More Toronto homes hit the market and sell at speed as spring nears
In this report, we'll be breaking down the February stats provided by the Toronto Regional Real Estate Board (TRREB). They are specifically for the City of Toronto which includes Etobicoke, Central Toronto, North York, East York and Scarborough.
With the arrival of spring, there's a burgeoning sense of anticipation surrounding the City of Toronto's real estate dynamics. A deeper dive into these numbers offer a nuanced perspective of what's happening on the ground.
“We have recently seen a resurgence in sales activity compared to last year. The market assumption is that the Bank of Canada has finished hiking rates. Consumers are now anticipating rate cuts in the near future. …,” said TRREB President Jennifer Pearce.
Despite the challenges imposed by high borrowing costs, which have tempered the market's growth compared to the record highs of February 2021, there's an unmistakable increase in buyer activity .
“As we move through 2024, an increasing number of buyers will re-enter the market with adjusted housing preferences to account for higher borrowing costs. In the second half of the year, lower interest rates will further boost demand for ownership housing. First-time buying activity will also be a contributing factor, as many renters look to trade high monthly rents for a long-term investment in which they can live and build equity,” said TRREB Chief Market Analyst Jason Mercer
While it's common to see an increase in new listings from January to February, there’s a significant amount of new listings compared to February, 2023. This recent surge in new listings suggests that sellers, who were previously hesitant, are now re-engaging with the market.
Price trends in February were stable, with the average selling price closely mirroring last year's figures, settling at $1,072,528.
Month-over-month the average selling price was up 11.8%, breaking the one million dollar mark again since dropping in January. Despite the modest ups and downs throughout the past year, the lack of significant price volatility suggests a market that is healthy.
Understanding key real estate market metrics: sales-to-new-listing ratio, days on market, and months of inventory:
The sales-to-new-listing ratio (SNLR) tells us how many of the newly listed properties are being sold in a certain time frame. If the ratio is around 50%, it means the market is balanced. But if it goes above 60%, that's when we start to see a seller's market, where prices tend to rise. So, the higher the ratio, the better it is for sellers and the more competitive the market becomes for buyers.
The average days on market (DOM) refers to the average amount of time that it takes for a property to be sold after it is listed for sale. This can be a useful metric for understanding how quickly homes are being snapped up in a particular area.
Lastly, the months of inventory (MOI) is a measure of the amount of time it would take for all of the currently listed properties to be sold, based on the current rate of sales. It's a useful metric for understanding how much supply there is relative to demand in a particular area. For example, if there are 100 properties currently listed for sale and 20 of them are sold each month, it would take 5 months to sell all of the properties (100 / 20 = 5).
February 2024:
February 2023:
You might be curious why we're seeing average prices, new listings, and sales all trending upwards while the sales-to-new-listings ratio (SNLR), days on market (DOM), and months of inventory (MOI), appear to be moving in the opposite direction. This seemingly contradictory trend warrants a closer examination to fully understand what's unfolding in the market.
Now, looking at SNLR, a slight decline points towards a more balanced or buyer-friendly market. The SNLR is a key indicator of market conditions, showing the relationship between supply (new listings) and demand (sales). A lower SNLR compared to the previous year and month tells us that new listings are still outpacing sales. This is providing buyers with more options, reducing the pressure and competition seen in a seller's market.
However, it's crucial to juxtapose this trend with the observable market behaviours, such as the increase in holding offers and multiple offer situations that began intensifying towards the end of January. This suggests that, while the overall market may be balancing, there are still pockets of intense activity where demand outstrips supply, leading to competitive bidding wars.
An increase in average days on market (DOM) year-over-year, albeit slight, coupled with a significant drop from January's 37 days, reflects a market adjusting to new dynamics. Properties are taking a bit longer to sell than they did last year, but the dramatic decrease from January shows a quickening pace, likely spurred by the increased market activity we’re seeing as spring approaches.
Lastly, the months of inventory (MOI) metric, which shows how long it would take to sell all current listings at the current sales pace if no new listings were added, is essential for understanding market balance. An increase in this metric makes a lot of sense as new listings outpaced sales this February.
So, when you see a discrepancy between metrics like sales and new listings trending positively while SNLR, DOM, and MOI are moving in the opposite direction, it’s a sign that the market is in a state of transition.
These contrasting movements suggest that while activity is picking up, the market is still balanced, offering different implications for buyers and sellers. Over time, as more data comes in, these metrics will align more closely with the market's reality, providing a clearer picture of the trends at play.
If you have any questions or would like more information on recent home sales in your specific neighbourhood, don't hesitate to connect with us here.