John Pasalis in Toronto Real Estate News
The Toronto Real Estate Board reported 10,995 sales in June 2009, a 27% increase over the same month in the previous year and the highest June sales on record.
Toronto’s real estate market continues to suffer from an extreme shortage of homes for sale. The following chart shows that the volume of homes available for sale has been on the decline since March (purple line).
There were 30% fewer homes available for sale in June 2009 compared to the same month in the previous year. But while inventory continues to slide, sales have been on the rise.
The combination of the 27% increase in sales and the 30% decline in inventory means we are in the middle of a very unbalanced seller’s market.
We can see this imbalance by looking at the sales-to-inventory ratio for Toronto’s market. The sales-to-inventory ratio measures the balance between supply and demand. During a balanced market we would expect to see roughly 2 sales for every 10 homes available on the market or a sales-to-inventory ratio of 20% (Related: Lessons from Toronto’s Real Estate Crash ). Toronto’s sales-to-inventory ratio jumped to 59% in June 2009 moving us even further into Seller’s market territory.
A 59% sales-to-inventory ratio may not mean that much to the average home buyer, but it really is an alarming number. Consider this, June 2009’s sales-to-inventory figure is the highest we’ve seen in the past twenty years. This means that the imbalance between supply and demand – favouring sellers - was greater in June 2009 than any other month in the past twenty years, including Toronto’s real estate bubble in the late 1980’s.
An overheated real estate market is something we should be concerned about and will need to keep an eye on in the months ahead.
John Pasalis is the Broker owner of Realosophy Realty Inc in Toronto. Email John
excellent article
Navtaj Chandhoke
Founder, Professional Real Estate Investors Group (PREIG) Canada
www.preigcanada.com
Posted by: Navtaj Chandhoke | July 06, 2009 at 05:16 PM
So will this finally silence the people who have been saying that "now's a great time to buy"?
Posted by: Jordan | July 06, 2009 at 06:45 PM
Great article John!
I was doing the same analysis and thought I would check your site to see if there was mention of this very grim situation. I'm glad you haven't joined in with CREA and TREB saying that the recent sales activity is representative of a return to a healthy real estate market. This is absurd! As you've stated, this is a very unhealthy marketplace. Using Central Toronto as an example: sales to active ratio went from 40% in June 2008 to 70% in June 2009!!! The potential ramifications are obvious: an extremely low supply of houses is not sustainable and eventually, market forces will prevail causing a flood of supply into the market causing a crash in prices. Add to this the very real concern of rising mortgage rates (three months ago I could get a 5 yr fixed for 3.5% now it will cost me 4.4%!)and the potential for a crash in home prices is very high.
John, you hve assessed the current market very well -I'd love to get your thoughts on the potential ramifications.
Thanks,
scared pig
Posted by: lipstickonapig | July 14, 2009 at 01:15 PM
I sold my house in June, 2009. Is this the right time to buy or should i wait for a better market. Thank you for advice.
Posted by: Arman | July 31, 2009 at 11:05 PM
Through the given graph imbalances in the market demands of real estate and property investments have been seen in Toronto's market , these show an unstable conditions .
Posted by: Tax Foreclosures | October 09, 2009 at 01:55 AM
very useful article for people who want to buy new property.
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akshayata
Brisbane real estate
Posted by: akshayata | February 08, 2010 at 02:26 AM