Sellers Lead with New Listings Anticipating Market Upswing
In this report, we'll be breaking down the March 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.
There's a noticeable increase in seller confidence as they gear up for what they hope will be a lively spring season. This optimism is not only fuelled by the possibility of a drop in borrowing costs soon, which could heat things up even more, but also by the beginnings of seeing buyers participate in multiple offers again, signalling a renewed competitive spirit in the market.
“We have seen a gradual improvement in market conditions over the past quarter. More buyers have adjusted to the higher interest rate environment. At the same time, homeowners may be anticipating an improvement in market conditions in the spring, which helps explain the marked increase in new listings so far this year. Assuming we benefit from lower borrowing costs in the near future, sales will increase further, new listings will be absorbed, and tighter market conditions will push selling prices higher,” said TRREB President Jennifer Pearce.
With the anticipation of lower interest rates this year, sellers have regained confidence in the Toronto real estate market. We can see that in the month-over-month and year-over-year increase in new listings this March. On top of just the regular seasonal uptick around this time of year, we’re seeing more movement, particularly in those sought-after neighbourhoods or micro-markets within the city.
Interestingly, while sales in March were somewhat subdued compared to last year, there was a notable increase of 17.1% from February. This upswing suggests that buyers are beginning to respond more robustly to the market's offerings, spurred perhaps by the stabilization of interest rates and a growing acclimatization to the current economic climate.
With new listings on the rise and sales also increasing, though not quite at the same pace, we're witnessing an interesting balance in the average price of real estate across the city. The market is quite diverse at the moment. In highly sought-after areas, homes continue to sell quickly, often with multiple offers. However, in other areas, buyers may still find some attractive deals.
This variability isn't just about location; it also depends on the type of property buyers are interested in, whether it's condos, townhouses, or detached homes. All these factors are interplaying to maintain, and even gradually increase the average price across the market. This steady, if slight, uptick in prices suggests a complex but stable market environment where both buyers and sellers can find opportunities.
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).
While both new listings and sales have increased, the increase in new listings has outpaced that of sales. This has led to the SNLR dropping both year-over-year and month-over-month. Essentially, the market is receiving more new listings relative to the number of sales being completed.
It's important, however, to consider this alongside visible market behaviours. For instance, the trend of holding offers and experiencing multiple offer scenarios has picked up steam since late January. This highlights that, despite a more balanced overall market, there are specific areas where demand heavily outweighs supply, igniting fierce bidding wars.
The Average Days on Market (DOM) have been decreasing since the start of the year, signalling that properties are moving faster. This trend often reflects a surge in market activity, with buyers making offers and closing deals more quickly. The steady drop in DOM is a clear indicator of a market gaining momentum, potentially gearing up for even more activity if interest rates fall, encouraging further buyer engagement.
A rising MOI in the current environment indicates that while there is more activity (as shown by decreasing DOM), the increase in inventory (due to more new listings) is keeping the market from tipping too far in favour of sellers.
As we monitor these trends, the key will be to observe how changes in interest rates influence these dynamics. A decrease in rates could potentially accelerate sales enough to absorb the growing inventory, which would lower the MOI and balance or even raise the SNLR. This would signal a shift towards a sellers market if the increase in sales outpaces the rate at which new listings are added.
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