, for the sake of comparison, you might like to compare that number to last year.
By the end of August 2011, 62,757 transactions had taken place. By the end of August 2012, 64,200 transactions were reported. That’s a 2.3% increase when we are comparing the first 8 months of the calendar years.
What happened month by month? January, February, March, April, and May were up. June, July and August were down. However, it is important to note that overall, that 8 month period reported a higher number of sales than last year.
If you buy in January, you can’t buy again in August!
Remember the tropical temperatures that Toronto experienced in January? Some restaurants and cafes actually set up their summer outdoor furniture for a few days.
Why did the market start early this year? The answer may be as simple as the weather!
If you would like to discuss the market, please call your RE/MAX West agent.
Brian Madigan LL.B., Broker is a Manager at RE/MAX West Realty Inc., Brokerage 416-745-2300.