Torontonians have become so accustomed to hearing about how competitive the real estate market is and how quickly prices are rising that they have begun to tune out what they see as the same old story. But what many don’t realize is that 2016 is different from previous years. It’s the tipping point where our booming real estate market is on the verge of becoming a full blown real estate bubble.
Detached house prices are appreciating twice as fast in 2016 as they were last year with prices up 22% year over year in August. Home prices increasing at 22% per year is a significant cause for concern. At this rate of appreciation the average price of a detached home will double from $964,000 to $1,928,000 in just 3.5 years.
Let’s take a look at a few charts to see how Toronto’s appreciation in house prices has been building momentum over the past 3 years.
The chart below shows the number of detached homes that have sold each month since 2013. Sales have been increasing every year since 2013.
This increase in demand has resulted in a decline in the inventory of homes available for sale each month. The chart below shows the number of homes available for sale in each month from 2013.
During the busy spring period there were roughly 11,000 homes available for sale each month in 2013. In 2016, that number has been cut in half to just over 5,000 homes available for sale. Today's home buyer has half as many homes to choose from compared to just 3 years ago.