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What’s Happening in the Toronto Real Estate Market? (August 2013)

Toronto Real Estate Market -August 2013 Statistics

In order for us to assess what is happening, let’s have a look at the public announcement (and commentary) by the Toronto Real Estate Board. After all, they are the ones who maintain the statistics.

Here’s a copy of the news release:

August 2013 Sales and Average Price Up Over 2012

TORONTO, September 5, 2013 –Greater Toronto Area REALTORS® reported 7,569 residential transactions through the Toronto MLS system in August 2013. This represented a 21 per cent increase compared to 6,249 sales in August 2012.

“Sales were up strongly this past August for all major home types compared to last year. Many households have accounted for the added costs brought on by stricter mortgage lending guidelines and have reactivated their search for a home. These households have found that a diversity of affordable ownership options exist throughout the GTA,” said Toronto Real Estate Board President Dianne Usher.

The average selling price for August 2013 was $503,094 –up by almost 5.5 per cent compared to the average of $477,170 in August 2012. The MLS® Home Price Index (HPI) composite benchmark was up by 3.7 per cent over the same period.

“Despite an increase in borrowing costs during the spring and summer, an average priced home in the GTA has remained affordable for a household earning an average income. With this in mind, tight market conditions are expected to promote continued price growth through the remainder of 2013,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.

All in all, that sounds pretty good, sales are up 21% and prices are up 5.5 %. So, what could be better than that?

Let’s have a closer look at the numbers.

Sales                         (broken down monthy)

January                                     4,431
February                                  6,809
March                                      9,383
April                                        10,021
May                                         10,544
June                                         9,129
July                                          7,338
August                                     6,249
September                                5,687
October                                    6,713
November                                5,615
December                                 3,582

January                                     4,229
February                                   5,613
March                                      7,540
April                                        9,541
May                                         9,952
June                                         8,840
July                                          8,420
August                                     7,569

Average Prices                 (broken down monthly)

January        $462,701
February      $500,249
March          $500,892
April            $515,888
May             $514,567
June             $507,342
July             $475,523
August         $477,170
September   $501,326
October       $502,127
November    $484,186
December    $477,756


January        $482,080
February      $509,396
March          $517,207
April            $525,402
May             $540,756
June             $530,342
July             $513,043
August         $503,094

When we look at the average prices what do you see? At $503,094 we are only marginally better than several other months since 2012. In February of 2012 we were already at $500,249. That would be a 0.01% (1/10 of 1%) increase over 18 months, which works out to an annual 0.04 %. That’s not good. That’s a gain of less than one half of one per cent per year.

And, if we look at the month of May this year, we were at $540,756, so we have lost $37,662 since then, which works out to 7% drop since that time.

It’s fun to work with numbers. Sometimes they say what you want them to say and sometimes they don’t. Naturally, it’s important to be consistent and there are likely to be differences when comparing.

The Toronto Real Estate Board (TREB) constantly uses the year over year comparison. At least, they are consistent in their presentation. So, they compare August of this year to August of last year and go with the result, up or down.

This is a good comparison model when we are talking about sales. August traditionally is not a particularly strong month, so it’s better to compare it, to the month of August in previous years. This year, sales were up by 21%. But, you really can’t understand whether that’s positive or negative, until you know something about the August sales in previous years. Maybe August 2012 was just a bad year?

So, just for the fun of it, why don’t we look at the last 10 years. All these numbers are drawn from TREB’s published statistics:

2013                                                     7,569

2012                                                     6,249

2011                                                     7,542       

2010                                                     6,232       

2009                                                     8,035

2008                                                     6,318

2007                                                     8,059

2006                                                     6,976

2005                                                     7,326

2004                                                     6,743

The average number of real estate transactions which took place during the month of August was 7,105. This year, there were 464 more deals, which is a 7% increase over the 10 year average.

You might also wonder how the year is going, even if you reduce that 21% increase down to 7%?

Well, not quite so good!

Last year, the total sales to the end of August was 63,904 and this year that same number is 61,704, or 2,200 fewer sales. That would be a 3% decrease in sales this year. So, do you really care about the sales in August this year? And, why compare it to August 2012, which was the second worst August in a decade?

And what about that $503,094, how does that compare to the past?

Here are some of the recent newspaper headlines, published about the TREB results:

“Toronto Real Estate Prices Jump with Condos helping increase in sales”

“Toronto Homes Sales up 21% in August, realtors say”

“Canada’s Two largest real estate markets are surging”

However, what if we were to come up with our own headlines:

• Toronto Prices Drop 7% since May

• Toronto Market Stagnates with 18 Months of No Growth

• Sales in Toronto Are Down 3% this year    

Our own headlines are all actually true. They are biased, in part, because we wanted to choose a negative spin. But, just how valuable is the positive spin, particularly when those choosing the headlines, are not disclosing any bias, just providing you with the facts, or at least some of them.

If you would like to discuss the market, please give me a call.

Brian Madigan LL.B., Broker