Did Garth Turner Impact Toronto's Real Estate Market?

John Pasalis in Toronto Real Estate News

When economists see a significant and sustained deviation from recent trends in data, they try to find the factor(s) that may have contributed to this shift.  For example, the Toronto real estate market experienced a very sudden and sustained increase in the number of homes sold last year.  Most economists attributed this increase in demand to the introduction of 40 year mortgages which suddenly made home buying more affordable.

Toronto's real estate market experienced another significant and sustained deviation from recent trends, this one beginning in April 2008.  The chart below shows the number of new listings (homes) available for sale through the Toronto Real Estate Board for each month since 2006.  New listings should not be confused with total inventory or active listings which I talked about last week.  Total inventory refers to the total number of houses available for sale in any given time period.  New listings refers to the number of new houses that came on the market in a particular time period.

Note that the number of new listings for each month in 2007 was quite similar and moved in relative unison with the volume in 2006. 

New listing volumes for the first three months in 2008 (green line) started out lower than both previous years, in part due to Toronto's heavy snowfall this year, but in April 2008 the number of new listings surged by 37% over the previous month and was 18% higher than the volume for April 2007. For each of the past four months the number of new listings on the market have been anywhere from 8% to 18% higher than the previous year.

How do we explain the sudden and sustained increase in the supply of new listings coming on the market?

The Garth Turner Factor

This year Canadian MP and author Garth Turner released his cautionary outlook for Canada's real estate market titled Greater Fool.  Garth Turner warns Canadians that Canada is poised for a housing crash similar to the one taking place in the US.  Turner advises Canadians to sell their house now and rent if their home makes up more than a third of their total net worth. 

The book was released in March 2008.  The following month the number of new listings on the market jumped by 37%.  Did thousands of people in Toronto heed Turner's advice to sell their house? 

Turner's influential book and blog may have played some part in the rise in April's new listing volume but the heavy snowfall from January to March also played a roll. Many sellers held off on listing their house during the winter months because the heavy snowfall made it difficult for buyers to look for houses.

While the harsh winter may help explain the rise in April's new listings how do we explain the sustained increase in new listings from May to July? Is this short term trend an indication that more sellers are looking to "cash out" at what they perceive to be the peak of Toronto's real estate market?

Perhaps, but part of the increase in new listings may be explained by the many price changes we are seeing in Toronto's real estate market.  When a realtor wants to change the price for their listing at 123 Main Street for example, they can either update the listing for that home with the new price or they can take 123 Main Street off of the market and then upload a new listing for 123 Main Street at the new price.  The advantage of the later approach is it resets the Days on Market for the house back to 0 making the listing look newer than it really is.  One of the problems with this is that both listings would be counted as new listings because they would have different MLS numbers.

Some agents actually use this price changing strategy as part of their marketing plan for selling homes in a slowing market.  The agent will list the house at a high price and if the house does not receive an offer within 10-14 days the agent will take the house off of the market and will relist it at a lower price.  Even if the agent and seller don't want to reduce the price for the home, the agent will still take the house off of the market if it doesn't sell after 10-14 days and will relist it at the exact same price in order to reset the Days on Market.  The agent will continue to relist the property every couple of weeks until it sells. It's not uncommon to see the same house listed up to 4 separate times by the same agent.  In this case TREB's data would show 4 new listings when there should have been just 1.

This strategy to relist properties in order to reset the Days on Market is not new but has probably been occurring more often now than in previous years given the slowdown in Toronto's real estate market.

Due to the limited data available it's tough for anyone to say conclusively what's driving the increase in new listings but I suspect that it's a combination of the factors outlined above which are all signs of a slowing market.  I'll be keeping an eye on this data to see if this trend continues into the fall or if new listings return to 2006/2007 levels.

John Pasalis is a sales associate at Prudential Properties Plus in Toronto and a founder of Realosophy. Email John

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Comments

[Nicky 6]

What, you're not going to continue to blame the City of Toronto's new property transfer taxes for the country wide slump in real estate?

You real estate agents at too much!

[Trekie2]

What really bothers me is the fact that you clearly state that RE agents remove listings to "clear" the amount of days on market data from the MLS and relist lower. How is this honest business?

Again slimy RE agents just trying to move product and line there pockets...

Garth at least states some truths and if anyone with a brain looks at past trends in RE will soon see that a correction, i.e. crash is inevitable.

[Popping-Bubbles]

Ha ha ha ha. Too funny. In one month a book almost nobody had read caused "new listings on the market jumped by 37%".

[Toronto realtor]

Mr. Turner has influenced everyone and everything considering RE. His outlooks on the recent problems are a bit harsh and perhaps influenced by his political career. Most of his supporters come from the people who have some trouble with their homes and living, which are most Canadians. But non the less, his book has many good insights, though in some places the problems repeat in many matters. To the "renewed" listings us realtors sometimes use, they are not illegal, but may be considered as unfair, but sometimes, they are the only thing that can help sell.
But still John. You are doing a great job with this blog. Keep it up.
Julie

[Calgary_rip_off]

Garth rocks.

