Toronto Market Report - June 2022

SALES COMMENTARY

Everyone wants to know when we reach the top and the bottom of a real estate market. The reality is that you only know these points after the fact. About a month later. For the public, it is all about prices but for the real estate industry, we also focus on the volume of sales as an indicator too. 

Sales in May on TRREB were down 38% from May a year ago but they were down only 9% from April. Last year, the decrease from April to May was 13%. It will be interesting to track the May to June drop this year as compared to 2021 when it was just 7%. This may give us an indicator if sales will level off by September. 

The big concern is how high will mortgage rates rise? We see some short-term pain but looking at the 5-year bond yield (the basis of the 5-year fixed mortgage) and the 10-year bond yield there is very little difference. That means investors are betting that in 5 years' time, rates will be the same as today. Going forward, what will support housing prices is the replacement cost for new housing (it will only be more expensive) and the move back/preference into the GTA.

COMPARING AVERAGE PRICES

One of the worst statistics to use with pricing is the ‘average’ price. It assumes that when comparing different time frames, the mix of sales does not change. A simple example: last year there were 2 sales – one at a million and one at $500,000. The average sale price was $750,000. This year there were 2 sales – both for the same $500,00 unit but they now sold for $600,000. The average price today is $600,000 and the press will report a drop in average prices of $150,000. The reality is that prices went up by $100,000.  

To better understand the actual size of these decreases, we show average price by area and by property type. The range of price decreases is from 3.5% to 17.9 %, while the media reports 9.2% for the GTA.