In Calgary.

[Rafael Simms]

obviously the writer of this article has a vested interest in the real estate market. How can be believe anything these people write. Information released by the media regarding the housing market is just creative form of advertising to get uninformed individuals to get into the real estate market.

[Trekie2]

Julie, you wrote -

To the "renewed" listings us realtors sometimes use, they are not illegal, but may be considered as unfair, but sometimes, "they are the only thing that can help sell."

How about honesty? Oooops....this is RE

[islander]

If you can't believe anything this guy writes, or you don't trust realtors, why are you reading this blog?

Shouldn't you be reading a source you trust?

Sincerely,

Your Mirror

[islander]

If you can't believe anything this guy writes, or you don't trust realtors, why are you reading this blog?

Shouldn't you be reading a source you trust?

Sincerely,

Your Mirror

[islander]

If you can't believe anything this guy writes, or you don't trust realtors, why are you reading this blog?

Shouldn't you be reading a source you trust?

Sincerely,

Your Mirror

[islander]

If you can't believe anything this guy writes, or you don't trust realtors, why are you reading this blog?

Shouldn't you be reading a source you trust?

Sincerely,

Your Mirror

[Truth or Talk]

Evrybody has their biases.

But as somebody who scours the internet for credible/objective sources of real estate information/analysis, I'd have to say that this blog is by far, the least biased when it comes to Toronto real estate. You just need to scan back on the older articles to see that this is the case.

[John Pasalis]

I forgot to mention that it isn't always realtors that recommend relisting properties. Often times sellers will insist on relisting their property to reset their days on market.

Since there are no rules or laws against this, sellers and agents will continue doing this.

I'm not condoning this practice, it just is what it is and we need to take this information into account when we're looking at New Listing data in a market that is slowing down.

[Sam]

Garth is 100% correct! The housing bubble has popped and people like you are trying to evade the facts.

[toro]

give it up John, you act like Garth's book is being read by millions, if it was then I will agree that he may of had some influence. i dont believe that is the case.

[Rob]

i think GT has enabled those with a bearish slant on the markets to be heard but that's about it.

those who've not bought or sold in the last 10 years or who are not in the industries profiting from the run up are waking up to the ridiculousness of the PR campaigns behind them.

call it a correction or what you will, prices are or will soon be dropping on their own pace at their own speed and location may not be enough if there is a panic and it snowballs. it's only in the last few months that we've found out just how many mortgages were in the 0/40 ball park. what else hasn't been published by CMHC and CREA in the endless positive spin.

[Chuck D]

In the winter they blamed the snow. Now they're blaming Turner's book. I haven't spoken to many people who've read the book but I have spoken with lots of people who feel the market has peaked. Here's an idea...Blame it on the rain....We've had record rainfall that could be driving consumers away. Or perhaps you could admit that prices have gone out of reach and have eclipsed inflation.

[Sam Trent]

Garth Turner is a nobody. He had NO effect on the housing market..at all.

[Mark]

You have got to be kidding right? Garth wrote a book and suddenly people start selling their homes?

Garths book was in limited release and in the GTA only 3 were sold in Halton area bookstores and I was one of them (I needed a good laugh)

WOW...Garth Turner impacting the real estate market of the supposed economic engine of the country.

Id like a drag of what youre smoking...

[Al]

My take is the increase in listings is the flippers exiting the market. Garth may have convinced them, or more likely it's the carnage down south. Even the mild level off in price appreciation could have scared the flippers off.

The practice of relisting to reset DOM is a stupid one. It's self defeating, as people come to realize that DOM is a useless stat.

[Dont Buy IT]

If you look at the survey on this site, most people think a major correction/crash has already started in Toronto Real Estate. Even alot of Honest Agents (not all of them) admit that things are pretty bad and we are on the verge of a major correction. Combination of double digit sales drops every month and a 30% increase in inventory means a downward pressure on prices.

Ontario is in a major recession and just look at the thousands losing their jobs monthly and you will see the Toronto Real Estate Market tanking has nothing to do with Garth Turner.

[fahmy kadiri]

My favorite analogy is that of a restaurant owner who all of a sudden experiences a surge in business because a circus show is in town. Misinterpreting the market he begins to hire all sorts of staff and even buys the property next door to expand his business. Things are good until the circus show packs up and he is stuck wondering what happened to his customers.

- A slowing economy
- Job losses
- Lower wages (my company actually lowered the entry level salary for my job)
- elimination of the 40 year AM
- higher taxes

these are the major factors in the slowdown of the RE market, to suggest Garth single handedly caused a downturn is just plain silly.

RE is only worth what someone else can afford, the current prices are not affordable for the reasons mentioned above as Garth would say, a lot of homeowners will be getting an involuntary "hair cut" in this market.

[Bubble Trouble]

Ha Ha, too funny! Absolutely Garth has caused the Real Estate market to start falling in Toronto. He also caused Real Estate to crash in Japan, to start falling in the UK, in Spain, in Australia and especially In the US. Of course it would have nothing to do with a classic Bubble deflating in all of those markets and now deflating in Canada.